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In a field like construction, which comes with higher risks of personal injuries or property damage, having strong commercial insurance policies in place is critical for protecting your business. General liability insurance is the foundation of risk management not only for construction businesses but for almost any small business, as it offers protection from common claims relating to injuries and property damage caused by your business. In this guide, we will detail what general liability insurance for contractors is, why it is important, what to look for when shopping for a policy, and our favorite insurers for liability coverage.
In legal terms, liability refers to the responsibilities or obligations one party has to another under the law. When a party is found to be liable in a court case, the court essentially rules that they can be held responsible for harm that came to another party due to a particular action or failure to act. And these rulings often come with legal or financial penalties meant to punish the liable party and compensate the parties that experienced harm.
Any business can face the risks of a liability suit. A recent study found that commercial liability claims in the U.S. legal system collectively cost $343 billion annually—up from $300 billion just two years before—and that small businesses bear 53% of that cost. Damages from a liability claim can be enough to wipe out some smaller businesses, and even many mid-sized or larger firms can still struggle to withstand the costs.
Some businesses face particularly high risks for liability claims, and contractors and construction professionals are among them. Because of the nature and complexity of the work, liability claims in construction are fairly frequent and can come from a number of sources: A vehicle transporting materials to a job hits another vehicle, damaging it and injuring the driver. An office renovation takes longer than expected, leading a client to lose business income from having the office closed. An electrical system is installed improperly, causing a fire that destroys a new home. An employee slips and falls at a job site and suffers an injury that leaves them unable to work.
These are just a small sampling of the types of claims that a construction business might face. Fortunately, commercial liability insurance exists to help businesses with the costs of legal defense, damages, and other expenses related to liability claims. Some commercial insurance types, like workers comp and commercial auto, are used widely across most industries. Others, like builders risk, are specific to the types of claims that a construction business will face. But one of the most fundamental forms of commercial coverage in any industry is a general liability policy, and construction is no different.
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