Contractor liability insurance coverage explained

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Contractor liability insurance avails financial protection in a wide array of scenarios where your business accidentally causes harm to another person or their property. If your business is sued for an event covered by the liability insurance the insurance company is obliged to pay for your legal defense and cater for any settlements up to the policy limit.

Contractor liability insurance is particularly important for contractors since the nature of work done can pose significant risk to people and property.

What Does Contractor Liability Insurance Cover?

  • Bodily Injury: This cover protects your business if it causes physical injury to another person. Though it’s important to note that it doesn’t cover employee injuries, which instead are covered by worker’s compensation insurance.
  • Property Damage: This insurance covers you for damage caused by your business to someone else’s property. Though it doesn’t cover property belonging to others that is under your custody or care. For instance if you’ve been hired to remodel a client’s bathroom any unintentional damage is covered by voluntary property damage.
  • Products and Completed Operations: This coverage protects you after your work is complete. If any of the work you’ve completed as a contractor causes bodily injury or property damage.
  • Personal and Advertising Injury: This liability coverage caters for a category of nonphysical injuries that your business may cause to another person or business. In contracting business you may experience this in cases of copyright infringement, slander, libel and publications that violate privacy.
  • Medical Payments to Others: This covers for medical payments in case someone is injured on your business premises as a result of your activities. Unlike in the case of bodily injury coverage, where payments are only made if your business is at fault, medical payments to others compensates for injuries whether or not your business is to blame.

Is Contactor Liability Insurance Required?

Contractor liability insurance isn’t legally required in many instances. However, in some states liability insurance is a mandatory requirement for getting a license for some contracting professions such as plumbing.

Some clients require that a contractor has liability insurance before they do business with them. If a client engages a contractor and an accident occurs he may have to pay for damages if the contractor doesn’t have insurance. Therefore many clients expect to see proof of contractor’s liability insurance before hiring them.

In case you are a subcontractor to a general contractor, they may require that you have liability insurance. Reason being the general contractor is responsible for any damages caused by their subcontractors and in case the subcontractor is not insured the general contractor is liable for any damages or injuries caused by them.

Contractor’s liability insurance protects contractors financially in the event they are obligated to pay for damages arising from property damage, bodily, personal or advertising injury to other parties caused in the course on the contactor’s work. It’s highly recommended that every contractor maintains this coverage to protect their business. It’s also a highly sought after requirement by many clients.


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