Contractor Insurance Coverages, and What Each One Actually Does
A contractor’s insurance program is not one policy. It is six to ten of them, and what matters most is rarely any single policy. It is whether they work together. The gaps between policies are where claims get denied, and those gaps stay invisible until something happens.
This page explains what each coverage does, what it does not do, and where it commonly falls short on a growing contractor’s program. It is written to be useful whether or not you ever call us.
General Liability
The foundation of the program. It responds to bodily injury and property damage arising out of your operations and your completed work, and it is the policy your customers and general contractors are asking about when they demand a certificate.
What it does not do is cover the cost to repair or replace your own defective work. That is the work-product exclusion, and it is the source of most coverage disputes in construction. The policy pays for the damage your faulty work caused to other property, not for redoing the work itself.
Where it falls short on contractor programs: residential and tract home exclusions that the insured never noticed, subcontracted work restrictions that gut a general contractor's coverage, missing per-project aggregate, additional insured endorsements narrower than the contract requires, and pollution and fungi exclusions that remove the most expensive part of a claim.
Workers Compensation
Statutory coverage for employee injury, and for most trade contractors the largest line on the program. Premium is driven by payroll, by classification, and by your experience modification, which compares your claim history to others in your class.
The employers liability portion, sometimes overlooked, is what responds when an injured employee's claim moves beyond the compensation system. Action-over claims, where an employee sues the general contractor who then tenders back to you, run through this coverage and through your indemnity obligations at the same time.
Where it falls short: classification that has not been reviewed since the business was half its current size, subcontracted labor without certificates becoming your payroll at audit, and seasonal or overtime payroll reported incorrectly.
Commercial Auto
Covers vehicles you own, and with the right symbols, vehicles you hire and vehicles your employees own and use for work. That last category, hired and non-owned auto, is inexpensive and frequently missing. An employee running to the supply house in a personal truck is an exposure the business owns whether or not the policy reflects it.
Driver selection and motor vehicle record discipline affect both what you pay and, at a certain point, whether a carrier will write you at all. This is one of the few lines where an operational change produces a fast, measurable result.
Umbrella and Excess Liability
Additional limit sitting above your general liability, auto, and employers liability. For most contractors it is the least expensive meaningful limit available, and it is increasingly a contract requirement rather than a choice.
The detail that matters is whether it follows form. An umbrella that sits above the right underlying policies and follows their terms does what you expect. One that carries its own exclusions, or that fails to schedule a policy you need it above, creates a gap exactly where you assumed you had protection.
Tools, Equipment, and Installation Floater
Inland marine coverage for property that moves. Hand tools, larger equipment, material in transit, and material staged on a job site waiting to be installed. None of that is covered by general liability, and a standard commercial property policy generally covers it only at your own premises.
Where it falls short: limits set years ago and never raised, equipment scheduled at values that no longer reflect replacement cost, rented and leased equipment overlooked entirely, and installation floater coverage that ends before the customer formally accepts the work.
Builders Risk
Course of construction coverage on the project itself, responding to physical damage to the structure while it is being built. Usually placed per project, though contractors with steady volume can look at a blanket or reporting form.
The items most often handled poorly are soft costs, delay in completion, coverage for materials stored off site or in transit, and the point at which coverage ends. Whether the policy runs to substantial completion, to occupancy, or to acceptance is a detail worth pinning down before a loss rather than during one.
Contractors Pollution Liability
The pollution exclusion on a general liability policy is far broader than most contractors expect, and it captures events that do not feel like pollution at all. Refrigerant discharge, fuel spills, silica, dewatering and sediment runoff, concrete washout, mold, and potable water contamination all sit inside it.
For HVAC, sitework, excavation, concrete, and plumbing contractors this coverage is closer to core than optional. General contractors take on the exposure indirectly, since they inherit it from every trade on the site. It is also becoming a contract requirement on more projects each year.
Professional Liability and Design-Build Errors and Omissions
General liability covers what you build. It does not cover what you decide. The moment your shop specifies equipment, sizes a system, engineers a detail, or takes on delegated design, you are making professional judgments, and a claim arising out of one of those judgments falls outside general liability entirely.
Contractors frequently assume this exposure belongs only to firms with a licensed engineer on staff. It does not. The exposure follows the decision, not the credential.
Cyber Liability
The claim trade contractors actually see is wire fraud on a progress payment. Someone spoofs an email, changes the remittance instructions, and a six-figure payment goes to the wrong account. That is a social engineering loss, and it is not covered by a crime policy written for employee dishonesty unless the right endorsement is present.
Beyond that, contractors hold employee data, customer information, and increasingly building system access credentials. The exposure is smaller than in a technology business but it is not zero, and the coverage is inexpensive at this size.
Surety and Contract Bonds
Bid, performance, payment, and license and permit bonds. A bond is not insurance. It is a credit instrument, underwritten on the financial strength of the business and often on the personal indemnity of the owners.
Growing contractors run into bonding capacity as a constraint on the size of work they can take. Building a bond program is a multi-year exercise involving reviewed or audited financial statements, working capital, and a relationship with the surety that starts before you need the capacity.
Also worth knowing about
- Employment practices liability. Once you pass roughly fifteen to twenty employees, wage and hour and discrimination claims become a real exposure, and defense costs alone justify the coverage.
- Management liability and directors and officers coverage, relevant for contractors with outside investors, a board, or a formal ownership structure beyond a single owner.
- Crime and employee dishonesty, particularly for contractors with material inventory, a parts counter, or employees handling customer payments.
Between the policies
How the pieces fit together
The coverages above are usually explained one at a time. The problems almost always happen between them.
The umbrella and what it sits above. Your umbrella has to sit above the right underlying policies and follow their terms. An unscheduled underlying policy is a gap at the exact limit where you thought you were protected.
General liability and professional. General liability covers what you build, professional covers what you decide, and a claim that mixes both can fall into the space between two policies that each point at the other. Matching forms, or placing both with attention to the overlap, is what closes it.
General liability and pollution. Pollution events are excluded from general liability by a definition broad enough to surprise most contractors. Contractors pollution liability exists to fill that specific hole rather than to add a new one.
Auto and inland marine. Equipment that travels between sites can fall across the boundary between the two policies. Which one responds depends on how the machine was being used at the moment of the loss, which is a poor thing to discover afterward.
Workers compensation, employers liability, and your subcontract. An injured employee's claim can travel from the compensation system into an action-over suit against the general contractor and then back to you through the indemnity clause you signed. Three documents determine the outcome and only one of them is a policy.
Most contractors have most of this. What they usually do not have is confirmation that the pieces line up with each other and with what their contracts require. That is what a coverage review is for, and it costs nothing.
Let’s look at what you have
Send us your current policy, including every endorsement, and tell us what your contracts require. We will tell you where the two do not line up. It costs nothing, and it does not obligate you to move anything.
Working with specialty trade contractors in all 50 states, at our best with firms between $500,000 and $20 million in annual revenue.
The information on this page is general in nature and is not a statement of coverage or a contract. All coverage is subject to policy terms, conditions, exclusions, and carrier underwriting. Availability varies by state, class of business, and individual risk.