General Liability Insurance for Home Builders

Working to build and renovate homes is important and rewarding work. You are in the business of creating the places people will call home, potentially for many years into the future.

These are construction sites, and that means heavy equipment, sharp tools, and uneven surfaces are all part of the day-to-day job—which can mean risks in the form of damage or the potential for injuries.

All home builders should think of general liability coverage as their most basic component of insurance protection.

What does general liability insurance cover for contractors?

General liability insurance protects a home builder’s business from legal claims such as property damage and personal injuries. This form of insurance will help to cover legal and medical bills if someone’s property is damaged, or if a third party is injured in the course of business activity.

General liability insurance can also cover reputational damage, which is an important consideration with the prevalence of social media.

Why do home builders need general liability insurance?

Home builders and contractors need general liability insurance because accidents can and do happen. If something goes wrong at a construction site and property is damaged, general liability insurance can help to pay for the cost of repairs, protecting the business’s bottom line.

And, if someone is injured, general liability coverage will help to cover the injured party’s medical bills and the associated legal bills too.

How much general liability insurance coverage do contractors need?

Similar to other forms of insurance, the amount of general liability coverage for contractors will vary based on a number of factors, including the location of the business, the type of construction work performed, and the number and type of risks.

Here are some of the considerations an insurer includes when determining risk:

• Location – Where your home building business is located and where your work is performed is an important part of the calculation of coverage. There are several reasons for this, including how the state (or states) in which you operate regulates your line of business, and how things like storm damage and crime rates impact your area.
• Prior Claims – Your business’s claims history will factor into your general liability insurance premium rates.
• Type of home construction – What type of home construction does your company focus on, or specialize in? Middle-market construction will present different risks than high-end custom home construction, largely due to the cost of materials used in building.

What is important to consider when contractors purchase general liability insurance?

The type of homes constructed, and the size of your business operations are two of the most basic considerations when you shop for general liability insurance coverage.

Here are some other questions, the answers to which may have an impact on the amount of general liability insurance coverage contractors will need:

• How many employees do you have, and how many of them are on-site versus in an office?
• How many subcontractors typically work on a project?
• What is the scale of your typical projects—do you generally renovate older homes, or build new home subdivisions?
• Is your work generally in suburbs, rural areas, or within city limits?
• What type of homes do you build? Are they generally new construction, or do you renovate older properties?
• What is the potential for weather-related damage?
• Are your building sites on a coastline, or inland?

These are just some of the factors you will want to consider when purchasing general liability insurance coverage.

What doesn’t general liability insurance cover?

General liability insurance protects your home building company from claims by third parties if something goes wrong in the course of doing business, but it will not cover you for every potential accident or injury. You will likely need to purchase additional coverage through separate policies to protect your business. Here are some examples of what general liability insurance does not cover:

• Worker’s compensation insurance – This is required coverage for most types of businesses in almost every state. Designed to protect workers who are injured on the job, worker’s compensation coverage is essential for home building contractors, because with sharp tools, using ladders, and an active worksite, the potential for injury is high.
• Commercial auto insurance – If your home building business has trucks and vans used for work purposes, those vehicles should be insured using a commercial vehicle policy.
• Subcontractor insurance – Most home-building businesses rely on a network of subcontractors for specialized tasks. It is important to talk to your insurance agent about the benefits of asking your subcontractors to carry their own insurance policies—and to talk about the risks associated with using subcontractors who don’t have their own insurance.
• Professional liability insurance – General liability protects your home building business against accidents or property damage that happen on a building site. Professional liability insurance, which is also sometimes called Errors and Omissions coverage, protects against claims made about the quality of your work. This is an important distinction. Think of it this way—general liability insurance will cover medical costs if the homeowner comes out to the building site and is injured tripping over a tool that was left out. Professional liability coverage covers costs associated with claims about the workmanship after the homeowner moves into the house.
• Pollution liability insurance – Depending on the type of construction work your company performs, you may wish to carry pollution liability coverage. If your business does extensive renovation or tear-downs of older properties, pollution liability coverage can protect you against claims of asbestos or lead contamination of the worksite, for example.

General liability insurance coverage is a must for contractors. If you are looking for a policy to cover your home-building business, talk to the experts at Rate Insurance. They will help you to find the right coverage at the right price to protect your company.

Disclaimer:

All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Rate Insurance does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Rate Insurance. Rate Insurance, its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.