There comes a time in every homebuilder’s career when they are faced with legal threats. This may come in the form of a lawsuit alleging that their company caused someone bodily injury or damage to the property of a client.
For homebuilders, this threat can be even more frequent, as the work that they do often puts them in close proximity with other people and their belongings. Additionally, contracting work often requires physical labor, which increases the chances of employee injury, hence the necessity for a workers' compensation policy.
To protect yourself and your business financially, it is important to have contractor liability insurance, also known as general liability insurance. This type of insurance can cover the costs of any damages that you are found liable for, up to the policy limit.
You've likely heard this before, but may be wondering: What does contractor liability insurance cover? Let's break this down below.
What is Homebuilder’s or Contractor's Liability Insurance?
Contractor liability insurance, also known as general liability insurance, is a type of insurance that may protect you financially in the event that you are found liable for damages or injuries caused to third parties.
This coverage can include both property damage and bodily injury and can be used to cover the costs of medical expenses, legal fees, and more.
For example, let's say that you are a residential contractor who is working on a home renovation project. During the course of your work, one of your workers accidentally damages a piece of the homeowner's property. Your contractor liability insurance would then step in to cover the cost of repairing or replacing the damaged property, up to your policy limit.
Or, maybe you are working on a construction site and a member of the public is injured by one of your workers. Again, your contractor liability insurance would cover the cost of medical expenses incurred by the injured party, as well as any legal fees that you may incur as a result of the accident, up to the policy limit.
In short, contractor liability insurance provides financial protection for you in the event that your business is found to be responsible for property damage or personal injury.
So, if you are a homebuilder, make sure you have adequate liability insurance in place. It could save you from financial distress.
Who Needs Contractor Liability Insurance?
Many clients, banks, states, and projects will require that you have some form of contractor's liability insurance in order to work with them. This is because they want to be sure that they are protected in the event that something goes wrong during your work.
Additionally, even if it is not required, it is still a good idea to have this coverage to protect yourself financially.
If you choose not to carry liability insurance, you may miss out on important project opportunities. You also open yourself up to a great deal of financial risk if something were to go wrong during your work.
What Does Contractor Liability Insurance Cover?
Contractor liability insurance can help you cover the costs of any damages or injuries that occur during your work, as well as the costs of any legal fees that may arise.
This includes coverage for:
- Bodily injuries
- Property damage
- Personal and advertising injury
- Medical expenses
This coverage can help you protect yourself and your business in the event that something goes wrong during a project.
In order to be protected by this insurance, the damages or injuries must have been caused by your work as a homebuilder and must have occurred during the policy period.
It's important to note that this type of insurance will not cover any damages that were caused intentionally by you or your employees. For example, if someone is injured on the job due to your negligence, you would be covered. However, if someone is injured because one of your employees got into a fight with them, you would not be covered.
How Much Does Contractor Liability Insurance Cost?
The cost of liability insurance for residential contractors will vary depending on a number of factors, including the size of your business, the type of work you do, and the amount of coverage you need.
For example, a small homebuilding business that does residential work will typically pay less for liability insurance than a large commercial contractor that does high-risk work.
The premium you’d pay is determined by direct payroll to employees, payroll to any uninsured subcontractors, and gross sales. You make an estimate to begin the policy. Once your 12 months are up, you are audited by the insurance company. If your payroll and sales were higher than your estimate, you owe an additional premium. If the numbers are lower than your estimate, you get a refund.
To get an accurate estimate of what your business will pay for liability insurance, contact a licensed insurance agent to help review all your risks and exposures.
What Other Kinds of Insurance Should Homebuilders Consider?
Residential contractors should be aware of the different types of insurance available to them and what each one covers.
For example, in addition to general liability insurance, contractors may also want to consider purchasing:
- Pollution liability insurance: This type of insurance protects contractors from claims arising from pollution or contamination caused by their work.
- Cyber liability insurance: This type of insurance protects contractors from claims arising from data breaches or cyber attacks.
- Employment practices liability insurance (EPLI): This type of insurance protects contractors from claims arising from wrongful termination, discrimination, and other employment-related issues.
- Commercial auto insurance: This type of insurance covers vehicles used for business purposes.
- Commercial umbrella insurance: This type of insurance provides additional liability coverage above and beyond the limits of other insurance policies.
Securing General Liability Insurance for Homebuilders
Now that you know what types of coverage are available, you can make an informed decision about which ones are right for your business. Remember, even if you decide not to purchase some of the following types of insurance, it's still important to be aware of your exposures and how much it would cost to insure them.
Pollution liability, cyber liability, and employment practices liability (EPLI) are just a few examples of potential risks that could put your business at risk. By understanding what types of coverage are available, you can make sure your business is protected against any unforeseen liabilities.
Contact the homebuilders insurance experts today to learn about our insurance options for contractors.
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