Running a contracting business comes with risk. Whether you're working on a small residential project or a large commercial job, one accident can result in property damage, an injury, or a costly claim.
That's where commercial general liability insurance comes in.
For California contractors, understanding what general liability insurance covers—and what it doesn't—is an important part of protecting your business.
What Is General Liability Insurance?
General liability insurance is designed to protect your business from certain claims involving third-party bodily injury, property damage, and other covered liability exposures.
For example, imagine you're remodeling a customer's home and accidentally damage part of the property. Or a customer trips over equipment at your jobsite and is injured.
Depending on the circumstances and the terms of your policy, general liability insurance may help pay covered damages as well as legal defense costs.
Is General Liability Insurance Required for California Contractors?
California does not generally require every licensed contractor to carry commercial general liability insurance. However, contractors licensed as a Limited Liability Company (LLC) are required by the California Contractors State License Board to maintain liability insurance. For an LLC with five or fewer personnel of record, the minimum required limit is $1 million, increasing by $100,000 for each additional person, up to $5 million.
However, that doesn't mean you won't need it.
Customers, general contractors, property owners, landlords, lenders and other businesses may require you to provide proof of general liability coverage before you're allowed to begin a project.
The California Contractors State License Board also advises consumers to verify whether a contractor carries commercial general liability insurance.
For many contractors, carrying adequate liability insurance is simply part of operating a professional business.
What Can Contractor General Liability Insurance Cover?
Every policy is different, but general liability insurance may provide protection for claims involving:
Bodily Injury
If someone other than an employee is injured because of your business operations, your policy may provide coverage for a resulting claim.
For example, a homeowner could trip over equipment or materials at a jobsite and be injured.
Property Damage
Contractors work around other people's homes, buildings and property every day.
If your operations accidentally cause covered damage to someone else's property, general liability insurance may help protect your business from the financial consequences.
Products and Completed Operations
Sometimes a problem doesn't appear until after the job is finished.
Completed operations coverage can be especially important for contractors because certain covered claims may arise from work after you've left the jobsite.
Personal and Advertising Injury
General liability policies can also provide coverage for certain non-physical injuries, subject to the terms and exclusions of the policy.
What Does General Liability Usually NOT Cover?
General liability insurance is important, but it doesn't cover every risk your contracting business faces.
For example, you may need other insurance for:
- Employee work-related injuries
- Business vehicles
- Tools and equipment
- Damage to your own business property
- Professional or design-related errors
- Cyber risks
- Certain pollution exposures
That's why contractor insurance is often made up of several different types of coverage rather than one policy.
General Liability vs. Workers' Compensation
These two coverages are often confused, but they serve very different purposes.
General liability insurance primarily addresses certain claims made by customers and other third parties.
Workers' compensation insurance provides benefits for employees who suffer covered work-related injuries or illnesses.
California employers are generally required to carry workers' compensation coverage even if they have only one employee. Certain contractor classifications have additional workers' compensation requirements even when they report having no employees.
If you employ workers, general liability insurance is not a substitute for workers' compensation.
What Is a Certificate of Insurance?
If you do commercial work, you've probably been asked for a Certificate of Insurance, often called a COI.
A certificate provides evidence of insurance and summarizes information about your policies, such as the insurance company, policy dates and limits.
A customer or general contractor may request a certificate before allowing you onto a jobsite or before awarding you a contract.
It's important to remember that the certificate itself doesn't replace your insurance policy. The actual policy terms, conditions and endorsements determine your coverage.
What Does “Additional Insured” Mean?
Some contracts require the property owner, general contractor or another party to be added to your general liability policy as an additional insured.
This can provide that party with certain protection under your policy for covered claims arising out of your work, depending on the endorsement and circumstances.
Not every additional insured endorsement provides the same protection, so it's important that your insurance agent review the actual requirements in your contract.
What Do $1 Million / $2 Million Liability Limits Mean?
A common general liability policy structure is:
$1,000,000 Each Occurrence
The maximum the policy may pay for a covered occurrence, subject to the policy terms.
$2,000,000 General Aggregate
The maximum the policy may pay for certain covered claims during the policy period, subject to how the policy applies.
Those limits are common examples, but they aren't automatically right for every contractor.
The appropriate limits can depend on the type of work you perform, your contracts, payroll, subcontractor use, project size, customers and other exposures.
The Cheapest Contractor Policy Isn't Always the Best Policy
Price matters—especially when you're running a business.
But two policies with similar limits can provide very different protection.
Before choosing coverage based only on price, consider things such as:
- Your contractor classification and type of work
- Subcontractor requirements
- Additional insured endorsements
- Completed operations coverage
- Policy exclusions
- Deductibles or self-insured amounts
- Contract requirements
- Coverage for the specific work you perform
Finding out that an important part of your operation is excluded after a claim occurs can be far more expensive than choosing appropriate coverage from the beginning.
Protect the Business You've Worked Hard to Build
Every contracting business is different.
A one-person contractor doing residential repairs has very different insurance needs than a contractor with employees, multiple vehicles, subcontractors and large commercial projects.
At Bryan Bagwell Insurance Agency, we help California contractors review their business insurance needs and shop for coverage that fits the work they actually perform.
Whether you need general liability, workers' compensation, commercial auto, commercial property, or other business insurance, we're here to help.
Need a Contractor Insurance Quote?
Contact Bryan Bagwell Insurance Agency today to review your current insurance or request a quote.
Serving contractors throughout California, including Victorville, Hesperia, Apple Valley, Adelanto, Oak Hills, Phelan and surrounding High Desert communities.
Bryan Bagwell Insurance Agency
California Insurance License #0F88891
Coverage, eligibility, limits, exclusions and availability vary by insurance company and policy. This article is for general informational purposes only and does not change, expand or replace the terms of any insurance policy.