General Liability Insurance for Contractors: Cost & Coverage
If you’re a contractor, one accident, property damage claim, or lawsuit can wipe out months — even years — of profit.
Whether you’re a general contractor, electrician, plumber, roofer, or remodeler, general liability insurance is one of the most important protections your business can carry.
In many cases, it’s not just recommended — it’s required by clients, municipalities, or state licensing boards.
This detailed 1800-word guide explains:
- What general liability insurance covers
- What it does NOT cover
- Why contractors specifically need it
- How much it costs in 2026
- What affects pricing
- Coverage limits explained
- How to reduce premiums
- Common mistakes contractors make
By the end, you’ll understand exactly how to protect your contracting business properly.
What Is General Liability Insurance for Contractors?
General liability insurance (GL insurance) protects contractors against third-party claims involving:
- Bodily injury
- Property damage
- Personal and advertising injury
- Legal defense costs
It covers accidents that happen during business operations — especially on job sites.
Contractors face higher physical risk exposure than most other businesses. That’s why this coverage is considered foundational.
Why Contractors Specifically Need General Liability Insurance
Contracting work involves:
- Tools and heavy equipment
- Physical labor
- Client property
- Subcontractors
- Public interaction
- Structural modifications
Each of these increases legal and financial risk.
Without insurance, you could be personally responsible for:
- Medical bills
- Property repairs
- Legal fees
- Settlements
- Court judgments
Even a small claim can exceed $50,000. Larger claims can reach six figures.
What Does General Liability Insurance Cover?
Let’s break it down into core coverage components.
1. Bodily Injury Coverage
If someone is injured because of your work or on your job site, this coverage pays for:
- Medical expenses
- Hospital bills
- Rehabilitation
- Legal defense
- Settlements
Example:
A homeowner trips over construction materials left on-site and fractures their ankle.
Medical expenses: $18,000
Lawsuit settlement: $40,000
Legal defense: $25,000
General liability covers these costs up to policy limits.
2. Property Damage Coverage
Covers damage you cause to someone else’s property.
Example:
While installing cabinets, you accidentally damage a client’s granite countertop worth $12,000.
Your general liability policy pays for repairs or replacement.
This is extremely common in contracting.
3. Completed Operations Coverage
Protects you after a job is finished.
If your completed work causes damage later, you’re still covered.
Example:
You install plumbing incorrectly.
Six months later, pipe leaks and damages flooring.
Completed operations coverage handles the claim.
This is critical for contractors.
4. Personal and Advertising Injury
Covers claims such as:
- Defamation
- Libel
- Copyright infringement in advertising
Less common for contractors, but included in standard policies.
What General Liability Insurance Does NOT Cover
It’s important to understand exclusions.
It does NOT cover:
- Employee injuries (covered by workers’ compensation)
- Professional design errors (covered by professional liability)
- Damage to your own equipment
- Auto accidents (covered by commercial auto)
- Intentional damage
- Poor workmanship replacement
Example:
If your work is defective, insurance may cover resulting damage — but not cost to redo faulty work itself.
How Much Does General Liability Insurance Cost for Contractors in 2026?
Cost varies significantly by trade and risk level.
Typical annual premiums:
Low-risk contractor (handyman, small remodeling): $500 – $1,500 per year
Mid-risk trades (electricians, plumbers): $1,200 – $3,000 per year
High-risk trades (roofers, structural contractors): $3,000 – $10,000+ per year
Monthly cost often ranges: $50 – $400+
Factors That Affect Cost
Several variables determine premium:
1. Type of Work
Riskier work = higher premium.
Roofing costs more than painting. Demolition costs more than landscaping.
2. Annual Revenue
Higher revenue = more exposure.
$200,000 annual revenue costs less to insure than $2 million.
3. Claims History
Frequent past claims increase premiums.
Clean claims history lowers cost.
4. Location
State laws, litigation environment, and weather risks influence rates.
Urban areas typically cost more than rural.
5. Coverage Limits
Higher limits = higher premiums.
Standard contractor limit: $1 million per occurrence
$2 million aggregate
Higher limits cost more.
Recommended Coverage Limits
Most contractors carry:
$1 million per occurrence
$2 million aggregate
Large projects may require:
$2 million per occurrence
$4 million aggregate
Commercial clients often demand minimum coverage amounts in contracts.
Certificates of Insurance (COI)
Clients often request proof of insurance before awarding contract.
A Certificate of Insurance confirms:
- Coverage type
- Policy limits
- Effective dates
Without insurance, you may lose bidding opportunities.
General Contractor vs Subcontractor Coverage
General contractors often require subcontractors to carry their own general liability insurance.
Subcontractors should never rely solely on general contractor’s policy.
If subcontractor causes damage:
They are responsible.
Proof of insurance protects all parties.
Additional Insured Endorsement
Many contracts require contractors to list clients as “additional insured.”
This extends your coverage to them for claims arising from your work.
Important for commercial projects.
Real-World Claim Example
Scenario:
General contractor renovating kitchen.
Worker accidentally damages gas line.
Explosion causes:
Property damage: $120,000
Neighbor property damage: $80,000
Injury claim: $200,000
Total exposure: $400,000+
Without insurance, contractor faces bankruptcy.
With $1M policy: Covered within limits.
General Liability vs Professional Liability for Contractors
General liability: Covers physical accidents.
Professional liability: Covers design errors, engineering mistakes.
Contractors offering design-build services may need both.
How to Lower General Liability Premium
- Maintain clean claims history
- Implement safety programs
- Use written contracts
- Require subcontractors to carry coverage
- Increase deductible
- Bundle with Business Owner’s Policy (BOP)
Risk management reduces long-term cost.
Business Owner’s Policy (BOP) Option
Many contractors bundle:
- General liability
- Property coverage
- Business interruption
Often cheaper than purchasing separately.
Common Mistakes Contractors Make
- Buying minimum limits only
- Not covering completed operations
- Letting policy lapse
- Failing to list additional insured
- Not reviewing policy annually
- Assuming insurance covers poor workmanship
Understanding coverage avoids costly surprises.
Is General Liability Legally Required?
In many states, it is not mandated by law.
However:
- Licensing boards may require it
- Clients often require it
- Commercial property managers demand it
Practically speaking, it’s essential.
Can You Work Without It?
Technically possible in some states.
Financially dangerous.
One accident can destroy your business.
Most serious contractors consider it non-negotiable.
Umbrella Insurance for Contractors
Umbrella insurance adds extra liability coverage beyond general liability limits.
Example:
$1M general liability limit
$1M umbrella policy
Total available coverage: $2 million
Useful for contractors handling larger commercial projects.
Final Verdict
General liability insurance is foundational for contractors.
It protects against:
- Injury claims
- Property damage
- Lawsuits
- Completed work claims
Cost depends on trade, revenue, and risk level — but typically ranges from a few hundred to several thousand dollars annually.
Compared to potential six-figure lawsuits, it’s a necessary investment.
For contractors, insurance isn’t just about compliance — it’s about survival.
If you want, I can next create a comparison between General Liability vs Professional Liability for contractors specifically, or a cost breakdown by trade (plumber, electrician, roofer, handyman).
