Contractor General Liability Insurance Explained

Do you have contractor general liability coverage? When you run a business in the construction industry, you may think of insurance far more often than other business owners. Keeping all the coverage types, limits, and requirements in order can be overwhelming. If you've got questions about contractor general liability insurance specifically, keep reading.

We've got this foundational commercial insurance policy unwrapped and simplified.

Contractor General Liability Insurance Explained

Let's start with the basics:

What does CGL cover?

Contractor general liability (CGL) is a commercial insurance policy that protects you against third-party injuries and property damage claims.

  • Someone walks into your project site and trips over a power cord, breaking their arm when they fall onto the hard concrete foundation.
  • Your new hire accidentally backs some heavy equipment into a neighboring fence.
  • A delivery driver comes into contact with exposed wires while dropping off a package at the site.
  • Heavy branches from the tree you're trimming damage the motorcycle parked below.
  • Your excavation work weakens the foundation of the adjacent building.

These are just a few examples of third-party property damage or injury claims that could happen due to your business activities.

While protection against third-party injuries and property damage are the most common reasons to carry CGL, there are other protections this commercial insurance coverage provides.

CGL will also typically protect you against claims for advertising injury or reputational harm.

When your ad campaign comparing your work to competitors veers off-course or your website logo and design is too similar to another landscaper in town, CGL offers coverage for libel, slander, copyright infringement, or use of another's advertising idea.

What's not covered by CGL?

When remembering what protection contractor general liability offers, just keep “other people” in mind. It won't cover the property and people that belong to your business.

CGL will not cover employee injuries or illnesses. If a random stranger off the street gets hurt because of your business, CGL is designed to cover the claim. However, if one of your employees gets injured in your business, you'll need worker's compensation insurance to cover medical bills and lost wages.

CGL will not cover your business property. Your property needs specialized protection, from your office building to your warehouses full of materials and equipment. You can protect your office building and furniture with commercial property insurance and even get specialized tools and equipment coverage for the high-value equipment that helps you get the job done. But CGL won't kick in coverage if your own stuff gets damaged — only if someone else's does.

Are Contractors Required to Carry Liability Insurance?

Some contractor insurance policies — such as worker's compensation insurance — are required by law. If you fail to carry workers comp, you could face penalties, including fines and jail time.

But what about general liability? Do you have to legally have to carry it?

The short answer is no.

CGL is not required by law.

There is a longer answer here, one in which you may be required to carry CGL by certain clients.

If you bid on a job with the State of California, you'll need proof that you carry contractor general liability insurance before the contract is signed in limits not less than $1,000,000 per occurrence and $2,000,000 aggregate for bodily injury and property damage liability.

California's not the only example here. If you want to bid on government contracts, be prepared to carry liability insurance, worker's comp insurance, and construction bonds.

Even if you don't ever plan on bidding on state or federal projects, many private clients will want to see proof of liability insurance before they sign a contract with you, as well.

And, if you live in CA, you will have to disclose upfront whether you carry this coverage or not.

In CA, home improvement contractors are required to disclose to clients whether or not they carry commercial general liability insurance pursuant to California Business & Professions Code §7159.3.

While you may not be legally required to carry this essential coverage, CGL can help you get more jobs, from home improvement projects to those coveted government contracts.

How Much Does Contractor General Liability Cost?

Your CGL costs will vary depending on a number of factors, such as your industry class code, the type of work you do, how long you've been in business, whether you've had previous claims and other factors.

However, CGL is surprisingly affordable, especially compared to other types of insurance such as workers comp.

General contractors typically pay an average of $142 monthly for general liability insurance coverage.

There may be ways to reduce your insurance costs as well. You can save by bundling multiple policies together or paying your annual premiums upfront instead of monthly, for example.

To get a more accurate idea of how much CGL will cost for your construction business, get a no-obligation quote from Aegis Insurance Markets.

General liability insurance for contractors is known as a foundational insurance policy for a reason. It's the solid foundation of protection for your business against the most common claims you're likely to encounter as you build your business. From here, you can add on additional coverages for specific risks you're likely to face, but without CGL in place, you're building your business on rocky ground.

For more information about CGL or other contractor insurance policies, call the construction insurance professionals at Truckee-based Aegis Insurance Markets. We make it our business to protect yours.




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40169 Truckee Airport Rd. Ste #203
Truckee, California 96161
Phone (800) 579-6369
Fax (530) 582-6007
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