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Understanding contractor insurance

The eight coverages, explained by the loss they cover

Here is what each coverage actually does, in terms of the loss it responds to.

General liability

Third party injury and property damage caused by your operations.

What it covers

  • Third-party bodily injury caused by your operations
  • Property damage you cause to someone else's property
  • Injury to a member of the public on your job site
  • Completed operations claims that surface after you finish
  • Legal defence costs for a covered claim, even a meritless one

What it does not

  • Injury to your own employees
  • Damage to your own tools
  • Damage to your own vehicles
  • The cost of redoing your own defective work

Workers compensation

Medical care and lost wages for your own injured employees.

What it covers

  • Medical treatment for a work-related injury
  • A portion of lost wages during recovery
  • Disability and rehabilitation benefits
  • Death benefits for dependants
  • Employer liability for claims brought directly against you

What it does not

  • Injury to anyone who is not your employee
  • Injury outside the course of employment
  • Pain and suffering, which the system does not pay by design

Commercial auto

Vehicles used in the business, including owned, hired and non owned.

What it covers

  • Liability for injury or damage you cause in a work vehicle
  • Collision and comprehensive on your own vehicles
  • Medical payments for you and your passengers
  • Hired auto for vehicles you rent
  • Non-owned auto for employees driving their own cars on your business

What it does not

  • Tools inside the vehicle
  • Vehicles you do not own or list
  • Personal use by someone outside your household

Tools and equipment

Your tools and equipment against theft, damage and loss.

What it covers

  • Tools stolen from a truck, site, or storage unit
  • Equipment damaged in transit between jobs
  • Rented equipment you are responsible for
  • Tools lost or damaged on site

What it does not

  • Tools left in an unlocked or unattended vehicle overnight, on many forms
  • Normal wear and tear and mechanical breakdown
  • Tools belonging to someone who is not an insured

Builder's risk

The project under construction, plus materials on site.

What it covers

  • The structure under construction, including materials and work in place
  • Materials on site and in transit
  • Fire, wind, hail, and vandalism
  • Temporary structures and scaffolding
  • Debris removal after a covered loss

What it does not

  • Injury to a worker
  • Damage you cause to a neighbouring property
  • The cost of correcting faulty workmanship
  • The value of the land itself

License, bid and performance bonds

A guarantee of performance or payment, not a transfer of risk.

What it covers

  • A license bond, required by most states to hold a contractor license
  • A bid bond, guaranteeing you enter the contract at your bid price
  • A performance bond, guaranteeing you complete the work
  • A payment bond, guaranteeing your subs and suppliers are paid

What it does not

  • Anything. A bond is a guarantee, not insurance, and the surety recovers what it pays

Umbrella and excess liability

Extra limits above your underlying policies once those are used up.

What it covers

  • Limits above your general liability and auto policies
  • Larger projects where the contract requires higher limits
  • A broader definition of covered loss on some forms

What it does not

  • Anything your underlying policy does not cover at all
  • Workers compensation, which needs its own excess coverage

Professional liability

Claims from design work and advice, which general liability excludes.

What it covers

  • Allegations of negligent work, design, or specification
  • Advice or estimates a client relied on
  • Errors in drawings, plans, or schedules you produced
  • Defence costs, often the larger part of the claim

What it does not

  • Bodily injury and property damage, which belong to general liability
  • Penalties and fines
  • Work you were not licensed to perform

What each coverage responds to

Work out what you are legally required to carry, then what your contracts require, then what your own balance sheet could not absorb. The overlap is your minimum and the third category is usually what gets skipped.

How claims work

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