Why do Contractors pay more for General Liability Insurance?

By April 5, 2017News

I get this question asked all the time. In order to help answer that question, it’s easier to first explain General Liability, look at potential claims that it would cover and what factors are taken into consideration for rating General Liability Policies.

What is General Liability?

A General Liability Policy protects the business owner from claims arising for alleged bodily injury, personal injury or property damage liability with regards to the work the contractor performs.

Now what does that really mean?

Here are some examples of how your General Liability can help protect your business:

Example #1:

A painter is doing an exterior remodel on an apartment complex. While painting the trim, the contractor accidentally over sprays some paint onto a new car that is parked nearby the complex. The General Liability would cover the damages to the property (vehicle) due to the negligence of the contractor.

Example #2

A contractor that is working on an exterior sign installation job for a local restaurant takes a break for lunch. Before leaving, he forgot to properly secure the sign and it falls from the building and cracks the concrete in front of the store. Since the contractor was negligent in not securing the sign, the damage to the concrete would be covered by the General Liability Policy, as well as, injury to any pedestrian that occurred from the sign falling.

* Each policy has exclusions, you should see what your policy does and does not cover to make sure you are not left with any open exposures.

What factors play a part in pricing?

There are a variety of carriers that can write General Liability for Contractors; depending on their program, they may use different rating factors, such as:

– Gross Receipts

– Employee Payroll

– % of work subcontracted out.

– Type of work being performed by the contractor.

– Project types ( New Construction vs. Remodel Work )

These all can play a factor in your pricing, you should ask your agent what factors are being used to rate your policy. Due to the risky nature of the construction industry, and the types of claims that it would cover, the pricing tends to be higher than most industries. New Construction, especially for Residential properties, can cause your price to increase dramatically.

Remember that New Construction is considered Ground Up Construction not Remodel Work or a Room Addition.

The better you explain EXACTLY what your company does, and you can prove that with your website through examples of past projects and safety/procedures you have in place, the better your underwriter will understand what your company is doing. What this does is take away the fear of any unknown risk, which can result in better and more accurate pricing.

If you would like help looking over your currently policy to see what it covers and if there are any open exposures, please message me. I will be more than happy to review it with you!

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