What is A Contractor’s Liability Insurance?

A contractor’s liability insurance is a safety net for people who work in construction. It is a specialized form of insurance against different risks and liabilities that contractors face, like property damage, bodily injury, and even legal fees arising from lawsuits. This article explains it in detail.

What is This Insurance About and What Does it Do?

A contractor’s liability insurance (CLI) covers building professionals and contractors in case of construction errors. It is purchased by contractors who design and build construction projects. 

It covers both mistakes made by the contractor and third parties hired by the contractor. These third parties may be needed in case of specialized work, like drywalling, electric work, plumbing, and such.

Not all contractors provide all kinds of construction-related services. Usually, only larger contractors offer them in-house. Yet they’re also exposed to more risks, which this insurance protects them from. 

Why is A Contractor’s Liability Insurance Needed?

It covers risks that aren’t covered by a General Commercial Liability insurance (CGL). A CGL doesn’t include professional liability exclusions, which is why a contractor’s liability insurance can come in handy. 

What is Covered Under A CLI?

Many construction-related activities can be included in a list that’s in the policy documentation. Or it may be tailored to the needs of the contractor purchasing it. Some policies include a list of undertakings that aren’t a part of coverage. 

Contractors can buy a standing contractor’s liability insurance that covers everything that the contractor does. They may also choose to purchase a policy that covers particular projects with detailed time frames.

CLI vs Builders’ Risk Coverage

Both of these types of insurance cover a similar set of conditions, entities involved, and types of loss in a building project. Although, the CLU is usually taken out by the contractor. While builders’ risk is taken out by the project’s owner.

Also, the CLI can be taken out for building improvement projects, yet it may not be available for a new project without any existing structure. Simultaneously, builders’ risk coverage can secure projects that don’t have an existing structure. 

Summing Up Contractor’s Liability Insurance

Contractors liability insurance provides coverage for both third-party hires and contractors, like designers, architects, and engineers. It helps in case of errors and mistakes made on the job, and other losses incurred during a building project.

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