Definition of a Contractor's General Liability Insurance
Many types of losses can occur at construction sites, such as injuries and property damage. To safeguard against these scenarios, states require contractors to purchase general liability insurance. Depending on the size of the contract, however, some states allow contractors to work on small jobs without insurance. If you are a contractor, having general liability insurance can protect you from financial ruin in the event of negligence or acts of omission.
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General Liability
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No matter how careful you are, things happen that you can not control. For this reason, contractors need to purchase general liability insurance. The insurance typically protects the assets of the construction site against lawsuits stemming from maiming or death, damage to property, equipment failure, theft, fires and explosions, and contractual liabilities. Before purchasing general liability insurance, make sure you fully understand the exact coverage offered. Coverage will vary from policy to policy.
Umbrella Liability Coverage
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Larger contractors with large construction sites typically purchase umbrella liability coverage. General liability insurance usually has a maximum payout limitation that may not cover all of your liability. An umbrella liability insurance policy provides coverage in the event your general liability insurance policy does not provide sufficient coverage. Umbrella liability insurance policies can protect the cash flow of a large contractor. Lawsuits that exceed your general liability insurance coverage can bankrupt your company. Umbrella liability insurance provides a safeguard in the event your general liability insurance coverage is not sufficient.
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Exclusions
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Before purchasing contractor's general liability insurance, make sure you fully understand any exclusions listed in the insurance policy. You should know exactly how your insurance policy will and will not protect you. All insurance policies have some exclusions. To make up for these exclusions, you can typically purchase riders or other types of insurance for the specific exclusions. Types of insurance that may provide coverage for exclusions in contractor's general liability insurance include omissions liability insurance, director's and officer's liability and professional liability insurance.
Perceived Risk
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When underwriting a contractor's general liability insurance policy, insurance company's consider the perceived risk of your construction site. Construction sites are not equal, and some sites will involve more risk then other types of sites. Make sure your insurance agent fully understands the nature of your construction sites. You want to make sure you purchase enough coverage but at the same time you do not want to purchase more coverage than you need.
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