How Does Contractor's General Liability Insurance Work?

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Contractors' general liability insurance policies are typically designed to work in a very specific way. Find out about how contractor's general liability insurance policies work with help from an insurance professional in this free video clip.

Part of the Video Series: Insurance Information
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Video Transcript

Hi, this is David Sumpter, commercial insurance specialist with Wateridge Insurance in San Diego with some tips for contractors when it comes to liability insurance. Whenever you enter into a contract with a general contractor developer, you're probably going to be required to evidence your insurance. It's one of the first things they'll ask for and you're probably not getting paid until you give it to them so here's some of the things you're going to need to be looking for. Number one, probably general liability, that's the most important coverage that most contractors are required to carry, then you need to look at your worker's compensation insurance and commercial auto insurance. You may need to have a bond, you may need to have a builder's risk policy. It all depends on the contract but check with your agent. They can look through the contract and let you know what's most crucial. Now how does it work? When you get a liability policy and you evidence that coverage to a general contractor or a developer or whoever you're working with you are typically going to provide a certificate of insurance. That certificate of insurance lists off everything that you have when it comes to coverage. So the effective dates, coverage limits and policy term with the insurance carrier that you're working with. You provide that certificate of insurance to your general contractor or your developer or whatever, entity that you're working with and after you purchase that insurance give them the certificate of insurance. Usually you get to put the shovel into the dirt. Keep in mind contractor's liability insurance is specifically a little bit tough to procure sometimes because of construction defect claims. So one thing you want to look at is some insurance carriers will actually add exclusions. What is an exclusion? An exclusion is part of the rules that the insurance carrier sets forth for your policy. So if there's an exclusion for what you are doing, you have no coverage. So make sure you look at that insurance policy form with your broker and navigate the form to make sure that what you are doing isn't excluded. Also make sure that in your state find out what coverages are required by your state license bureau. Here in California, you are require to provide worker's compensation, liability and bonding. So make sure again to rely upon your broker to get every coverage in place before you start signing that contract and put the shovel in the dirt. I'm David Sumpter, commercial insurance specialist with Wateridge Insurance and that's what you need to know as a contractor when it comes to insurance.

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