A single lawsuit can cost a construction business hundreds of thousands of dollars in defense costs and settlements. For general contractors, what insurance does a general contractor need comes down to protecting cash flow, assets, and active projects from common claim scenarios.
General contractor insurance coverage can feel complicated because requirements vary by project, client, and state. A practical approach is to match coverage to real exposures—job-site injuries, third-party property damage, subcontractor risk, equipment loss, and contract-driven insurance requirements—without paying for coverage that does not apply to your work.
This guide outlines the most common construction business insurance policies contractors use, what each one generally covers, and how they work together. It also explains how to estimate exposure and reduce premium surprises when you request quotes.
Understanding What Insurance Does a General Contractor Need: The Foundation
General contractors often face higher day-to-day liability because construction work happens in changing environments with multiple trades, tools, materials, and public exposure. A basic insurance program usually needs to address third-party bodily injury, third-party property damage, employee injuries, damage to work in progress, and claims tied to professional services or contract obligations.
Construction risk is typically driven by job type, subcontractor use, payroll, work at heights, driving exposure, and the value of projects and materials. For that reason, builders insurance requirements are usually set by what you do and what your contracts require on each job.
The True Cost of Being Underinsured
Many contractors carry only minimum required coverage, which can leave gaps in construction company protection. Underinsurance most often shows up when a claim exceeds your limit, falls into an exclusion, or when a contract requires coverage you do not carry.
- Large third-party injury claims can exceed basic liability limits
- Job-site injuries can increase workers compensation costs and trigger audit adjustments
- Design or management errors can create professional liability exposure
- Uninsured equipment losses can disrupt operations and delay projects
Contractor insurance types matter because gaps can turn a manageable claim into a catastrophic loss.
Commercial General Liability: The Cornerstone of Contractor Protection
For most general contractors, commercial general liability (CGL) is the core policy. CGL generally covers third-party claims for bodily injury, third-party property damage, and certain personal and advertising injury claims arising from your operations.
What CGL Covers
A typical general liability policy may include:
- Premises liability: Injuries occurring on your business property or job sites
- Products liability: Damage caused by materials or products you install
- Completed operations: Claims arising after project completion
- Personal and advertising injury: Libel, slander, and copyright infringement claims
- Medical payments: Immediate medical expenses for injured third parties
- Legal defense costs: Attorney fees, court costs, and settlements
Coverage Limits and Considerations
Most contractor liability policies use a per-occurrence limit and an aggregate limit. Common baselines are $1 million per occurrence and $2 million aggregate, but construction insurance requirements often increase with job size, public exposure, and owner requirements.
Many commercial projects require higher limits, additional insured status for owners and general contractors, and specific completed-operations wording. If you want a quick way to estimate how payroll and job type can influence baseline exposure before requesting quotes, this optional insurance cost estimator can provide a high-level reference point.
Workers Compensation Coverage: Protecting Your Most Valuable Asset
Workers compensation coverage is required in most states when you have employees, but rules can vary by state, ownership structure, and subcontractor arrangements. Workers comp pays statutory benefits for work-related injuries and can also reduce employer liability exposure in many common claim situations.
What Workers Comp Provides
Workers comp generally includes:
- Medical expense coverage: Necessary treatment for work-related injuries
- Disability benefits: Wage replacement when an employee cannot work
- Rehabilitation costs: Therapy and, in some cases, vocational support
- Death benefits: Benefits for eligible dependents in fatal cases
- Employer liability protection: Defense for certain employee-related lawsuits
Classification and Premium Factors
Workers comp premiums are largely driven by payroll, class codes, and your experience modification rate (EMR). Higher-risk job classifications typically carry higher rates. Misclassification and incomplete payroll allocation can materially change premium, especially at audit.
Safety programs and return-to-work practices can reduce claim frequency and severity over time, which may improve EMR and stabilize costs. If you want to sanity-check how payroll and job roles could affect workers comp exposure before comparing quotes, you can use this optional workers comp cost estimator as a high-level baseline.
Builder’s Risk Insurance: Project-Specific Protection
Builder risk coverage protects the structure, materials, and certain project-related property during construction. It is commonly required by lenders, owners, and commercial contracts for new construction and major renovations.
Coverage Scope
Building contractor coverage under builder’s risk typically includes protection for:
- Fire, lightning, and explosion damage
- Wind, hail, and weather-related losses
- Theft of building materials and installed fixtures
- Vandalism and malicious mischief
- Vehicle and aircraft damage to the structure
- Certain water damage scenarios
Policy Structure Options
Builder’s risk may be written as a single-project policy or an annual reporting form, depending on volume and project mix. Common exclusions include flood, earthquake, wear and tear, and faulty workmanship, which may require endorsements or separate policies depending on location and contract terms.
Evaluating contractor coverage options for builder’s risk also includes confirming the named insured, how materials are valued, which locations are covered, and when coverage starts and ends.
Professional Indemnity Insurance: Protecting Against Design Errors
Professional indemnity insurance (errors and omissions) addresses claims tied to professional services that general liability typically excludes. It is most relevant for design-build contractors, construction managers, and general contractors who provide professional advice, design input, or management services.
When Professional Liability Matters
Construction business protection through professional liability is most relevant when your scope includes:
- Architectural or engineering design services
- Project management and scheduling
- Cost estimation and budgeting
- Construction management oversight
- Specification writing or material selection
- Building code compliance consulting
Coverage Mechanics
Contractor professional liability is often written on a claims-made basis, meaning the policy in force when the claim is made responds, subject to terms and retroactive dates. Continuous coverage is important because claims can be made months or years after completion.
Commercial Auto Insurance: Mobile Equipment Protection
Commercial auto coverage is typically necessary when vehicles are used for business—trucks, vans, and vehicles hauling tools—because personal auto policies often exclude business use. Auto liability claims can be severe, especially when injuries involve third parties.
Coverage Components
Common components of business insurance for contractors vehicle coverage include:
- Liability coverage: Protection when your vehicles cause accidents
- Collision coverage: Damage to your vehicles from accidents
- Comprehensive coverage: Theft, vandalism, and weather damage
- Uninsured/underinsured motorist: Protection against drivers without adequate insurance
- Hired and non-owned auto: Coverage for rented vehicles and employee personal vehicles used for business
Inland Marine Insurance: Tools and Equipment Coverage
Inland marine coverage is commonly used to insure mobile tools and equipment that move between job sites. This is often separate from standard property coverage, which may have limited protection for items away from a primary location.
What’s Protected
Inland marine policies commonly cover:
- Hand and power tools
- Heavy equipment and machinery
- Scaffolding and temporary structures
- Building materials in transit or at job sites
- Leased or rented equipment (with proper endorsements)
- Electronic equipment including lasers and surveying instruments
Coverage terms vary, so confirm valuation, theft provisions, job-site storage requirements, and whether rented equipment is included or must be scheduled.
Contractor Bonding Requirements: Beyond Insurance
Surety bonds are not insurance, but they are often required for licensing, public work, and certain private contracts. Bonds guarantee performance and payment obligations to project owners and other parties.
Types of Construction Bonds
The primary bonds affecting general contractors include:
- License bonds: Required by many states to obtain or maintain contractor licenses
- Bid bonds: Guarantee you’ll honor your bid if awarded the contract
- Performance bonds: Ensure project completion according to contract specifications
- Payment bonds: Guarantee payment to subcontractors and material suppliers
- Maintenance bonds: Cover defects discovered after project completion
Bonding requirements are contract-driven and can limit which jobs you can pursue. Bonding capacity is typically tied to financial strength, experience, and the type of work performed.
Umbrella and Excess Liability: Extended Protection
Umbrella or excess liability provides additional limits above underlying policies, typically general liability, auto liability, and employer’s liability. It is often required on larger projects and can be a cost-effective way to increase limits compared to raising every primary policy limit.
When Higher Limits Matter
Umbrella coverage is commonly considered when:
- Contract requirements exceed your primary policy limits
- Your business assets exceed current coverage amounts
- You work on high-value commercial or residential projects
- Your projects involve significant public exposure
- You employ large crews or manage multiple subcontractors
Umbrella policies can add $1–$10 million or more in limits, depending on underwriting and project requirements.
Cyber Liability: The Emerging Risk
Construction operations increasingly use digital tools—job scheduling, cloud documents, email approvals, electronic payments, and vendor portals. Cyber liability coverage can help address losses tied to data breaches, ransomware, funds transfer fraud, and certain technology-related claims, depending on policy terms.
Putting It All Together: Building Your Insurance Program
A strong program aligns coverage with your operations, contracts, and subcontractor structure. The main objective is to reduce coverage gaps, confirm contract-required endorsements, and avoid last-minute policy changes after a job is awarded.
Recommended Coverage Priorities
For most general contractors, prioritize coverage in this order:
- Commercial general liability – required for virtually all operations
- Workers compensation – legally mandated in most states
- Commercial auto – essential if you own any business vehicles
- Builder’s risk – critical for new construction and major renovations
- Inland marine – important for protecting tools and equipment
- Professional liability – essential for design-build and CM services
- Umbrella liability – recommended for additional protection
- Cyber liability – increasingly important for all businesses
Cost Management Strategies
Cost control is often driven by accurate information and consistent documentation:
- Bundle policies with a single carrier for multi-policy discounts
- Implement formal safety programs to reduce workers comp premiums
- Choose appropriate deductibles based on your risk tolerance
- Review coverage annually to adjust for business growth
- Work with an agent specializing in construction insurance
Conclusion: Secure Your Construction Business Today
Answering what insurance does a general contractor need usually means balancing state requirements, contract requirements, and real job-site exposures. Commercial general liability, workers compensation, and commercial auto form the core for most contractors, while builder’s risk, inland marine, professional liability, and umbrella coverage address common gaps depending on scope and project requirements.
Insurance planning works best when it happens before a project starts: review contract insurance requirements, confirm additional insured and waiver wording when required, and track subcontractor certificates consistently. This reduces claim disputes and helps avoid last-minute coverage changes that can increase cost.
Review your current policies against your actual operations and the types of jobs you bid. If limits, exclusions, or subcontractor requirements are unclear, clarify them before a loss occurs.
Ready to price-check your exposure before requesting formal quotes? This optional insurance exposure estimator can help you get a high-level starting point based on payroll and job type.
