As a contractor, you know that accidents can happen on the job site. From property damage to bodily injury, unexpected incidents can not only be harmful but also costly. That's why having Commercial General Liability (CGL) insurance is crucial for contractors of all types and sizes. In this blog post, we will explore the importance of having comprehensive CGL insurance coverage and how it can protect your business from financial damage in case of unforeseen circumstances. So, sit back, grab a cup of coffee, and let's dive in!
First, let us see what commercial general liability is.
Commercial General Liability (CGL) insurance is one of the most important types of liability insurance that provides coverage against a variety of risks faced by a business in its day-to-day operations. CGL insurance is designed to protect businesses from lawsuits and financial loss that may arise due to property damage, bodily injury, or personal injury that may be caused to third parties by the business's operations, products, or services.
Regardless of the type of construction or installation business you run, general liability insurance can protect you from lawsuits originating from the above-mentioned situations. Purchasing commercial general liability insurance coverages is always a good idea because it protects your company from lawsuits and hefty compensation that could otherwise spell doom for your business. It is important to have CGL insurance even if you are a small contractor with a limited budget. If you don't have CGL insurance and you are sued, you could lose a big chunk of what you have worked so hard for.
The policy is appropriate for all sizes and types of businesses, including small companies, startups, and big corporations. This coverage is available to business owners, operations heads, managing directors, and anybody involved in business operations. It also safeguards sellers, distributors, and manufacturers from business liability.
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Is general liability insurance required for all contractors?
The following types of contractors, tradespeople, and construction businesses may need this type of liability coverage:
- General contractors, concrete contractors, masonry contractors, excavation contractors, drywall contractors, paving contractors, and permanent yard contractors.
- Plumbers, roofers, carpenters, welders, electricians, painters, landscapers, home inspectors, appliance repair technicians, and handy people.
- Snow and ice removal businesses, Debris removal businesses, tree service businesses, and interior & exterior construction businesses.
It protects contractors by covering the costs of lawsuits filed by third parties
A general liability insurance policy covers the costs of lawsuits filed by third parties after a construction company or one of its employees causes bodily injury or property damage. It means, if your construction business is sued, you will have to pay legal fees, damages, and settlement costs, no matter how liable you are. Contractors or anyone else involved in a construction business can benefit from general liability insurance (also known as contractor's liability insurance) since it covers the cost of any lawsuit filed against them.
You will also be able to receive compensation from your general liability insurance company for the injuries to the third party, including medical expenses.
Contractors often purchase commercial general liability insurance to protect them from third-party lawsuits for -
- Financial loss due to property damage
- Injury to third parties and clients. For example, your client trips over a wet floor in your office or falls over a power cord and breaks his leg.
- Reputational injuries. For instance, when your competitor accuses you that one of your advertisements has damaged its reputation.
- Your construction activity or product installation causes damage to a third party
Does general liability insurance cover every lawsuit?
General liability insurance may not cover every lawsuit but would help by covering the most common and expensive lawsuits. In addition to general liability coverage, you can add vendor endorsements, oral & written contractual liability, damages to rented premises, etc., as per your business requirements- by paying additional premiums.
Excess Liability Coverage
A CGL policy can be supplemented with excess liability coverage to cover claims beyond the limit of the policy. Some policies may exclude certain actions, which we will learn about in the next section.
Exclusions in a commercial general liability insurance coverage
- Expected or intended injury
- A failure or delay (by the contractor or on his behalf) to perform an agreement or contract as per its terms.
- Liabilities arising out of the conduct of the Insured’s business
- Pollution
- Liabilities already covered by other policies ( such as liabilities under workmen's compensation)
- Damage to the work of the insured
- Damage to the insured’s property
- Professional liability
- Errors and Omissions.
What factors can influence the cost of general liability insurance coverage for contractors?
The cost of general liability insurance for contractors in India is determined by a variety of factors, including:
- Size of the business: The size of the contractor's business can also impact the cost of insurance. Larger businesses may pay more due to the increased risk of potential claims.
- Type of work: The nature of the work being performed by the contractor can have a significant impact on the cost of general liability insurance. Riskier activities such as roofing or demolition work may result in higher premiums.
- Claims history: Insurance providers will also take into account the contractor's claims history when determining premiums. Contractors with a history of excessive claims may be considered at higher risk and could face higher premiums.
- Coverage limits: The amount of coverage the contractor chooses can also impact the cost of insurance. Higher coverage limits will typically result in higher premiums.
- Deductibles: The deductible is the amount the contractor will pay out of pocket before the insurance coverage begins. Higher deductibles can result in lower premiums, but also mean the contractor will pay more from his pocket, in the event of a claim.
- Experience and qualifications: Insurance providers may also take into account the contractor's prior experience and qualifications. More experienced contractors with certifications and licenses may be considered at lower risk and could face lower premiums.
- Location: The location of the contractor's business can also impact the cost of insurance. Areas with a higher risk of accidents or natural disasters may result in higher premiums.
Overall, the cost of general liability insurance for contractors in India will depend on a combination of these factors, as well as the specific insurance provider and the policy being considered. It is important for contractors to shop around and compare quotes to find the best coverage at the most affordable price.
Points to keep in mind while Shopping for the Right Coverage
When shopping for CGL insurance policies, there are a few things you should keep in mind.
- Make sure you understand the coverage limits of the policy. You will want to ensure the policy covers all your potential risks, including third-party property damage and bodily injury.
- Consider the deductibles and co-pays associated with the policy. You will want to make sure you can afford the out-of-pocket costs when you need to file a claim.
- Do not forget to read the fine print of the policy so that you understand exactly what is covered and what is not.
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Conclusion
As a contractor, you are responsible for any damage or injury that occurs to third parties because of your work. If you are sued, commercial general liability (CGL) insurance will cover your legal expenses and any settlements or judgments against you up to the limit of your policy. It is common for clients to demand that you should have a CGL insurance cover, before working with your company. Some clients may also require you to name them as additional insured on your CGL policy. This means that the client is covered under the policy for any liabilities arising from your business operations. This way, clients can minimize their own risk exposure and protect themselves from potential financial losses.
