5 Reasons Contractors Need General Liability Insurance

What is Liability Insurance?

Contractor’s liability insurance is coverage designed to protect the members of a contracting business from third party litigations. This is so that if a lawsuit for injury or damage is brought against your company, the company and contractors have some protection. 

It covers property damage, injury, financial losses, structural damage, and other liabilities that may be incurred during the process of your contract work or caused by your company in the long term. 

Why Get Liability Insurance?

There are several reasons that liability insurance is necessary for any contractor looking to make a living. Liability insurance will help to pay with your court fees in the event of a litigation, and if you do need to pay out a settlement, the insurance will also help you to cover it. To learn more about what kinds of things contractor Insurance covers and what to expect, see this breakdown of contractor liability policy. 

It’s important to get your liability coverage set up ahead of formalizing your business so that you are ready to work without exposing yourself  to a potentially ruinous lawsuit. Having this coverage will make your business much more secure and protected. 

One: Liability Insurance is Necessary for a Permit

Most states in the U.S require contractors to have liability insurance in order to get a work permit and set up business. This means it will be very difficult if not impossible for you to work as a certified contractor if you do not get some form of liability insurance first. 

In order to prepare your business and protect your interests, you should get liability insurance before starting your business or taking any contracts. Even if your state does not require it, you will not be able to work in any states where it is required if you don’t have the coverage beforehand, and it will leave you vulnerable to suits and exorbitant legal costs. 

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Two: It Puts Clients at Ease

Many clients will be more willing to work with you as a contractor if they know you have liability insurance, and for responsible clients it will be a dealbreaker if you don’t have any. Clients want to work with someone who is insured and taking all the steps necessary to protect their business. 

Your clients will associate preparedness with quality and care. A business that has all of their insurance and liability coverage in order is assumed to be more professional. 

Three: Protect Your Business 

Lawsuits are costly and difficult, and they can easily ruin your business if you don’t have some kind of protection in place. Having liability insurance will prevent you from having to close down shop when you’re unable to pay for damages. 

It will also help you pay for better legal assistance than you might be able to afford on your own, which could save you on settlement and put your mind more at ease.

Four: Employee Security

While general contractor liability insurance does not cover everything, such as injury to employees, it does offer extra security to anyone working with the company. They know that if there is property damage, third party injury, or another incident, neither the individual employee nor the company will have to pay for the litigation.

The likelihood of the company suffering and having to close down or downsize on jobs will be much less likely with this coverage. 

Five: Protect Against Mistakes

Professional mistakes do happen in the course of contracting work, and these can be costly as well. If a mistake is made during the course of work that causes litigation, even after the fact, the coverage you have will help pay for any legal issues. 

This can also cover you if you have a third party involved with your contract work and their work becomes the subject of a lawsuit. 


Getting contractor’s liability insurance will be essential to your business, to prepare you for getting a permit and assuring your clients of your responsibility. It will protect you, your employees, and any subcontractors you hire from the full brunt of litigation and prevent you from going out of business due to the legal costs.

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