Contractor General Liability Insurance Explained: What It Covers and What It Doesn't

General liability insurance is the first policy most contractors are required to carry, and it's the one most misunderstood. Here's what it actually does — and what it leaves uncovered.

What general liability covers

A standard commercial general liability (CGL) policy covers three main things:

• Bodily injury and property damage (Coverage A). If someone is injured at your jobsite or your work damages a third party's property, GL pays the claim and the legal defense costs.
• Personal and advertising injury (Coverage B). Defamation, copyright infringement, false arrest — these aren't common contractor claims but they're covered.
• Medical payments (Coverage C). Small medical bills for injuries on your premises, paid regardless of fault — typically a $5,000 or $10,000 sublimit.

The coverage limit is usually stated as two numbers: $1M per occurrence / $2M general aggregate. The per-occurrence limit is the most the policy pays on any single claim. The aggregate is the most it pays in the policy period (usually one year) across all claims.

The completed operations extension

Completed operations coverage — included in most CGL policies — extends your GL protection to claims that arise after you finish a job. If a deck you built collapses six months after completion and injures someone, that's a completed-operations claim. Without it, your GL only covers incidents during the active work period.

GCs and project owners routinely require evidence that your policy includes completed operations with limits matching the primary GL.

What general liability does NOT cover

This is where contractors get into trouble. GL explicitly excludes:

• Your own work. Defective workmanship claims — fixing or redoing your own faulty work — are not GL claims. That's a professional liability or contractor's errors and omissions issue.
• Your tools and equipment. GL doesn't cover your tools if they're stolen or damaged. That's inland marine (tools and equipment coverage).
• Workers' injuries. Your employees' on-the-job injuries are handled by workers' compensation, not GL.
• Your vehicles. Commercial auto is a separate policy.
• Pollution. Most GL policies carry a "total pollution exclusion" — you need a separate pollution liability policy if your work creates environmental exposure.
• Professional errors. If you provide design, consulting, or engineering advice and it causes a loss, that falls under professional liability, not GL.

Key endorsements to ask about

Standard CGL policies can be modified. Common endorsements contractors should understand:

Additional insured (AI) endorsements — GCs and property owners require being named as additional insureds on your GL. This extends your coverage to protect them for liability arising from your work. Know the difference between scheduled AI (named specifically) and blanket AI (covers anyone you're contractually obligated to add).

Waiver of subrogation — Waives your insurer's right to sue a third party (like a GC) to recover what they paid on a claim. Often required by subcontracts.

Primary and non-contributory language — Makes your GL respond first before any other insurance the additional insured carries. Almost universally required by GC contracts now.

Per-project aggregate — Resets your aggregate limit on a per-project basis instead of sharing one annual aggregate across all projects.

How GL premium is calculated

Most CGL policies for contractors are rated on payroll or revenue depending on the carrier and state. Some use payroll for field workers and revenue for estimating and project management. The key variables:

• Trade type and work classification
• Annual payroll or revenue
• Work location (states with more litigation cost more)
• Claims history (loss runs for the past 3–5 years)
• Whether you use subcontractors and whether they're insured

Getting it right

The most common GL mistake contractors make is buying the cheapest policy without reading the exclusions. A policy that excludes height work, excludes subcontractors, or carries a small aggregate can leave you exposed to the exact claims you're most likely to face.

Read your policy's exclusions before a claim — not after.

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Contractors Choice Agency has placed contractor insurance programs since 2005. We're licensed in all 50 states and typically deliver quotes in about 15 minutes. Call 844-967-5247 or get a quote online.