Insurance

8 Reasons Why You Need General Liability Insurance for Your Construction Firm

Last updated by

November 3, 2021

We’ve all heard of all the latest lawsuits in the news. From drunk drivers suing car companies after crashes to burglars suing home-owners after an injury, lawsuits are everywhere.

71% of companies spend $1 million or more on litigation per year. Do you have that much extra cash to spend on a lawsuit?

With all these lawsuits, liability insurance has become even more important.

Since building sites involve lots of workers, complicated equipment, and sometimes-dissatisfied customers, liability insurance is a must for construction firms.

This article will explain the ins and outs of general liability insurance and the eight ways it can benefit your construction firm.

Table of Contents

What Is General Liability Insurance?

General liability insurance can cover many unexpected situations. Two of the most common are paying for lawsuits and legal bills or paying medical bills when someone is injured on a business’s property. It can also cover complaints of slander or libel.

A typical annual premium for business liability insurance is $750 to $2,000. Lawsuits and legal fees can cost millions of dollars. You’re money ahead to have general liability insurance!

Rates are different depending on your state and line of work. Rates for construction companies can cost a little more just because the likelihood of injury is a little higher than other businesses.

When you purchase general liability insurance, you will buy a plan with a max coverage amount. This is when you will decide how much the insurance company will pay for legal fees and settlements vs. how much you will have to pay.

Let’s say you buy a plan with a maximum of $300,000 and are sued for $250,000 of medical because one of your workers fell off a ladder with a broken rung. This case could have legal fees of $100,000, which means your company would pay $50,000 out of pocket.

Make sure to do the research in your area for average legal and lawsuit costs. A construction insurance agency can help you take all these things into account.

Now, why should you have liability insurance? Here are 8 reasons.

1. Worker Injuries

All companies with more than three employees are required to provide workers compensation. General liability insurance can also help cover your workers’ lawsuits when they are injured on the job. It can be used for medical expenses too.

This will keep your company from legal trouble if an employee gets hurt. Your company will also not have to pay all the medical bills out of pocket, which can bankrupt a company.

2. Civilian Injuries

Sometimes people enter your construction zone whether you want them to or not. Since construction sites can be dangerous places, people who shouldn’t be there may get hurt.

General liability insurance will cover medical expenses if someone is injured on your work site. It will cover the accidents of customers and invited guests. It can even cover lawsuits from people even if they shouldn’t have been there.

3. Property Damage

Sometimes in the construction process damage happens to existing buildings or land.

This could be damage to a house’s siding when a garage is added. It could be a ruined shrub. It could even be noise disrupting the feeding schedule of neighboring cows.

Some customers are understanding and don’t care as long as problems are fixed. Other people get angry and want a payout.

Liability insurance will cover your company if there is property damage during the construction process. This will save you a lot of money out of pocket.

4. Material Issues

Even if the construction process goes smoothly, sometimes there are issues afterward. Maybe a washing machine you installed breaks and floods a house. Maybe the shingles you used on the roof turn out to be faulty.

A lot of home purchases that go bad, like appliances or garage doors, should be taken up with manufacturers. All too often, though, contractors are blamed.

Even if all of your materials were good, some people may try to sue you when they damage something in the house like a dishwasher or door. In one Florida case, a couple tried to sue the construction company because a piece of crown molding fell and hit someone in the head.

Liability insurance covers any legal action that people may take after your job is complete.

5. False Advertising Claims

Many people don’t know that general liability insurance covers claims of false advertising. While this is a less common issue with construction jobs, contractors are sometimes sued when people don’t believe they’ve fulfilled their promises.

If customers aren’t happy with the job you’ve done and try to claim you didn’t deliver on your contract, liability insurance makes sure you won’t have to pay for a lawsuit. Even if they sue you for false advertising, you’re covered.

6. Copyright Issues

People don’t think of copyrights when they think of construction. However, blueprints and plans are sometimes protected.

If a business or individual thinks a contractor has disclosed plans that should’ve been secret, there can be a lawsuit. Liability insurance will cover this.

7. Project Bids

Many contractors get major projects through offering price bids. Many business or government construction jobs require that contractors have general liability insurance and are bonded.

Bonding covers the customer if there are any issues with the construction company.

The insurance covers the construction company if the customer or employees sues.

Since insurance is often a requirement of even placing a bid, being insured will make sure your construction company gets more jobs and better jobs.

8. Employee Benefits

General liability insurance can be a benefit you offer to your employees. If you have employees or individuals you often contract with, you can add them to your company’s liability policy.

This type of benefit will attract worker to your company. It will also make sure that your employees and contract workers stick with you.

Also, having liability insurance will let your employees know that their job is secure. They won’t need to worry about your company going bankrupt while paying off a lawsuit.