In 2019, a summer storm sent a construction crane crashing through an apartment building in Dallas, killing a 29-year-old woman sitting on her couch. Four years later, a jury found the developer negligent and awarded her family more than $860 million. The crane operator walked free.
Most people in construction understand they need insurance. Fewer understand exactly what they need, what their contracts require, and where their current program has gaps. This guide covers all three.
Key Takeaways
General liability alone isn’t enough. A standard $1M/$2M policy won't cover employee injuries, stolen equipment, professional errors or post-completion defects without additional coverage in place.
Contracts set the floor, not the ceiling. Project owners specify exact insurance requirements, and meeting minimums isn't always enough on larger commercial work.
Certificates of insurance have real limits. A COI proves a policy exists, but it is not confirmation of coverage.
Uninsured subcontractors become your problem. If an uninsured subcontractor causes a loss on your job site, your own insurance carrier will likely absorb the cost of the claim; however, you may also be canceled or non-renewed by your insurance carrier for working with an uninsured subcontractor.
Umbrella limits need a fresh look. Nuclear verdicts against construction businesses have surged, and limits that felt adequate five years ago may not hold up today.
Construction Liability Exposure Is Unlike Most Industries
Construction sits near the top of every industry liability ranking. OSHA's "Fatal Four" — falls, struck-by incidents, electrocutions and caught-in/between accidents — account for the majority of construction fatalities each year. Water-related claims have compounded the problem; losses exceeding $1 million have tripled since 2015.
General contractors sit at the center of it all. You're not just managing your own crews; you're absorbing liability for subcontractors, owners and third parties on or adjacent to your job site every day.
The Core Construction Insurance Coverages Every GC Needs
General Liability Insurance: The Baseline
General liability covers third-party bodily injury, property damage and personal injury arising from your operations. The standard minimum is $1 million per occurrence / $2 million aggregate, which is what most contracts and licensing boards require.
Products and completed operations coverage is part of a standard general contractor liability insurance policy and responds to defect claims that surface after project delivery. For example, a leaking roof, a failed mechanical system, or a structural issue that shows up in year three. In this type of business, litigation can begin long after the work is done.
An occurrence-based policy is almost always the right structure for construction company insurance. It covers any incident that happens during the policy period, regardless of when the claim is filed, which is critical for long-tail completed operations exposure.
Workers' Compensation Insurance: Legally Required, Financially Critical
Workers' compensation is mandatory in 49 states and required by virtually every commercial contract. It covers the costs of job-related injuries, illnesses and lost wages.
The average lost-time workers' comp claim costs
more than $47,000. Amputation claims, which aren't uncommon in high-risk trades like construction, average over $125,000. Severity has been climbing across the trades, making safety investment a financial decision as much as an operational one.
Builders Risk Insurance: Protecting the Project
Builders risk covers the structure under construction against fire, theft, vandalism and other covered perils. It typically includes materials, installed components and embedded labor. It's project-specific and ends at substantial completion.
Who procures it matters. Standard contract language typically assigns builders' risk to the project owner, but GCs frequently purchase it when the owner doesn't. If both parties assume the other has coverage and neither does, that oversight exposes the project, leads to disputed claims, and can halt work while you sort out the details.
That’s why confirming who holds the policy before work starts is crucial.
Inland Marine Insurance: Protecting the Equipment
Standard commercial property insurance doesn't follow your equipment to the job site. A contractor's equipment floater—sometimes called tools and equipment insurance—is a type of inland marine coverage that protects owned and rented machinery wherever it travels.
Fewer than 25% of stolen construction equipment is ever recovered, according to the National Equipment Register and NICB, making theft a near-certain total loss without this type of coverage.
Commercial Auto Insurance: Personal Policies Don't Cover Business Use
Commercial auto insurance is required on any vehicle used for business purposes. Personal auto policies exclude business use entirely, which means an employee running materials to a job site in their own truck and getting into an accident faces a denied claim. The standard contract requirement is a $1 million combined single limit.
A hired and non-owned auto endorsement covers employees using personal vehicles for work. Most general contractors have this exposure, but not enough address it.
Commercial Umbrella: Why Your Current Limits Deserve a Fresh Look
A commercial umbrella policy extends limits above general liability, auto and employer's liability once an underlying limit is exhausted. For contractors, it's the policy that determines whether a serious claim is manageable or catastrophic.
Limits set years ago deserve a fresh look.
Nuclear verdicts in civil litigation reached $31.3 billion in 2024, with construction and engineering accounting for $2 billion of that figure. A limit that felt adequate when you last reviewed your program may not hold up against today's litigation environment.
Does My General Liability Coverage Include My Subcontractors?
Generally, no. Your general liability policy covers your operations, not the independent work of subcontractors on the same job. Each sub should carry their own general liability policy and list your company as an additional insured.
If an uninsured sub causes bodily injury or property damage on your construction project, the claim lands on your insurance program. That's why requiring a certificate of insurance both before awarding work to your subcontractors and before remitting final payment to your subcontractors isn't just an administrative task; it's a financial control that benefits you.
What Is a Certificate of Insurance and Why Do Contractors Need One?
A COI is a one-page summary of a policy's coverage types, limits, effective dates and policy numbers. It proves coverage exists, and is essential before beginning any work.
However, it does
not confirm that the right endorsements are attached nor is it a confirmation of coverage. Coverage disputes at claim time often trace back to missing or incorrect endorsements, none of which a COI would have revealed in its entirety.
Where GC Programs Most Often Break Down
Unverified Subcontractor Coverage
This is the most common problem. When an uninsured sub causes a loss, the GC's policies absorb the cost, and premiums reflect it at renewal.
Missing CG 20 37 from Subcontractors
Two endorsements make additional insured status work correctly: CG 20 10 covers ongoing operations, and CG 20 37 extends that protection to completed operations after the project finishes. A subcontractor that provides CG 20 10 but not CG 20 37 leaves no additional insured protection for post-completion defect claims.
Inadequate Umbrella Limits
A $1 million umbrella made sense for small businesses when median verdicts were far lower. However, limits set years ago need a fresh look given the litigation severity in the construction industry today.
No Professional Liability on Design-Build Work
Commercial general liability insurance policies exclude professional services entirely. A GC providing drawings, specifications or engineering decisions needs a separate
errors and omissions policy. General liability will not respond to a design error claim.
Build a Program That Holds Up at Claim Time
A certificate of insurance is not a coverage review, and checking a contract requirement box is not a risk management strategy. At Pepper, Johnstone & Company, we work with contractors to analyze actual exposure, verify subcontractor compliance and structure programs that work when a claim happens, not just when a bid goes out.
If you're a
residential,
commercial, or
artisan contractor and want a real look at your coverage options,
contact us for an insurance quote today.