What insurance contractors need to win jobs

For most contractors, the job asks for insurance long before the law does. A general contractor (GC) won’t let your crew through the gate without a certificate that matches the subcontract, a property manager won’t set you up as a vendor without one, and a homeowner comparing three bids has every reason to favor whoever can show proof the same afternoon.

What they ask for is fairly consistent from job to job, even if the wording isn’t: general liability that keeps covering your work after you leave, workers’ comp or proof that you’re exempt, and a few endorsements that protect the person hiring you. Each of those requests is explained below, along with how to meet it without holding up the start date. The policies a contracting business usually carries are on insurance for contractors.

Who’s going to ask, and for what

The bottom row is the one that varies most, and there’s no national rule to point to. California’s Contractors State License Board, for one, requires every active licensee to file either a certificate of workers’ comp or a signed exemption saying they have no employees, and it requires a handful of classifications, including concrete, HVAC, asbestos abatement, roofing and tree service, to carry workers’ comp even when they have no employees at all. Your state may work very differently, and the SBA’s licensing guide says plainly that what you need depends on your activity and your location, so check with your own state and local licensing offices before you assume anything.

Reading the insurance exhibit, line by line

The exhibit is usually a page or two near the back of the subcontract, and it’s worth reading before you sign anything else. Here’s what’s typically on it:

• Limits. For example, $1 million per occurrence and $2 million in total, sometimes with an umbrella on top. The contract sets the floor, and your per-occurrencePer-occurrence limitA per-occurrence limit is the most a liability policy will pay for all claims arising from a single incident, however many people are hurt or claims are filed.Read the definition and aggregateAggregate limitAn aggregate limit is the most a policy will pay for all covered claims combined during one policy period, no matter how many claims you have.Read the definition limits have to meet it.
• Additional insuredAdditional insuredAn additional insured is a person or company, such as a landlord or client, added to your liability policy so it can protect them from claims tied to your work.Read the definition. The GC, and often the property owner, get coverage under your general liability for claims that arise from your work. Look for the words “ongoing and completed operations.”
• Primary and noncontributoryPrimary and noncontributoryPrimary and noncontributory is policy wording that makes your insurance pay first for a covered claim, without asking the additional insured’s own insurance to share the cost.Read the definition. Your policy pays first, and it won’t ask the GC’s policy to share the cost of a claim caused by your work.
• Waiver of subrogationWaiver of subrogationA waiver of subrogation is an agreement, usually added to your policy by endorsement, that stops your insurer from recovering claim payments from a specific client, landlord or contractor.Read the definition. Your insurer gives up its right to recover what it paid from the GC. It’s often required on both general liability and workers’ comp.
• Per-project aggregate. Some contracts ask that your aggregate limit apply separately to each project, so a bad claim on another job can’t use up the limit available on theirs.
• How long completed operations lasts. Some exhibits ask you to keep completed operations coverage, with them as additional insured, for a set number of years after the job ends. That’s a promise about future renewals, so put it on your calendar.
• Notice of cancellation. A promise to tell the GC if your policy is cancelled. Whether your insurer will do this depends on the policy, so read this line carefully.

Read your own exclusions against the job too, because some contractor policies exclude certain work, such as residential projects or work above a set height, that an exhibit simply assumes you’re covered for. The exhibit also often sits right next to an indemnity clause that makes you responsible for claims arising from your work, which is a contract question as much as an insurance one. See hold harmless and indemnification clauses for that half, and how to read insurance requirements in a client contract for a full checklist.

Why a GC cares about completed operations

Look at when that claim showed up. Not during the job, when the crew was on site and the GC’s own policy was watching, but long after the last invoice was paid and everyone had moved on to the next project.

Completed operations is built for exactly that timing. General liability typically includes products-completed operationsProducts-completed operationsProducts-completed operations is the part of general liability that covers injuries or damage caused by your finished work, or products you sold, after the job is done.Read the definition coverage, which can respond to injuries and damage to other people’s property caused by your finished work, subject to the policy’s terms and limits. The claims a GC worries about most are exactly those: a supply line that weeps inside a wall for months, a deck ledger that pulls loose under a crowd, roof flashing that lets water in after the first heavy storm of the season. So when a GC asks to be an additional insured on completed operations, they’re asking for your policy to stand in front of them when the owner sues over your work a year from now.

Here’s where a certificate can fail that check. An additional insured endorsement can be written to cover only ongoing operations, which protects the GC while you’re on site and stops the day you leave, and a GC who reads the endorsement closely will notice that the protection ends right where their biggest exposure begins. If the exhibit says “ongoing and completed operations,” make sure your endorsement says the same thing, and ask an underwriter if you aren’t sure which one you have.

One more line deserves to be said out loud. General liability pays for the damage your work causes, but it isn’t a warranty on the work itself, and the cost of tearing out and redoing your own faulty work is usually excluded.

Workers’ comp, subcontractors and the audit

Whatever your state’s law says about your headcount, expect a GC to make workers’ comp a condition of getting hired.

GCs ask because their own insurers usually want it, and because their own premium auditPremium auditA premium audit is the insurer’s review of your actual payroll, sales or other figures after a policy ends, used to replace estimates and set your final premium.Read the definition can charge them for any sub who turns up uninsured. Still, expect the request even if you work alone, in which case your state may offer an exemption or let you cover yourself as the owner. Rules vary a lot, however, so check yours through the U.S. Department of Labor’s list of state workers’ compensation agencies.

The same logic runs down the chain to you. If you hire subcontractors, collect their certificates before they start, because at the end of your own term the auditor will review who you paid, and the auditor can count payroll paid to an uninsured sub as your own on workers’ comp, and sometimes on general liability, which can mean a bill you never planned for. How to collect and check certificates from your subcontractors has a checklist for doing that properly.

Calling someone a sub doesn’t make them one, though. The IRS sorts that out with three kinds of evidence, behavioral control, financial control and the type of relationship, to decide whether a worker is an independent contractorIndependent contractorAn independent contractor is a self-employed person or business you hire for a job who controls how the work gets done, rather than working as your employee.Read the definition or an employee, and the Department of Labor notes that misclassified workers may not receive the minimum wage and overtime pay they’re owed. Do independent contractors need workers’ comp? covers how this plays out at audit.

The coverage the contract doesn’t mention

The exhibit lists what the GC needs from you, and stops there.

Your tools rarely appear in a GC’s exhibit, yet a stolen trailer full of saws, nailers and a laser level can stop a job for a week while you rent replacements and wait for a check. Commercial property usually covers items at your shop and does little for them on a job site or in your truck, which is the gap tools and equipment insurance is built for, and it can include theft from a locked vehicle, though policies often require signs of forced entry.

Some contracts also ask for coverage that sits outside a contractor’s package, but Corgi doesn’t offer these, so you’d buy them separately:

• Commercial auto for trucks and vans your business owns or uses.
• Umbrella or excess liability when the contract’s limits are higher than your general liability.
• Surety bonds, such as a license bond or a performance bond, when a licensing agency or project owner asks for one. What “licensed, bonded and insured” actually means explains the difference.
• Pollution liability for work such as mold, lead or tank removal.

Getting proof to the job the same day

You won the bid. Now the clock starts.

With Corgi, a certificate is available the day you buy, and you can download it or send it to a GC or homeowner from your account; if a contract needs a higher limit than you carry, limits can be raised the same day, and questions about whether an endorsement meets a specific exhibit go to underwriters, not a broker. A few habits cut down the back-and-forth after that:

1. Keep a copy of every GC’s certificate holder wording, so the next certificate is right the first time.
2. Ask whether your policy’s additional insured endorsement is blanket, which applies to anyone your written contract requires, or scheduled, which lists names one by one.
3. Track your renewal date. GCs often ask for an updated certificate the week your policy renews, and an expired one can hold up a pay application.

For what a certificate shows and what it doesn’t, see what is a certificate of insurance? and additional insured vs. certificate holder.