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General liability insurance pays when your business is held responsible for injuring someone or damaging their property, including legal defense. For contractors it has two halves: accidents while you work, and problems caused by work you already finished. It does not cover your own injuries, your vehicles, your employees' injuries or, usually, the cost of redoing poor work. Read the limits, exclusions and policy form before you buy.
Key takeaways
- General liability covers harm to other people and their property, not your own losses.
- Contractors need completed operations coverage, which responds after the job is done.
- Occurrence policies respond to events during the policy period; claims-made policies need the claim filed during it.
- Know your per-occurrence limit, aggregate limit and deductible before a claim, not after.
- Report incidents to your agent quickly and in writing, even when you think they are minor.
General liability is the policy customers ask about, property managers require and most contractors buy first. It is also the policy most owners have never read. They know they are "insured," and they find out what that means the day a customer calls about a cracked window, a flooded basement or a slip on a wet driveway.
This guide goes one level deeper than our overview of business insurance for contractors. It explains what a general liability policy is built to pay, the terms on the declarations page, the exclusions that surprise service businesses, and what to do when something goes wrong. It is general information from state regulators and insurance definitions, not legal or insurance advice. Policies differ by insurer and state, so read your own policy and ask a licensed agent.
What does general liability insurance pay for?
The National Association of Insurance Commissioners (NAIC) groups the covered events into four categories: bodily injury, property damage suffered by others, personal injury (libel and slander, for example), and false or misleading advertising. In plain terms, general liability responds when someone outside your company says your business hurt them or their things and wants to be paid.
For a service business, the claims tend to be ordinary and expensive:
- A homeowner's guest trips over an extension cord your crew ran across a walkway.
- A ladder slides and cracks a window or dents a gutter.
- Overspray, runoff or a cleaning product damages a car, a deck or landscaping.
- A water line your technician touched leaks two days later.
A key part of the value is the defense. When a claim turns into a lawsuit, the insurer generally hires and pays for the lawyers, subject to the policy's terms. For a small company, the cost of defending a claim can matter as much as the cost of paying one.
The two halves: premises and operations, and completed operations
The NAIC's glossary describes commercial general liability as having two major sub-lines: premises and operations, and products and completed operations.
- Premises and operations covers accidents at your place of business and during your work: the trip over the hose while the crew is on site.
- Completed operations covers harm caused by work after it is finished. The NAIC defines completed operations liability as covering contractors, plumbers, electricians, repair shops and similar firms for bodily injury or property damage from defective work completed or abandoned by or for the insured, away from the insured's premises.
For a contractor, completed operations is not a footnote. A railing that gives way six months after you installed it, a fixture that falls, a fitting that leaks after you leave: these are completed operations claims. Confirm that your policy includes this coverage and ask whether it has its own aggregate limit.
One distinction trips owners up. Completed operations coverage is generally about the damage your faulty work causes to people and other property. Paying to tear out and redo the faulty work itself is a different matter, and policies commonly limit or exclude it. Ask your agent to explain, with an example from your trade, what happens when your own work fails and damages something else.
Occurrence or claims-made: which policy form do you have?
Liability policies come in two forms, and the difference decides whether a late claim is covered.
| Occurrence | Claims-made | |
|---|---|---|
| What triggers coverage | Injury or damage that happens during the policy period | The claim, which must be made during the policy period |
| Claim filed after the policy ends | Can still be covered if the event happened while the policy was active | Generally not covered unless you buy an extended reporting period |
| Where you see it | Common for contractors' general liability | Common for professional liability |
The NAIC defines a claims-made form as one that pays only if both the triggering event and the claim are submitted during the policy term. An occurrence is defined around an accident that results, during the policy period, in bodily injury or property damage neither expected nor intended by the insured.
Because problems with finished work can surface long after the job, the policy form matters a great deal to contractors. Ask which form you are buying, and if it is claims-made, ask what happens when you switch insurers or close the business.
Reading the declarations page: limits, aggregates and deductibles
The declarations page is the summary at the front of the policy. Find these numbers and write them down:
- Each occurrence limit. The most the policy pays for a single event.
- General aggregate. The NAIC defines an aggregate as the maximum amount payable for a single loss or multiple losses during a policy period, or on a single project. Once it is used up, the policy pays nothing more until renewal.
- Products and completed operations aggregate. Often a separate total for completed work claims.
- Deductible. The NAIC defines it as the portion of an insured loss paid by the policyholder. Know whether it applies per claim and whether it applies to defense costs.
- Endorsements. Amendments that change the coverage. The NAIC notes an endorsement takes precedence over the general contract, so an endorsement can add or take away coverage you thought you had.
If your commercial clients require higher limits than the base policy provides, an umbrella or excess policy can sit on top. The NAIC describes excess and umbrella liability as coverage above the amount in a basic policy.
What general liability does not cover
According to the NAIC, general liability does not protect against claims from your employees, vehicle operations, work-related injuries (which belong to workers' compensation) or professional liability claims. In practice that means:
- Your crew's injuries go to workers' compensation, which most states require once you have employees.
- Crashes in company vehicles go to auto insurance. Read our guide to commercial auto insurance.
- Your own tools and equipment need property or equipment coverage.
- Professional advice, such as design or inspection opinions, may need professional liability.
Beyond those, ask your agent about exclusions that hit specific trades. Common ones to raise by name: pollution and chemical runoff, mold, work at heights above a certain level, roofing, work on certain building types, damage to property in your care while you work on it, and subcontracted work when the sub has no insurance of its own. You do not need to memorize policy language. You need a clear yes or no for the jobs you actually do.
A policy written for "window cleaning" may not respond to a claim from the gutter repair you started offering last spring. When you add a service, call your agent before you sell it.
What to do when something goes wrong on a job
How you handle the first hour of an incident shapes the whole claim.
- Make it safe. Stop the leak, rope off the area, call for medical help if anyone is hurt.
- Document it. Photos and video of the damage, the area, the equipment involved and the conditions. Names of everyone present. Write down what happened while it is fresh.
- Be decent, and careful with promises. Tell the customer you are sorry it happened and that you are reporting it. Many policies say the insured should not voluntarily make payments or assume obligations without the insurer's consent, so check yours before promising to pay for anything.
- Report it to your agent in writing, quickly. Late notice is a common reason claims get disputed. Report even when you think you will handle a small repair yourself.
- Keep the customer informed. Silence turns a claim into a complaint. For how to run that conversation, see how to handle customer complaints.
Some owners pay small damages out of pocket to protect their claims history. That can be reasonable, but talk to your agent first so you do not jeopardize coverage if the small problem turns out to be a large one.
Buying the right policy and keeping it current
When you shop, give every agent the same description of your services, revenue, payroll, subcontracting and the riskiest parts of your work, and ask for the same limits. Then compare the policy forms and exclusions, not just the price. A cheaper quote with a roofing exclusion is not cheaper if you do roof work.
Keep incident records in one place: what happened, photos, who was told, and the claim number. A CRM built around your jobs can attach incident notes and photos to the customer and the job, so nothing lives only on a technician's phone. Good records also help when you tighten your job-site safety to stop the same accident from happening twice.
Frequently asked questions
Does general liability cover damage to the customer's property?
Generally yes, when your business is responsible for the damage, subject to the policy's limits, deductible and exclusions. Damage to property in your care during the work and the cost of redoing your own work are common limits, so ask your agent.
Does general liability cover my employees if they get hurt?
No. The NAIC notes general liability does not cover work-related injuries to employees. That is the job of workers' compensation.
What is the difference between an occurrence and a claims-made policy?
An occurrence policy covers injury or damage that happens during the policy period, even if the claim comes later. A claims-made policy generally requires the claim to be made during the policy period.
Should I report a small incident if I plan to fix it myself?
Talk to your agent first. Many policies require prompt notice and restrict voluntary payments, and a small problem can grow into a large claim.
General information for service-business owners, not legal, tax or financial advice. Rules vary by state; check with a qualified professional for your situation.