Short-term liability insurance for contractors

Short-term liability insurance policies offer the same amount of protection as a year-round policy, but for a limited time. For most contractors, this starts with general liability.

General liability insurance covers third-party bodily injuries and property damage, like if a homeowner trips over a woodworker's materials during a renovation project, or a drywall installation contractor accidentally damages a customer's flooring on the job.

Commercial general liability insurance also covers personal and advertising injuries, including defamation and copyright infringement.

Another core component of general liability coverage is products-completed operations coverage, also called product liability insurance. This covers claims of bodily injury and property damage arising from a contractor's products or completed work, even after you've left the jobsite. For example, if a client discovers an electrician installed defective wiring that caused a fire, a claim could be filed against their business.

When a claim arises, general liability insurance for contractors will pay for legal defense costs and any settlements or judgments, subject to your policy terms and limits. However, it typically excludes damage to your own work in every circumstance, employee injuries, car accidents, and professional errors.

Depending on the type of work you do, you might also need coverage like:

• Professional liability insurance: Also called errors and omissions insurance (E&O), this coverage protects you against client lawsuits over unsatisfactory work. This can include mistakes, missed deadlines, negligence, and other professional service oversights.
• Commercial auto insurance: This policy helps cover legal fees, medical expenses, and property damage if an independent contractor's vehicle is involved in an accident. Almost every state requires this coverage for companies that own vehicles.
• Workers' compensation insurance: If an employee suffers a work-related injury or illness, this policy covers medical payments, disability benefits, and legal defense costs. Most states require this coverage for businesses with employees, but it's also smart coverage for self-employed contractors and 1099 workers.

To determine liability insurance costs, underwriters consider many factors, including:

• Policy limits: Choosing lower coverage limits can help you save money on liability insurance, but make sure you have enough coverage to handle a potential claim. Setting limits too low could cost you more down the road if your policy can't cover a pricey claim.
• Deductibles: Opting for a higher deductible is one of the easiest ways to lower your premium, but you must be able to pay the full amount before coverage kicks in. Choose a deductible you can easily pay out of pocket, so you're not stuck with a pricey bill.
• Your industry risks: The type of work you do directly impacts your premium. For example, a roofing contractor will likely pay more for insurance than a landscape designer. 
• Location: Regional factors like population density, healthcare costs, and property values all affect your insurance rates.
• Annual revenue: Businesses with higher revenue typically take on more clients and risks, which can increase your premium.
• Number of employees: Every subcontractor or employee added to a project increases the risk of workplace accidents and mistakes, which raises the cost of workers' comp, general liability, and similar policies.
• Claims history: A contractor who has filed an insurance claim in the past can expect higher rates than one that has a clean history of claims.

While short-term coverage can help with immediate project needs and offer flexibility for limited periods of time, an annual general liability policy is typically less expensive in the long run. Other advantages of year-round coverage include:

• It protects your business between jobs. Liability exposure doesn't disappear when a project ends. Bidding work, meeting clients, and visiting jobsites can all result in a claim. Without active coverage, those costs would fall on you.
• Repeatedly starting and stopping coverage can cost more. Multiple short-term policies can cost more than one annual policy. Coverage gaps can also complicate your insurance history and leave periods of work uninsured.
• It helps you meet ongoing business requirements. Clients, licensing boards, and contracts often require proof of insurance year-round, not just for a specific job. Even a brief lapse in coverage could delay or disqualify you from future work opportunities.
• Claims can arise after a job is complete. Liability claims can appear from incidents that occur during a project but aren't discovered until later. Whether it's covered depends on your policy terms, including whether your coverage is occurrence-based or claims-made.

Getting the right liability coverage begins with knowing your business's specific needs. Before you select a policy, you should assess:

• Your trade, the type of projects you take on, and the risks associated with your work
• Client contract requirements, including coverage limits and any additional insured specifications
• Whether you'll need coverage beyond the current job

Ready to get affordable coverage? Submit our easy online application to compare quotes from our top-rated U.S. providers. You can work with a licensed insurance agent to review coverage limits, exclusions, and deductibles to ensure that a policy is right for you.

Once you find the best policy, you can typically get coverage and your certificate of insurance (COI) within 24 hours.