How builder's insurance actually works
Most builders meet insurance twice: once when a licence or a contract demands a certificate, and once when a claim arrives. This site explains what the coverages do, what states require, and what drives the price, so the second meeting is less of a surprise.
Almost every builder meets insurance because someone else demanded proof of it. A general contractor will not let a subcontractor on site without a certificate. A licensing board will not issue or renew a licence without one. A property owner's lender wants to see it before funding draws. The certificate is the visible part, and it is the least interesting part, because it says nothing about whether the coverage underneath will actually respond.
What matters is the gap between what the certificate appears to promise and what the policy pays. A certificate showing general liability limits of one million dollars tells you nothing about the exclusions attached to it, and exclusions are where builder's claims are won and lost. Residential work, roof work, and anything involving a subcontractor's own employees are the three areas where a certificate can look perfectly adequate and the claim can still be denied.
General liability answers third party claims: someone outside your business is hurt or their property is damaged. It is the coverage your contracts are usually asking about. Workers compensation covers your own employees when they are injured, and it is the one coverage most states will not let you operate without. Commercial auto covers vehicles you own or use for the business, and it is the coverage builders most often assume they already have because they have a personal policy. Inland marine or tools coverage handles your equipment, which is usually the largest single asset a small builder owns and the least likely to be covered at home.
The other four, umbrella, builder's risk, surety bonds and professional liability, matter situationally. An umbrella is cheap protection once your underlying limits get used up. Builder's risk is for the project itself, not for you. Bonds are a different product wearing similar clothing, and professional liability is only relevant if you design rather than build.
Eight coverages cover almost everything a construction business faces. They do different jobs, and buying one does not cover the others.
Third party injury and property damage caused by your operations.
Medical care and lost wages for your own injured employees.
Vehicles used in the business, including owned, hired and non owned.
Your tools and equipment against theft, damage and loss.
The project under construction, plus materials on site.
A guarantee of performance or payment, not a transfer of risk.
Extra limits above your underlying policies once those are used up.
Claims from design work and advice, which general liability excludes.
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Tell us what you build and where. A licensed specialist will answer with specifics, not a brochure.
