To protect against claims of damage or injury, contractor and commercial construction businesses in Texas must carry contractors general liability insurance. In most cases, a contractor cannot start a job for a client unless they first furnish proof of insurance. Contractors insurance, or construction liability insurance, differs from other types of liability and business insurance. This makes it essential for a construction business to purchase the proper coverage from experienced contractors insurance agents.
Contractors liability insurance protects a construction or contracting business, and its owners, from liability against damage, personal injury, and advertising injury including slander or false advertising. The covered loss may occur at either the place of business or on a job site where the business is performing work.
Claims-Made Versus Occurrence Policies
There are two main types of contractors general liability insurance, based on how a claim is paid: claims-made or occurrence-based policies. Following are the main differences between the two types of contractor's or construction liability insurance policies referenced above :
Claims-Made Liability Policies – These policies cover claims for damage or injury that occurs while an insurance policy is in effect and must be claimed while the policy remains in effect. Claims made after a policy no longer is in effect are denied.
Occurrence Liability Policies – These type of policies cover claims for damage or injury that occur while the insurance policy is in effect, regardless of when the claim is actually made. Claims made after a policy is no longer in effect are still honored.
There are positive and negative aspects to both of these types of policies. Occurrence-based policies are more common, as they offer simple and complete coverage; however, they usually have higher premiums as they pay claims made even after a policy has expired. Claims-made policies often have lower premiums, as there are specific restrictions as to when a claim can be made. Unfortunately, this often means that a business would have to pay on their own for claims made after a policy effective date. Claims-made policies are commonly accompanied by extended coverage, like Prior Acts and Run-Off coverage. This coverage protects against claims made for an incident that occurs before a policy takes effect, or after a policy ends, respectively.
A contractor's general liability insurance policy commonly excludes certain types of claims. A commonly-excluded claim is for damages concerning the policyholder's own work. Whereas the property damage ensuing from work completed by a subcontractor may not be covered, the cost to repair or replace the original work is not.
Contractors general liability insurance does not cover worker’s compensation or an employer's liability. Insurance otherwise required under a specific policy. It also does not cover pollution incidents or exposure, or a business at risk for spills, releases, or other incidents that may cause injury or damage to property or the environment due to exposure to certain chemicals, smoke, vapors and other noxious, and environmentally injurious materials. Insurance agents generally recommended purchasing additional coverage for such events.
Contractors and construction liability insurance is essential coverage required by contractors in Texas to be protected against accidents and damage claims. Every company’s need for contractors insurance differs, so it is important to speak with experienced insurance agents about the various types of coverage you may need!
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