Starting a General Contracting Business: An Insurance Perspective
By Insurance Advisor Team
Starting a General Contracting Business: An Insurance Perspective

Embarking on the journey of a general contracting business involves careful consideration of risks and liabilities. This is true for any business. From an insurance perspective, it's crucial to understand and manage these risks to protect your business, employees, and clients. This will ensure your business continues to serve its function, and you may rest easy knowing this. Here are key steps to consider when starting a general contracting business, focusing on the insurance and risk management aspects.

Steps to start a General Contracting Business

Step 1: Assess Industry Risks

Before starting your general contracting business, assess the potential risks involved in the construction industry. These can include on-site injuries, property damage, project delays, and equipment theft or damage. Understand these risks, and you will be able to identify the types of insurance coverage you need to protect your business. Experienced employees and professionals are critical to gaining an appreciation of the nuances of the construction industry.

Step 2: Obtain Necessary Licenses and Qualifications

Ensure that you have the required licenses and qualifications for a general contractor in your region. This not only establishes your credibility but can also impact your insurance premiums. Insurers often consider your qualifications and experience when determining rates, as these factors can influence the likelihood of claims. More importantly, this also enhances credibility in the market so that more clients can rely on your business.

Step 3: Develop a Risk Management Plan

It makes perfect sense to create a comprehensive, written risk management plan that includes safety protocols, employee training, quality control measures, and contingency plans for unexpected events. A solid risk management plan can reduce the likelihood of accidents and claims, which can lead to lower insurance premiums. It also makes sense because you want to protect your business for the sake of not just reputation but also legal compliance with laws.

Step 4: Secure Adequate Insurance Coverage

The foundation of protecting your general contracting business is securing the right insurance coverage. Determining compensation for business disruptions caused by errors or factors beyond human control is the most challenging aspect of the task. These essential policies should be included in your insurance program if you want your business to have longevity:

General Liability Insurance: Covers third-party physical injuries and property damage caused by your business operations.

Professional Liability Insurance (E&O): Protects against claims of negligence or inadequate work which cause a financial loss to others.

Workers' Compensation Insurance: Mandatory in most regions if you have a certain number of employees. It covers the medical expenses and lost time resulting from employee injuries or occupational disease.

Commercial Property Insurance: Protects your business assets, buildings, contents, tools, and equipment (at your business location) from damage or theft.

Builders Risk Insurance: Covers property damage or theft occurring during construction, including materials and equipment.

Consider additional coverage like Commercial Auto Insurance for company vehicles and Umbrella Insurance for extra liability protection for claims that may exceed your underlying policies.

Also, ReadProfessional Liability Insurance: Definition, Types, Importance and Examples

Step 5: Choose the Right Insurance Provider

Select an insurer with experience in the construction industry. They should understand the specific risks of general contracting and offer tailored coverage options. An experienced insurer can also provide valuable risk management advice. This is helpful in navigating the complex maze of insurance policies where coverage forms, terms & conditions, and other insurance options can distract customers from achieving their optimum coverage goals.

Step 6: Regularly Review and Update Your Coverage

As your contracting business grows and takes on different projects, your insurance needs may change. Regularly review your policies and update your coverage accordingly. This ensures that you're adequately protected against evolving risks. The trends in the insurance industry change with changing regulations, policies, and economic situations. Whether this is good or bad, adaptation is survival in both Darwinian and financial terms.

Step 7: Establish Safety as a Priority

Implement strict safety protocols on job sites and invest in employee safety training and equipment. A strong emphasis on safety can prevent accidents, reducing the likelihood of insurance claims and potentially lowering your insurance costs. It also helps with OSHA compliance and basic regulations concerning businesses and prevents fines or penalties imposed by the authorities.

Step 8: Build Relationships with Insurance Brokers

You should consider working with an insurance broker who specializes in construction and contracting. Brokers can help you navigate the complex world of insurance, compare policies, and negotiate better rates. They help customize a specialized form of insurance policy with customized coverage provided by Insurance companies who can make exceptions for certain specific cases of business requirements.

Also, Read: Insurance Agent vs. Insurance Broker: What's the Difference?

Step 9: Understanding Contractual Liability

Be aware of the insurance requirements in your clients' contracts. Clients often require specific limits, endorsements, and types of coverage. Ensure that your insurance meets these contractual obligations to avoid liability gaps. Or else these gaps can become a chasm that torments business owners who must face a storm they might never have thought could occur.

Step 10: Maintain Good Insurance Records

Keep detailed records of your insurance policies, claims history, and risk management practices. Good record-keeping can be beneficial during insurance renewals and can assist in a claim. It is also helpful in retrospect when you look for a new insurance policy, and you can then compare it with the past data to avoid problems you might have faced earlier.  


Starting a general contracting business requires a keen understanding of the associated risks and a proactive approach to insurance and risk management. By prioritizing these aspects, you not only protect your business but also build a reputation as a responsible and reliable contractor. Insurance isn't just a regulatory requirement; it's a strategic tool that safeguards your business's financial stability and future growth.

Frequently Asked Questions about  General Contracting Business Insurance

Insurers often consider your qualifications and industry experience when calculating premiums. Generally, higher qualifications and more experience can lead to lower premiums, as they suggest a lower risk of accidents and claims.

It's advisable to review and update your insurance coverage annually or whenever there are significant changes in your business, such as taking on larger or different projects, purchasing new equipment, or hiring more employees.

Yes! Implementing strict safety protocols and investing in employee safety training can significantly reduce the likelihood of workplace accidents, which can positively impact your insurance rates.

Understand the insurance requirements stated in client contracts, such as specific coverage limits and types of insurance needed. Also, review the indemnification section. Ensure your policies meet these requirements to avoid potential liability issues.

Builder's Risk Insurance is typically necessary for any new ground-up construction projects and major renovations. It covers property damage during the construction process, including materials, equipment, and sometimes labor costs, which property policy typically excludes.

Maintaining a good claims history, with few or no claims, will positively impact your insurance premiums and may qualify you for discounts or more favorable terms from insurers.

For large-scale projects, consider additional coverage like Umbrella Insurance for extra liability protection and specific endorsements like a per-project aggregate that address the unique risks of your operations and the project.

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