Starting a contracting business is an exciting venture — filled with new clients, new projects, and endless possibilities. But amid the rush to secure jobs and assemble equipment, many new contractors overlook a crucial foundation: securing proper general liability insurance for contractors. By guiding contractors through the most common insurance missteps, brokers can help protect their clients from costly claims and compliance headaches before they happen.
Mistake 1: Underestimating Liability Exposures
Many new contractors assume that small jobs equal small risks. Some may not realize that contractors typically must obtain insurance before pursuing licenses and establishing their businesses.
Unfortunately, even a minor accident — a tool dropped on a client’s property or a bystander injured on-site — can result in significant financial losses. Brokers should encourage contractors to disclose their full range of operations, including the types of work, subcontracted services, and frequency of jobsite visits. A thorough understanding enables brokers to request accurate premium indications and ensure that coverage accurately reflects the contractor’s true exposure.
Mistake 2: Misunderstanding Policy Exclusions
First-time contractors often think their policy covers every possible incident. However, exclusions in a business general liability insurance policy can surprise them when it’s too late.
Operations involving certain materials, subcontractors, or off-site work may be excluded. Brokers play a key role in clarifying these details. You can walk clients through what’s not covered and help them understand the implications of exclusions specific to their trade.
Mistake 3: Skipping Subcontractor Oversight
In the early stages of growth, new contractors frequently hire subcontractors to meet deadlines but neglect to verify their insurance status. If those subcontractors lack coverage, the contractor’s own policy could be on the hook for any resulting claims.
Brokers should recommend collecting certificates of insurance from every subcontractor and establishing hold-harmless agreements to minimize exposure. This proactive step ensures both compliance and protection from liability transfer.
Mistake 4: Choosing the Lowest Premium Without Considering Coverage Gaps
Budget-conscious contractors may be tempted by the lowest-cost policy, assuming all general liability insurance is the same. But a cheaper option can leave them exposed to uncovered risks.
An artisan contractor, for instance, will have different requirements than a general builder or remodeler, and those nuances matter when selecting coverage. Brokers should help clients evaluate how limits, deductibles, and endorsements align with their actual operations, so that contractors secure protection suited to their trade and business goals.
Mistake 5: Failing To Update Coverage as the Business Grows
A contractor’s first policy may serve them well for small projects. But as they expand and add employees, vehicles, or specialized services, their liability exposure changes.
Brokers should encourage annual policy reviews and updates as part of risk-management best practices. Adjusting general liability insurance for contractors in line with growth keeps coverage relevant and effective over time.
Build a Stronger Foundation
Avoiding these five missteps helps new contractors establish long-term security and credibility in their field. For brokers, it’s an opportunity to demonstrate expertise, build trust, and deliver lasting value.
Commodore Insurance partners with brokers to streamline the underwriting process and help clients secure the right protection from the start. To explore coverage options for new and artisan contractors, contact us today.
About Commodore
Commodore Insurance Services, Inc. (Commodore) is a California corporation that operates as a Managing General Agency and Program Manager. Since incorporating in 1990, Commodore has developed an expertise in the production and underwriting of insurance products for businesses across the West Coast. Our focus is on providing top-level insurance products to our clients while striving to make it easy to do business for our brokers. Try us and find out why we have continued to be successful for more than 27 years and are recognized as the trusted leader in small business insurance.
