Protecting your assets and reducing risks are essential to your daily operations as a business owner or contractor. One of the most important choices you’ll make is selecting the right insurance policies to guard against unexpected events that cause financial loss.

Two policies you may need are general liability and builder’s risk insurance. In this article, we’ll look at both and explain how they differ.

General Liability vs. Builder’s Risk: The Short Answer

General liability insurance protects you from claims by other people, such as someone getting injured or someone else’s property being damaged because of your work. Builder’s risk insurance protects the project itself from physical damage while it’s being built, such as fire, vandalism, or storm damage. Most contractors need both, because neither covers what the other does

General liability at a glance:

• What it protects: Your business from third-party claims
• Typical claims: Bodily injury, damage to others’ property, advertising injury
• Who needs it: Businesses of all kinds
• How long it lasts: Ongoing, typically renewed annually

Builder’s risk at a glance:

• What it protects: The building and materials under construction
• Typical claims: Fire, theft, vandalism, storm damage to the project
• Who needs it: Contractors, builders, and owners on construction projects
• How long it lasts: The construction phase only

What Is General Liability Insurance?

General liability insurance shields companies from a variety of claims filed against them by third parties for bodily harm, property damage, personal injury, and injury to their reputation.

For companies of all sizes, it's essential to risk management because it may shield them from potentially crippling financial losses brought on by litigation and claims.

What Does General Liability Insurance Cover?

Because it’s designed to cover a wide variety of risks, general liability insurance is advised for businesses regardless of size or sector. It covers hazards such as slip-and-fall incidents, property damage caused by business operations, and advertising-related injuries, including defamation and copyright infringement claims.

It’s also intended to cover legal fees and other costs of defending a claim, along with lawsuits, settlements, and verdicts.

General liability policies are adaptable, which lets businesses customize coverage to their needs. Common coverage limits apply to bodily injury, property damage, and personal and advertising injury, and they can vary depending on the policy and the type of business.

Why Does Your Business Needs General Liability Insurance?

Protecting your company from protential lawsuits, claims, and financial loss is crucial to long-term profitability. Despite your best efforts, accidents can still happen. If someone is hurt, or property is damaged as a result of your operations or products, general liability insurance can help defend your business against legal action and claims from clients, suppliers, and other third parties.

It can also give you peace of mind so you can focus on growing your business, while helping you establish credibility with stakeholders and meet contract requirements.

What is Builder's Risk Insurance?

Builder’s risk insurance is a policy that provides coverage for physical damage to a construction project during its construction phase.

Contractors, builders, and property owners starting new construction or renovation projects frequently obtain it. The policy typically covers the construction phase, which can last anywhere from a few months to several years depending on the size and complexity of the project. For a fuller walkthrough, see our guide to builder’s risk insurance for contractors.

What Does Builder's Risk Insurance Cover?

This insurance coverage covers builders, contractors, and property owners against hazards related to building projects, such as theft, vandalism, and damage from natural disasters. It typically covers:

1. Property damage

Damage to the building or structure being constructed, as well as materials and fixtures used in construction.

2. Theft and vandalism

Theft, vandalism, and other criminal acts that occur on the construction site.

3. Business interruption

Lost income and other expenses that may result from construction delays or interruptions.

4. Additional expenses

Extra costs from unforeseen circumstances, such as debris removal after a natural disaster.

It’s important to remember that builder’s risk insurance doesn’t cover accidents or injuries that happen on the job site. You’ll need separate general liability and/or workers’ compensation coverage for those.

Why Do You Need Builder's Risk Insurance?

For builders, contractors, and property owners working on new construction or renovation projects, builder’s risk is a necessary policy. It’s frequently required under construction contracts, and without it you could be in breach of your contract. Carrying it helps you meet your contract terms and avoid costly legal disputes.

Construction projects are also inherently risky, with many factors outside your control, such as fire, weather, and theft. Builder’s risk protects against the financial loss from property damage and other losses during construction, and gives you peace of mind while the work is underway.

What Is The Difference Between General Liability And Professional Liability Insurance?

General liability and professional liability are two separate types of coverage that protect against different risks.

General liability insurance safeguards businesses from claims of personal harm or property damage allegedly caused by their activities, goods, or services. It’s intended to cover third-party claims, such as those brought by clients, suppliers, or other non-employees. Examples include slip-and-fall accidents, product defects, property damage caused by the business’s operations, and advertising injuries such as defamation or copyright infringement.

Professional liability insurance, also called errors and omissions insurance, defends professionals against allegations of negligence or mistakes in the services they provide. It pays claims from clients or customers who have suffered financial loss or other harm because of the professional’s actions or inactions. Examples include mistakes made by accountants, lawyers, architects, and other professionals that result in financial losses for their clients.

Which Type of Insurance Is Right for Your Business?

The right coverage depends on the type of business you have, the risks in your industry, and your unique needs. Some general guidelines:

• General liability insurance: Essential if your business interacts with customers, vendors, or other third parties. It covers claims of bodily injury or property damage caused by your operations, products, or services. Contractors should also review whether they need general contractors’ insurance.
• Professional liability insurance: May be necessary if you provide specialized services, such as a lawyer, accountant, or architect. It covers claims of negligence or errors in your services.
• Property insurance: Essential if your business owns property, such as a building or equipment. It covers damage from perils like fire, theft, or weather.
• Business interruption insurance: May be needed if your physical location is crucial to your operations. It covers lost revenue and added costs if you must close temporarily due to a covered peril, such as a fire or natural disaster.
• Cyber liability insurance: Important if your business collects, stores, or transmits sensitive information, such as customer data or financial information. It covers losses from data breaches, cyberattacks, and other cyber incidents.

Hotchkiss Insurance has a dedicated team that can help guide you toward the right coverage for your company’s needs.

Protect Your Business with the Right Type of Insurance Coverage

The best way to choose the right insurance is to work with an insurance partner who can assess your specific requirements and recommend the types and amounts of coverage that will fully protect your company.

Since 1975, Hotchkiss Insurance has protected a variety of businesses, including residential home building, commercial construction, trade contractors, manufacturing, distribution, restaurant and hospitality, retail, and more. We believe that protecting what matters most helps individuals and companies thrive.