Top 5 Common Risks in Construction: Why General Liability Isn’t Always Enough


For contractors in the United States, managing risk is a daily responsibility that extends far beyond simply completing a project on time. While general liability insurance is a vital starting point, protecting your business requires recognizing that the construction industry faces a unique, diverse set of exposures. Relying on a single policy leaves critical gaps that can lead to devastating financial losses, lawsuits, or the closure of your business.

Understanding the specific risks inherent in construction projects is crucial for selecting the right combination of coverages. Here are the top five common risks that threaten contractors and why general liability is often only the beginning of your safety net.

The Top 5 Risks Contractors Face

1. Workplace Injuries and Accidents

Construction sites are hazardous environments. Despite strict safety protocols, accidents happen, resulting in injuries to workers.

  • The Risk: Falls from heights, equipment malfunctions, and structural collapses.

  • Why GL Isn't Enough: General Liability only covers injuries to third parties (like clients or passersby). It does not cover your employees. Workers' compensation insurance is essential to cover medical bills and lost wages for your crew.

2. Property Damage to the Work in Progress

A significant risk involves damage to the structure currently being built or renovated, rather than damage to existing third-party property.

  • The Risk: A fire destroys a half-finished house, or a severe storm damages an uncovered building frame.

  • Why GL Isn't Enough: GL covers damage to other people's property. It does not cover the building you are constructing or the materials stored on-site. Builders risk insurance is required to protect the project itself.

3. Faulty Workmanship Claims

Even the best contractors can face claims regarding the quality of their work, whether due to a genuine mistake, a misunderstanding of specifications, or defective materials.

  • The Risk: A leaky roof installed last season, a structural crack, or an electrical failure that occurs months after project completion.

  • Why GL Isn't Enough: While GL has a "products and completed operations" component, specialized claims often require professional liability insurance (errors and omissions), especially if you provided design advice, structural calculations, or specialized consulting.

4. Theft, Vandalism, and Equipment Damage

Construction sites are often unsecured, making them prime targets for theft and vandalism. Furthermore, expensive tools and heavy machinery can be damaged in transit or on site.

  • The Risk: Generators, specialized tools, and heavy equipment being stolen overnight, or a forklift being damaged while being moved.

  • Why GL Isn't Enough: GL does not cover your own tools and equipment. You need inland marine insurance (often called equipment floater coverage) to protect your assets from theft and damage while they are away from your main shop.

5. Accidental Damage to Underground Utilities

Striking an underground utility line is a common and incredibly costly mistake that can halt a project and cause widespread disruption.

  • The Risk: Rupturing gas lines, cutting fiber optic cables, or damaging water mains during excavation.

  • Why GL Isn't Enough: While this may fall under general liability, the damages can quickly exceed standard limits. Furthermore, contractors need specialized coverage and rigorous procedures to manage the intense liability associated with utility damage.

Summary of Specialized Coverage Needs

RiskEssential Coverage
Worker InjuryWorkers' Compensation
Damage to ProjectBuilders Risk Insurance
Faulty Design/AdviceProfessional Liability (E&O)
Theft of ToolsInland Marine Insurance
Vehicle AccidentsCommercial Auto Insurance

Building a Comprehensive Protection Strategy

Relying on a single insurance policy is a gamble that rarely pays off. Instead, contractors must view risk management as a layered approach. By combining general liability with workers' compensation, commercial auto, and industry-specific policies like inland marine and builders risk, you create a robust shield against the unexpected.

Furthermore, implementing rigorous safety training and strictly following contractual risk transfer methods—ensuring all subcontractors carry their own insurance—reduces the likelihood of claims arising in the first place.


Comprehensive Guide to Insurance for a Contractor: Protecting Your Business and Assets



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