General liability insurance for contractors
Checked 2026-09-04 · 9 min read
§ 1What it covers
A commercial general liability policy answers one question: if your operations injure somebody or damage property that is not yours, who pays? It pays third parties, and it pays the lawyers who defend you — the defence cost is often the larger half in practice.
It is not property insurance for your own tools, it is not cover for the work itself, and it is emphatically not your licence bond. A bond pays a claimant and then takes the money back from you; insurance pays and does not.
Sometimes it is a licensing requirement.
California requires a licensed LLC to carry a cumulative limit of at least $1,000,000, rising $100,000 per additional person of record to a $5,000,000 cap (B&P Code § 7071.19). That is a floor set by statute, not a market convention.
§ 2Reading the limits
Limits come in pairs and the pair matters more than either number. Per occurrence is the most the policy pays for one event; the aggregate is the most it pays for the whole policy term. A busy year can exhaust an aggregate long before a single claim reaches the occurrence limit.
| Limit | What it caps | Where it fails you |
|---|---|---|
| Each occurrence | One event | A single large loss |
| General aggregate | All claims in the term | Several medium claims in one year |
| Products / completed operations aggregate | Claims arising after the work is finished | A defect that surfaces a year later |
| Damage to premises rented to you | Fire and similar damage to a rented space | A shop or yard fire |
The completed-operations aggregate is the one contractors under-read. Most construction claims arrive after the job is signed off, and they are paid from that line — not from the general aggregate.
§ 3The exclusions that bite
A CGL is a broad grant of cover with a long list of things carved back out. Four carve-outs account for most declined construction claims.
Read these four before you read the limits
- Your work. The cost of fixing your own defective work is generally not covered. Damage that defect causes to something else may be.
- Contractual liability. Cover for liability you assumed by contract is limited. An indemnity you signed does not automatically become the insurer’s problem.
- Professional services. If you designed as well as built, the design half sits outside a standard CGL and needs its own policy.
- Employees. Injuries to your own workers belong to workers’ compensation, not here.
Trade-specific exclusions sit on top: roofing, excavation and anything involving heat or water frequently attract their own carve-outs or higher deductibles. Ask the broker which exclusions were added for your class, not just what the limits are.
§ 4Endorsements you will be asked for
A general contractor’s subcontract will normally require three things beyond the limits themselves, and every one of them is an endorsement that must actually be on the policy — not a box someone ticked on a certificate.
- Additional insured. The GC and the owner get the benefit of your policy for claims arising out of your work.
- Waiver of subrogation. Your insurer gives up its right to chase the GC after paying.
- Primary and non-contributory. Your policy pays first, and does not share with the GC’s.
Our certificate-of-insurance guide shows where each of these appears on an ACORD 25, and how to tell a real endorsement from a certificate that merely mentions one.
§ 5Buying it well
Premium follows payroll, receipts and class of work, in that order. Describe the work accurately: a class code that understates what you do saves money now and gives the carrier a reason to argue later. Our GL calculator shows how those three inputs move the band.
Note what GL is not: it does not replace your $25,000 licence bond, and a board that asks for both is not being redundant — they answer different questions. See bond versus liability.
Checked against
- CSLB — Limited Liability Company (LLC) licencesread 2026-09-04
- CSLB — Bond Requirements (SB 607, effective 2023-01-01)read 2026-09-04
Not legal advice. Fees, bond amounts and deadlines are set by statute and change without notice — confirm with the board that issues your licence before you file.