Contractor Liability Insurance
In the United States, almost every state requires a contractor to obtain and carry contractor liability insurance prior to earning a contractors license or bidding on government contracts. This regulation, while mandated at the state level, is often enforced as low as the city and/or county level.
Contractor liability insurance is important because it protects the contractor in the event of an accident or problem that occurs as a result of his or her work as a contractor, both before a job begins, while it is underway, and after it is finished. States mandate this coverage because it protects the general population, and it also protects the contractors employees in the event that they get hurt on the job.
Contractor liability protects a contractor in the event that a structure, building, or job is involved in death, in which case the contractor might be sued for damages. Without this type of liability coverage, the contractor would be sunk, as legal costs alone could wipe out any companys operating budget.
When applying for a contractors license, a state or government agency will ask for proof of general liability coverage. If you dont have it, you wont be able to get your license. Without your license, you have no way of bidding on government jobs, or even taking money to do business, at least on a legal basis.
Though it might be possible to apply to bid on a government or civilian contract without contractor liability insurance, you wont be able to accept any funds or start the job until you have coverage, which means buying it and letting it lapse isnt an option. A contractor has a duty to buy and maintain coverage at all times while doing business.
Though contractor liability insurance does protect against accidents, it does not protect against negligence or poor work. For example, if a contractor is negligent in following safety regulations, they can still be held accountable for the damages, even if they do maintain liability coverage.
Likewise, should a contractor perform poor quality work, they are still help responsible for fixing it and/or anything that might happen as a result of the poor work. For example, a plumber might not properly seal a drain tube, which might cause a leak in the building. Because of the contractors poor work, they would be responsible for fixing all of the damage.
So, think of contractor liability insurance as a way to protect your employees and civilians while you are on the job, and as a stop gap against accident, injury, or death claims. It will prevent you from being a target for frivelous lawsuits, and will ensure that you are operating within the confines of local, city, and state laws and regulations.
Buying contractor liability insurance is a small price to pay for the peace of mind that comes with it. Though it isnt always cheap to buy contractor liability insurance, I suppose you should just consider it a cost of doing business as a contractor.