General liability insurance protects a company's assets under the circumstances that it is sued for the alleged destruction of its client's property. Contractor's general liability insurance is specific to the nature of the contractor's work for its clients.

Function

Unlike other types of insurance, if a claim is accepted, the policyholder of the insurance plan does not receive the claims payout. This is because general liability insurance is protection against third party claims, and functions to protect the company from having to pay damages that could financially cripple its assets.

Business Owner's Policy

Most commonly, a business' general liability insurance is part of its business owner's policy. This is usually the case for contractors. However, these coverages usually have fairly low limits, so contractors working in more risky work may wish to purchase a separate policy to ensure full coverage.

Risk

When purchasing insurance, a contractor needs to take into consideration the perceived risk inherent to its work. Contractors that work regularly with large machinery should purchase more insurance than those who do not.

Location

A contractor's location will affect how much liability insurance it carries. This is both because a state's history of how much is awarded for claims will necessitate higher or lower coverages, as well as the process for owning liability insurance.

Umbrella Liability Insurance

In cases in which contractors are held responsible for larger sums than their general liability insurance covers, additional support from an umbrella coverage plan can be necessary. Umbrella plans cover payments that exceed other plans' coverage.

Source:

Small Business D&B.com: Liability Insurance

More Information:

Chart Is Insurance.com: Contractors General Liability Insurance