General liability insurance covers bodily injury or property damage caused by a contractor’s negligence. However, it does not protect against financial damages resulting from negligent professional advice. As claims for monetary damages from professional advice become more common, contractors need contractor’s professional liability insurance to safeguard their business from these risks.
WHAT IS CONTRACTOR’S PROFESSIONAL LIABILITY INSURANCE?
Professional liability insurance protects contractors who provide advice or services from claims that their errors or omissions caused financial losses to clients. Unlike general liability insurance, it does not cover bodily injury or property damage, making it a complementary policy rather than a replacement.
According to the Assurex Global 2021 Construction Benchmark Report, only 13% to 24% of contractors purchase this coverage. Most firms (89%) opt for practice-based coverage, while only 11% purchase it on a per-project basis.
WHEN SHOULD YOU CONSIDER THIS COVERAGE?
The best time to evaluate your need for contractor’s professional liability insurance is before a loss occurs. To determine if it’s right for your firm, ask yourself:
- How often do you provide professional advice to customers?
- Do you frequently perform design-build projects?
- To what extent do you work as a construction manager?
- Do your contracts require this coverage?
If your firm regularly provides professional advice or engages in design-build or construction management projects, your exposure to financial liability increases.
WHAT TO LOOK FOR IN A POLICY
When purchasing contractor’s professional liability insurance, ensure the policy includes a broad definition of professional services to cover all your activities. Be cautious of limiting exclusions that could restrict coverage.
Want to Learn More?
Kapnick can help you evaluate your risks and determine if contractor’s professional liability insurance is a good fit for your organization. Contact us at for a personal risk assessment.
