Contractors professional liability insurance, also known as CPL insurance, is a special type of insurance schemed to offer protection to contractors and construction professionals against liability claims. What’s more, these claims can be regarding their professional services. CPL insurance is very important for contractors who are into consulting, designing, or offering services and covers the gap that comprehensive general liability insurance cannot close.
Unlike a general liability insurance policy, which offers protection for contractors when their job results in property damage or bodily injury, professional liability insurance provides coverage for situations when your job makes another person lose money. For example, you hire a subcontractor who is in charge of laying pipes (plumber). However, this person doesn’t do the work properly, and this leads to water damage, causing a costly repair for you as a general contractor.
For this reason, CPL insurance will provide you with compensation for judgments, legal fees, and settlements. As a business owner or a general contractor, this professional liability insurance gives you the protection you need. But before purchasing a quote, there are some things you have to look out for, which you will learn about later in this blog post.
How Does It Work?
To repeat, contractors professional liability insurance is a special and specific type of professional liability insurance, better known as an errors and omissions policy. It offers coverage to architects, contractors, engineers, and other construction workers for situations like improper installations and botched designs, as well as other structural mistakes caused by professional errors, negligence, and information concealment.
Without a doubt, these errors will cause rebuilding costs and costly repairs. Nevertheless, this type of insurance offers coverage for three types of liabilities. In this case, we have first-party indemnity coverage, third-party coverage, and pollution coverage. Even though commercial general liability policies often work with CPL insurance, they are not the same.
What Does Contractors Professional Liability Insurance Cover?
Figuring out what contractors professional liability insurance covers is key to determining if you need a policy or not. It will also help you discover the basics of coverage and what to expect when shopping for a policy. With this in mind, here are the inclusions and basic coverage that CPL insurance offers:
- Negligence
- Errors
- Incorrect professional advice.
- Omissions
In addition, if you are sued for financial losses, this type of professional liability insurance will help you cover the settlement and judgment costs.
What Does It Not Cover?
Even though contractors professional liability insurance offers a wide range of coverage, it cannot possibly cover all the potential situations contractors face. For a clearer understanding, here is what CPL insurance doesn’t cover:
- Illegal actions.
- Intentional mistakes.
- Employee illness and injury.
- Harrassment
- Discrimination
Apart from this, the exclusions involved with this policy type also depend on the insurance provider and specialty. This is why it is important to read through the contract before agreeing.
How Much Does Contractors Professional Liability Insurance Cost?
The price to pay to get contractors professional liability insurance revolves around various aspects and factors. Nevertheless, the average cost of contractor insurance that covers general liability falls within the range of $275 to $13,000 per year. Moreover, if you have a wrap-up insurance policy or controlled insurance program, you can include professional liability insurance to get better premiums.
Aspects that affect the cost of CPL insurance include:
- Policy limits.
- Type of project.
- Project’s location.
- Value of the project.
- Prior claims history.
- Additional coverage.
- Size of the workplace.
Who Needs a Policy?
Normally, contractors buy this professional liability insurance to receive coverage for possible liabilities due to mistakes, oversights, and negligence in the process of delivering services under an official contract. Errors and mistakes by your subcontractors are covered as well. For example, construction workers, design architects, builders, engineers, and other professional construction workers.
How to Get Contractors Professional Liability Insurance
Before getting or purchasing a contractors professional liability insurance policy, there are some things that you need to consider. For a better understanding, here is what you need to buy a quote:
- Analyze possible professional risks.
- Know how much coverage you need.
- Find good insurance coverage for other parties.
- Compare multiple insurance providers.
- Check client reviews.
- Look for policy restrictions.
- Search for discounts.
These are the steps you need to adhere to if you would like to find the best professional liability insurance for you and your subcontractors.
FAQs
Can I add contractors professional liability insurance to an existing policy?
Sometimes, CPLI can be added as an endorsement to an existing general liability policy, but the coverage may be limited compared to a standalone contractors professional liability insurance policy. It’s important to review the coverage details carefully.
Can CPL insurance cover past projects?
CPLI is offered on a claims-made basis, which means it covers claims made during the policy period. Some policies may offer retroactive coverage for services provided before the policy’s effective date, but this varies by insurer and may affect the premium. It’s essential to discuss your specific needs and coverage options with your insurance provider.
How Do I File a Claim Under CPL insurance?
If you need to file a claim under your CPL insurance policy, you should notify your insurance provider as soon as possible, providing all relevant details about the claim, including documentation and correspondence related to the alleged error or omission. Your insurer will guide you through the claims process.
