Hiring a general contractor is one of the more consequential decisions a real estate investor makes on any project. The contractor controls the timeline, the subcontractor network, and the quality of work. They also control how much legal and financial exposure lands on the property owner if something goes wrong on the job site.
The certificate of insurance comes before the contract
Before any contractor sets foot on a property, the investor should have a current certificate of insurance in hand. This document confirms the contractor carries active general liability coverage and, if they have employees, workers' compensation. A contractor who cannot produce one is either uninsured or has let coverage lapse. Both situations transfer risk directly to the property owner.
Requesting a certificate before signing is standard on commercial projects. On residential investment properties, it gets skipped more often.
What the certificate should show
General liability limits should be at least $1 million per occurrence for most renovation and construction projects. Larger projects or those involving occupied buildings often require $2 million. The certificate should also show active workers' compensation coverage if the contractor has employees on payroll.
The most overlooked field is additional insured status. A property owner can be named as an additional insured on the contractor's general liability policy, which extends that coverage to the owner if a claim arises from the contractor's work. Adding this costs the contractor nothing.
Why the contractor's insurance structure matters
General liability insurance covers third-party bodily injury and property damage claims. It also pays defense costs if a claim goes to litigation, including attorney fees and court costs. For an investor managing multiple properties, a contractor without adequate coverage on one project can create legal exposure that affects the entire portfolio.
If a contractor's employee is injured on the property and the contractor carries no workers' comp, the injured worker may have grounds to pursue the property owner directly. Verification falls on the investor before work begins, not after.
What contractors typically pay for coverage
Understanding what a contractor pays for insurance helps investors evaluate bids more accurately. A contractor pricing suspiciously low may be cutting costs on coverage.
|
Annual Revenue |
Typical GL Premium |
|
Under $150,000 |
Starting around $1,600/year |
|
$150,000 to $500,000 |
$1,600 to $3,000/year |
|
$500,000 to $1 million |
$3,000 to $5,000/year |
|
Above $1 million |
Roughly 0.75% of total revenue |
Specialty trades like roofing and demolition pay more than standard framing or finish work. A contractor doing both general and specialty work gets rated on the higher category.
Working with contractors who use independent brokers
A contractor who buys coverage through an independent broker rather than a single carrier tends to carry better-structured policies at more competitive rates. An independent broker shops coverage across multiple A-rated carriers rather than locking into one.
Farmer Brown Insurance places general contractors' insurance across all 50 states, with same-day certificates available for most applications. For investors who need a contractor to have coverage in place before a project starts, same-day binding is available for most standard contractor applications.
The subcontractor question
General contractors regularly bring in subcontractors, and each one creates additional exposure if uninsured. A well-run general contractor requires certificates from every subcontractor before they start work and maintains a log of active coverage throughout the project.
Investors hiring general contractors for larger projects should ask directly how the contractor manages subcontractor insurance compliance. A contractor with a clear answer and a documented process is operating at a professional level.
