General liability (GL) is the base policy that pays when your work injures someone else or damages their property, up to your policy limit. The two things that decide whether it actually protects you are the form (insist on occurrence, not claims-made) and the exclusions (it will not pay to redo your own bad work). Everything else is detail sitting on top of those two.
Occurrence vs claims-made: the one to insist on
This is about when coverage triggers, not how much it pays.
- Occurrence form covers an incident that happens while the policy is active, no matter when the claim actually shows up, even years later after you have switched carriers. If you solder a joint this year and it fails and floods a house four years from now, the occurrence policy from the year you did the work responds. That matches exactly how construction defects surface, which is why occurrence is the dominant form for contractor GL.
- Claims-made form triggers when the claim is filed, not when the work was done. The policy has to be active when the claim arrives, and the act generally has to have happened on or after the policy's retroactive date. Drop or fail to renew a claims-made policy and you have a gap unless you buy tail coverage (an extended reporting period). It runs cheaper in the early years and steps up over roughly seven years. It is normal for professional liability but uncommon, and weaker, for contractor GL.
The rule: for your GL, insist on occurrence. Reserve claims-made for professional liability / E&O, and budget for tail coverage any time you switch carriers or close the business.
The 1M/2M limit and how the aggregate works
The common standard for small and mid-size contractors is a "1M/2M" policy: $1,000,000 per occurrence / $2,000,000 aggregate.
- The per-occurrence limit is the most the carrier pays for any single claim.
- The aggregate limit is the most it pays for all claims in one policy year, added up.
- A separate products-completed operations aggregate (usually also $2M) typically applies to claims from finished work, kept distinct from the general aggregate.
Most commercial contracts, from public works to GC subcontracts, name 1M/2M as a minimum. Larger owners and GCs often require $2M/$4M, $5M, or more, which is normally met by adding an umbrella on top rather than buying a bigger primary policy. Your contract sets the real number, so route the exact required limit to your contract and Working in Your State.
Per-project aggregate: why one bad job shouldn't burn your whole year
Here is the trap in that aggregate. By default, the general aggregate is shared across every job you run in the policy year. One disaster on a single project can eat most of your aggregate, and then a legitimate claim on a completely different job later that year hits a nearly empty tank.
A per-project aggregate endorsement (commonly CG 25 03) gives each project its own separate aggregate limit, so a claim on one job does not deplete the coverage protecting your other jobs. GCs on multi-project accounts sometimes require it, and it is worth asking your broker about if you run several jobs at once. Confirm the endorsement is actually on the policy, because the certificate alone does not prove it.
The "your work" exclusion (and the two ways around it)
This is the most consequential limitation you will meet. The standard GL form excludes property damage to "your work," meaning the part you performed incorrectly. GL will not pay to tear out and redo your own defective work. People assume GL is a warranty on their workmanship. It is not.
Two carve-outs soften it:
- Subcontractor exception. If the damaged work was done by a subcontractor on your behalf, the your-work exclusion falls away and the claim is covered. This is why a GC who subs out almost everything has strong completed-operations coverage: it leans on the subcontractor carve-out.
- Resulting damage. Damage that results from the faulty work is generally covered even though fixing the faulty part itself is not. A bad roof detail that lets water in and rots the framing: the rotted framing is typically covered, the defective detail you botched is not.
There is also a timing piece. While you are still on the job it is "ongoing operations." Once you finish and leave, the products-completed operations (PCO) portion of the GL handles injury or damage arising from your completed work. PCO is the mechanism that answers construction-defect claims years after handover, so make sure you carry completed-operations coverage, not just ongoing operations.
To actually cover the cost of redoing your own faulty work, you need a separate contractor's E&O / workmanship product. See Do I need professional liability (E&O) insurance.
What GL flat-out does not cover
Keep these straight, because each one is a different policy:
- Your own defective work, redone (needs contractor's E&O / workmanship).
- Your employees' injuries (workers' comp).
- Intentional acts.
- Pollution, unless a contractor's pollution liability endorsement is added.
- Accidents in owned vehicles (commercial auto).
- Professional design errors (professional liability).
Common questions
Is occurrence or claims-made better for a contractor?
For contractor general liability, occurrence is the form to insist on. Occurrence covers an incident that happened while the policy was active even if the claim surfaces years later, which is exactly how construction defects work. Claims-made only responds if the policy is still active when the claim is filed, so dropping or switching it opens a gap unless you buy tail coverage. Claims-made is normal for professional liability, but for GL, occurrence protects you better.
What does "1M/2M" mean on an insurance certificate?
It means a $1,000,000 per-occurrence limit and a $2,000,000 aggregate limit. The per-occurrence figure is the most the policy pays for any single claim; the aggregate is the most it pays for all claims in the policy year combined. A separate products-completed operations aggregate usually applies to finished work. 1M/2M is the common minimum in commercial contracts, though larger jobs often require more, met with an umbrella.
Does general liability pay to fix my own bad work?
No. The standard "your work" exclusion means GL will not pay to redo your own defective workmanship. It surprises people who treat GL like a warranty. It does usually cover damage that results from the bad work, like framing rotted by a leak you caused, and it covers work a subcontractor did on your behalf. To cover redoing your own mistake you need a separate contractor's E&O or workmanship product.
Does my general liability cover work my subcontractors did?
Yes, generally. The "your work" exclusion is removed for work performed by a subcontractor on your behalf, so damage from a sub's work is typically covered. This subcontractor exception is why a general contractor who subs out most of the work still has strong completed-operations coverage. It is also why collecting valid certificates of insurance from every sub matters, so their carrier, not yours, is first in line when their work is the problem.
What is products-completed operations coverage?
It is the part of your general liability that responds to injury or property damage from work you have already finished and left. While you are on the job, claims fall under ongoing operations; once the job is complete, completed-operations coverage takes over, and it is what answers construction-defect claims that show up years after handover. Make sure you carry it, because ongoing-operations coverage alone gives you nothing after the job is done.
The honest bit
- 1M/2M is the common contractual standard, but your contract and your state license set the actual required limits, and bigger jobs demand more. Route the exact number to your contract and Working in Your State.
- Occurrence vs claims-made, the aggregate structure, and endorsement form editions are policy-language details. A certificate of insurance does not prove any of it exists, so read the actual policy and endorsements, or have your broker confirm them.
- This is general guidance, not insurance advice. For a serious claim or a contract with unusual coverage demands, a construction-savvy broker or attorney should look before you sign.
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