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Terms to Know When Buying Contractor's Insurance
Clear Answers for Complex Insurance Language
In large-scale construction, the fine print matters. Misunderstanding key insurance terms can mean costly coverage gaps, compliance issues, or even lost contracts. This guide breaks down the most important insurance terms for contractors—so you can make informed decisions and protect every project with confidence.
Key Insurance Terms Contractors Should Know
General Liability Insurance
Coverage for third-party bodily injury or property damage caused by your operations. Essential for protecting your firm’s financial stability on every project.
Certificate of Liability Insurance (COI)
Proof of coverage required by clients and project owners before work begins. It shows your policy types, limits, and endorsements.
Additional Insured
An individual or organization—such as a project owner—added to your policy for liability protection. Often required on large contracts.
Claims-Made vs. Occurrence Policy
- Claims-Made: Covers claims filed during the policy period, no matter when the incident happened.
- Occurrence: Covers incidents that occur during the policy period, even if the claim is filed later.
Experience Modification Rate (EMR)
A score reflecting your workers’ comp claims history. A lower EMR signals fewer claims, lowering premiums and boosting competitiveness in bids.
Waiver of Subrogation
A clause preventing your insurer from seeking recovery from a third party after paying a claim. Commonly required by project owners.
Umbrella Policy
Extra liability coverage beyond standard limits. Critical for firms working on large, high-value projects.
Deductible vs. Self-Insured Retention (SIR)
- Deductible: Amount you pay before insurance responds.
- SIR: You handle claims up to this amount before the insurer steps in.
Builder’s Risk Insurance
Protects buildings under construction, along with materials and equipment, against risks like fire, theft, or storm damage.
Professional Liability (Errors & Omissions)
Covers legal costs and damages if a client claims your firm made a professional error in design, specifications, or consulting.
Indemnity / Hold Harmless Clause
A contract provision requiring you to protect another party from certain losses. Critical to review, as it can shift significant liability onto your firm.
Surety Bond (Performance & Payment Bonds)
A financial guarantee—often required on public projects—that ensures you’ll complete work and pay subcontractors. Not insurance, but vital for winning government and large-scale jobs.
Common Pitfalls in Insurance Language
Even experienced contractors run into issues when reviewing policies. Avoid these costly mistakes:
Assuming All Risks Are Covered when exclusions apply
Overlooking Required Endorsements for project-specific compliance
Misreading Indemnity Clauses that expand your liability
Not Monitoring EMR Impact on workers’ comp premiums
Failing to Update Certificates when policies change mid-project
How UCI Helps You Navigate Insurance Terms
At UCI, we turn confusing insurance language into clear strategies that protect your business. Our specialists:
Explain every term in plain English
Review contracts for compliance and liability risks
Deliver fast, accurate Certificates of Liability Insurance
Customize endorsements for high-value and multi-state projects
Provide proactive guidance to minimize long-term costs
Make Informed Decisions on Every Project
Don’t let insurance jargon cost you contracts or coverage. Partner with UCI to ensure your insurance terms are clear, compliant, and tailored to your operations.