How much liability insurance should a contractor carry?

How much liability insurance a contractor should carry

The right limit depends on what could go wrong on your site and how much it would cost. A window cleaner working at ground level and a roofer working above occupied units present very different exposures. Most organizations set a baseline for all vendors, then raise it for specific trades or projects.

A common approach looks like this:

• $2M CGL per occurrence: the most common minimum for commercial work, such as cleaning, landscaping, general maintenance, painting and most service calls.
• $5M CGL per occurrence: common for higher risk trades such as roofing, fire protection, demolition, restoration and elevator work, and for larger sites or projects.
• More than $5M: some owners, lenders and large institutions require higher limits for major projects or high value buildings.

Other coverage to consider

General liability is the core requirement, but it does not cover everything. Depending on the work, many organizations also ask for:

• Automobile liability where the contractor uses vehicles on your site.
• Professional liability (errors and omissions) for consultants, engineers and designers whose advice or drawings could cause a loss.
• Pollution liability for environmental, abatement and remediation work.

Workers' compensation is a separate matter. In Ontario, you confirm it with a WSIB clearance certificate rather than a certificate of insurance. See what a WSIB clearance certificate is.

What to ask for on the certificate

A limit only helps if you can confirm it. Most organizations ask contractors for a certificate of insurance (COI) that shows:

• The insurer's name and the policy number.
• The coverage types and limits, including the per occurrence amount.
• The effective date and expiry date of each policy.
• Your organization named as additional insured, so the policy can respond to claims made against you arising from the contractor's work.
• A notice of cancellation provision, often 30 days, so you hear about a cancellation before it takes effect.

Setting your own requirements

Because limits are a contractual matter for most work, it helps to write them down once and apply them consistently. A short written standard avoids negotiating each vendor from scratch.

1. Set a baseline CGL limit for all vendors, typically $2M per occurrence.
2. List the trades or project types that require a higher limit, such as $5M for roofing or fire protection.
3. Decide which additional coverages apply to which vendors, such as auto, professional or pollution liability.
4. State that your organization must be named as additional insured.
5. Put these requirements in your contracts, purchase orders or vendor onboarding package.
6. Review the standard with your own broker or insurer, who can advise on your specific exposure.

Condo boards set their own requirements in contracts and policies, since there is no single statutory insurance minimum for contractors working for Ontario condo corporations. See condo contractor insurance requirements in Ontario.

Common mistakes

• Accepting an aggregate limit as the per occurrence limit. Check that the per occurrence figure meets your requirement.
• Missing additional insured wording. A COI that lists you only as certificate holder does not usually add you to the policy.
• Wrong legal name. The named insured should match the business you are contracting with.
• Filing the COI and forgetting it. Policies renew, lapse or get cancelled. See what happens when a contractor's insurance expires.

How to put this into practice

Write your limits down, share them with every vendor before work starts, and check each certificate against them when it arrives. Record the expiry dates and request updated certificates before they lapse. Our contractor compliance checklist covers the other documents most organizations collect.

Vendorpass lets you set insurance requirements once and shows which vendors meet them and which certificates are close to expiry.