A standard general contractor liability policy carries $1 million per occurrence and $2 million total. That figure reads the same on paper whether a crew is patching a bathroom or rebuilding half a house.
General Contractors Insurance, a project of Farmer Brown Insurance, has placed contractor coverage in all 50 states for more than 30 years. One issue that often comes up on larger renovations is that homeowners confirm a policy exists without checking whether the coverage actually fits the job.
The policy limit is fixed. The size of your renovation is not
Dropping from the standard $1 million and $2 million down to $500,000 in limits saves less than $100 a year on most policies. Not worth it, and most contractors know that, which is why the $1 million and $2 million figures show up on most certificates homeowners receive.
What that certificate does not explain is why two contractors can have the same limits even when their businesses are very different. A general contractor’s insurance program is priced based on the contractor’s own annual revenue, roughly 0.75 percent of it for the liability piece, with a minimum premium near $1,600 a year. A contractor doing $500,000 a year pays somewhere around $3,750 to $4,500 for that policy. A newer contractor doing $150,000 a year pays close to the floor. Both certificates say $1 million and $2 million. The difference is that one contractor is running a much smaller business.
Consider a remodel where the aggregate had already been spent down
Consider a homeowner in Austin paying $210,000 for a full kitchen and primary bedroom remodel, with a certificate on file showing the standard $1 million per occurrence and $2 million aggregate. The certificate does not show that the same contractor had already paid a $1.7 million fire-damage claim on another job earlier that year. That claim reduced the shared aggregate to roughly $300,000 for all remaining projects covered under the policy, including hers.
The per-occurrence number resets with each new incident, but the aggregate does not. It is the total the policy will pay across those claims during that policy year, shared across every job the contractor is working on rather than resetting for each new client who signs a contract.
None of that shows up on a certificate that only lists the original limits. Instead, it may appear on the declarations page or come up only if the homeowner asks how much of the aggregate is still available.
A contractor scaling up a business can outgrow last year’s policy
Contractors who spent years doing $150,000-a-year kitchens and bathrooms sometimes land a $400,000 whole-house renovation before their insurance reflects the size of the work they are now taking on. The revenue used to calculate the premium is usually based on the prior year, not the project currently underway, so a contractor may be handling a much larger project than the policy was priced around. That difference does not show up anywhere on a standard certificate either. It only shows up if someone asks how the current project compares to the contractor’s typical job size.
What actually protects a large renovation
A same-day certificate confirms a policy exists, but it does not confirm how much of that policy is still available. For a large project in the six-figure range, it is worth asking the contractor’s agent directly whether the aggregate has already been reduced by claims that year, and whether the coverage was priced for a business that is large and likely to carry more than one major project at a time.
Being added as an additional insured on the policy is also important information to ask about, since it puts a homeowner’s claim inside the same coverage rather than behind it. Most agencies that issue same-day certificates can add that in the same request.
For very large renovations where a single incident could use up a significant part of the aggregate, some contractors carry commercial umbrella coverage on top of the base policy, increasing the total available limit beyond the standard $2 million. It is worth asking whether a contractor carries this coverage before signing the contract, not after.
The $1 million and $2 million on the certificate were never the whole picture. They describe what the policy could pay out on a good year, not what is actually left the day a homeowner needs it.