Risk management resources
Essential tools and insights to help builders navigate complex insurance landscapes and optimize risk transfer strategies
Insurance terms decoded
Navigate complex insurance language with confidence. Our comprehensive glossary breaks down technical terms for residential home builders.
General Liability Coverage
General Liability covers damage or injury caused by a subcontractor’s work, things like water damage, faulty installation, or someone getting hurt because of their operations.
If a sub causes damage, you don’t want the claim landing on your insurance. GL ensures the sub’s policy responds first.
Being listed as Additional Insured means their policy must defend and cover you if their work triggers a claim. Without it, your insurance could be forced to pay even when the sub is responsible.
Waiver of Subrogation
It prevents the subcontractor’s insurer from coming after the general contractor if a subcontractor causes damage or injury, blocking action that could shift blame upstream.
It aligns with standard risk transfer practices in construction by ensuring the party closest to the work bears the risk and the subcontractor’s insurance is fully responsible for losses arising from their operations.
It protects the general contractor’s loss history and insurance costs by helping avoid unnecessary claims against the general contractor’s policies that could affect future premiums.
A waiver of subrogation is a provision where an insurer agrees that, after covering a loss for its policyholder, it will not seek repayment from any third party that may have contributed to the damage. This provision or endorsement can be applied to many coverages like general liability, workers compensation, and auto liability.
Primary and Non-contributory Insurance
“Primary and noncontributory” is a contractual insurance requirement that defines how multiple insurance policies must respond to the same loss. When a policy is required to be primary and noncontributory, it means the contractor’s liability insurance must respond first, before any other applicable policies, and may not seek contribution from other policies that could also be considered primary.
This places full initial responsibility on the contractor’s policy for covered losses. In other words, the contractor’s liability insurance must respond first before any other applicable policies
The contractor’s policy may not seek contribution from other policies that could also be considered primary. This helps ensure other parties’ insurance is not tapped for the same covered loss at the outset.
Auto Liability Coverage
Auto Liability covers accidents caused by vehicles a subcontractor uses for work, trucks, vans, trailers, and equipment moved on public roads.
If a sub’s vehicle injures someone or damages property while working on your project, you don’t want that liability pushed back to you.
If a claim involves a vehicle being used for your jobsite or project, being Additional Insured ensures their Auto policy defends you, not yours.
Workers’ Compensation
Workers Comp pays medical bills and lost wages when a subcontractor’s employee gets hurt while working.
If a sub doesn’t carry Workers Comp, the injured worker can legally pursue you or the property owner for coverage. It protects you from those claims and ensures legal compliance.
Umbrella Coverage
Umbrella insurance adds extra protection above a subcontractor’s General Liability, Auto, and Workers Comp limits. It’s for severe injuries, large fires, or major property damage.
High-severity losses can exceed basic limits quickly. Umbrella coverage ensures the subcontractor has enough financial protection to handle a catastrophic claim — instead of the GC getting pulled in.
Additional Insured status on the sub’s Umbrella policy means you’re protected even for large or high-dollar claims, keeping your own limits untouched.
Why “Additional Insured” Matters
When a subcontractor adds you as an Additional Insured on their liability policies, it ensures:
Their insurance pays first, not yours
You receive legal defense if you’re named in a claim
Your loss history stays clean, keeping your premiums lower
You’re protected from lawsuits related to the subcontractor’s work
You reduce risk transfer gaps that often cause claim disputes
Additional Insured status is what allows you to shift the risk of a subcontractor’s work to their insurance—where it belongs.
Notice of Cancellation
A notice of cancellation is a formal alert from an insurance company stating that a subcontractor’s policy will end on a certain date. The insurer must send this notice before the cancellation becomes effective, giving you time to address the issue.
This notice is important because it tells you that a sub’s insurance coverage is about to lapse or be terminated. That could be due to missed premium payments, underwriting issues, or other changes in the risk. Once the policy is canceled, the subcontractor no longer carries the protection your contract requires, and any losses that occur afterward may fall back on you or your own insurance.
Requiring notice of cancellation ensures you are informed early, so you can pause work, request proof of reinstatement, or take other steps to protect the project and your own liability.
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