Insurance Terms Every Contractor Should Know: A Wisconsin Glossary

Every contractor eventually gets a subcontract or bid package with an insurance section that reads like a foreign language. Additional insured. Primary and noncontributory. Waiver of subrogation. Per project aggregate. Most Wisconsin contractors sign anyway and hope their policy lines up, and many find out it does not only after a claim, a failed audit, or a general contractor holding back a payment.

This glossary explains the contractor insurance terms you will run into most often, in plain English, and what each one means for your business. It is written for Wisconsin trades, from one truck operations to established general contractors. MM Insurance Associates is an independent agency in New Berlin that has helped contractors across Wisconsin read and meet these requirements since 1997.

Proof of Coverage Terms

Certificate of insurance (COI)

A certificate of insurance is a one page summary, usually on the ACORD 25 form, that shows your carriers, policy numbers, effective dates, and limits. General contractors, property owners, and municipalities ask for it before you start work. The key thing to understand is that a COI is information only. It does not change your policy or grant anyone coverage. If a contract requires something, the policy itself has to provide it.

Certificate holder

The certificate holder is the person or company the COI is issued to, such as the general contractor or owner. Being listed as certificate holder gives them proof that you carry insurance. It does not make them an insured on your policy. That is a separate step.

Additional insured

An additional insured is a party that gets coverage under your general liability policy for claims arising out of your work. General contractors and owners almost always require it, because if your crew causes an injury on their project, they want your policy to defend them. Additional insured status is added by endorsement, and the wording matters.

• Ongoing operations endorsements, often the ISO CG 20 10, cover the additional insured while you are working.

• Completed operations endorsements, often the ISO CG 20 37, cover them after your work is finished. Many contracts require both.

• Blanket endorsements automatically extend status to anyone you agree in a written contract to cover. Scheduled endorsements list specific names, which means a new endorsement for every new job.

If you work for many different general contractors, a blanket additional insured endorsement with both ongoing and completed operations wording saves a lot of paperwork and prevents gaps.

Contract Language Terms

Indemnification or hold harmless agreement

This is the clause where you agree to defend and pay for losses the other party suffers because of your work. Your insurance responds to these agreements through contractual liability coverage in your general liability policy, but only to the extent the policy and state law allow. Broad indemnity clauses can ask you to take on more than your policy will pay, so have them reviewed before you sign.

Primary and noncontributory

Primary means your policy pays first when a claim involves the additional insured. Noncontributory means your carrier will not ask the general contractor's own insurance to share the loss. Together, they push the cost of claims from your work onto your policy instead of theirs. This wording has to be in your policy endorsement, not just typed onto the certificate.

Waiver of subrogation

Subrogation is your insurer's right to recover what it paid from whoever caused the loss. A waiver of subrogation gives up that right against a specific party, usually the owner or general contractor. Contracts commonly require waivers on general liability, commercial auto, and workers compensation. Carriers add them by endorsement, such as the ISO CG 24 04 on general liability, and some charge a small fee, especially on workers compensation.

Per project aggregate

A general liability policy has an annual aggregate, the most it will pay in total for the policy year. A per project aggregate endorsement gives each job its own aggregate limit, so a large claim on one project does not use up the coverage available for the rest. Larger general contractors frequently require it.

Policy Structure Terms

Per occurrence and aggregate limits

A limit of 1,000,000 per occurrence and 2,000,000 aggregate means the policy pays up to 1,000,000 for any single incident and up to 2,000,000 for all incidents in the policy year. Most subcontract requirements in Wisconsin start at these numbers and then ask for an umbrella on top.

Products and completed operations

This part of general liability covers injury or damage that happens after your work is finished, such as a railing that fails or a water line that leaks months after you leave. For most trades, this is where the largest claims come from, and it is the coverage general contractors care about most when they ask for completed operations additional insured status.

Occurrence versus claims made

Occurrence policies cover incidents that happen during the policy period, no matter when the claim is filed. Claims made policies cover claims filed while the policy is active, which makes the retroactive date and any tail coverage important. Contractor general liability is usually written on an occurrence basis, while professional liability is usually claims made.

Umbrella and excess liability

An umbrella sits above your general liability, commercial auto, and employers liability and adds extra limits once those underlying policies are exhausted. An excess policy works similarly but follows the underlying terms more strictly. When a contract asks for 5,000,000 in total limits, an umbrella is how most contractors get there.

You can see how these coverages fit together in our overview of business insurance for Wisconsin companies.

Payroll, Audit, and Workers Compensation Terms

Premium audit

Contractor general liability and workers compensation premiums are estimated at the start of the policy based on projected payroll or sales. After the policy ends, the carrier audits your actual numbers and either refunds or bills the difference. A surprise audit bill is one of the most common complaints we hear, and it usually comes from growth that was never reported or from uninsured subcontractors.

Class codes

Every employee's payroll is assigned to a classification that reflects the work they do. A roofer, a carpenter, and a clerical employee carry very different rates. Splitting payroll correctly between field and office staff is one of the simplest ways to keep a premium accurate.

Experience modification factor

Your experience mod compares your workers compensation claims history to other businesses in the same classifications. A mod of 1.00 is average, below 1.00 lowers your premium, and above 1.00 raises it. In Wisconsin, mods are calculated by the Wisconsin Compensation Rating Bureau. Many general contractors ask for your mod when they prequalify subcontractors.

Uninsured subcontractors

If you hire a subcontractor who cannot show their own workers compensation and general liability, your carrier may treat what you paid them as your own payroll at audit. That can add thousands of dollars to your premium. Collect a current COI from every sub before they start, and keep it on file for the auditor.

Wisconsin employers generally must carry workers compensation once they have three or more employees, or once they pay one or more employees 500 dollars or more in a calendar quarter.

Project, Property, and Bond Terms

Builder's risk

Builder's risk covers a building while it is under construction or renovation, including materials on site and often in transit. Depending on the contract, the owner or the general contractor buys it. Know which party is responsible, because a fire or theft on an uncovered project can wipe out a season of profit.

Inland marine and contractor's equipment

Tools and equipment that move between job sites are covered by an inland marine policy, often called a contractor's equipment floater. A general liability policy does not cover your own tools, and a commercial property policy usually covers them only at your shop. An installation floater covers materials you are installing until the owner accepts the work.

Surety bonds

A surety bond is a guarantee, not insurance. A bid bond guarantees you will sign the contract if you win, a performance bond guarantees you will finish the job, and a payment bond guarantees you will pay your subcontractors and suppliers. If the surety pays a claim, it expects you to reimburse it. Public projects frequently require bonds, and the surety will review your financial statements and track record before issuing them.

For a full look at how these pieces come together for a builder, read our general contractor insurance guide.

How to Use This Glossary Before You Sign

A short review before signing saves far more than it costs. When a new subcontract or bid package arrives, look for these items:

• Required limits for general liability, auto, umbrella, and employers liability, and whether you carry them today.

• Additional insured requirements, including whether completed operations wording is required and for how long.

• Primary and noncontributory and waiver of subrogation requirements, and on which policies.

• Per project aggregate, notice of cancellation, and any unusual indemnity language.

• Who buys builder's risk and whether bonds are required.

Send that section to your agent and ask one question: can my current policies meet every requirement, and if not, what endorsements do I need? It is much easier to fix before the job starts than after a claim.

Frequently Asked Questions

Does a certificate of insurance give the certificate holder coverage?

No. A certificate of insurance only shows what coverage you carry. To give another party coverage, your policy needs an additional insured endorsement that names them or includes them through blanket wording.

What is the difference between additional insured and waiver of subrogation?

Additional insured status lets another party use your policy when they are sued over your work. A waiver of subrogation stops your insurer from suing that party to recover money it paid on a claim. Contracts often require both.

Why did my premium go up after a contractor insurance audit?

Audits compare estimated payroll or sales to actual numbers. Common causes of an increase are business growth that was not reported during the year, payroll assigned to the wrong class code, and payments to subcontractors who could not show their own insurance.

What does primary and noncontributory mean on a contract?

It means your policy pays first for claims involving the additional insured, and your insurer will not ask the other party's insurance to share the cost. It must be provided by an endorsement on your policy.

Is a surety bond the same as contractor insurance?

No. Insurance protects you from covered losses. A surety bond guarantees your performance or payment to the project owner, and you must repay the surety if it pays a claim on your behalf.

Who calculates experience mods for Wisconsin contractors?

The Wisconsin Compensation Rating Bureau calculates experience modification factors for Wisconsin employers based on their workers compensation payroll and claims history.

Get Your Contract Requirements Reviewed

Insurance language should not be the part of a contract you skim. Call MM Insurance Associates at (262) 754-4736 and send us the insurance section of your next subcontract or bid package. A licensed agent will compare it to your current policies and tell you exactly what, if anything, needs to change.

You can also get started online through our customer portal and we will follow up with the coverage details that fit your business.