Does liability insurance cover construction mistakes?

Liability insurance covers third party lawsuits resulting from a contractors operations. This includes parties injured by faulty construction and also property damage resulting from faulty construction. Liability insurance DOES NOT cover the contractors property that is "their work" which needs to be covered by builders risk insurance.

Construction insurance policies are complex so make sure you work with a construction insurance broker to get quotes and understand what you are buying. Policies can be written to exclude types of work, certain projects, certain types of claims, and prior work performed.