Construction Industry

A contractor's insurance policy coverage can protect your business from devastating financial losses that can result from work-related accidents.

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Top Businesses We Insure in the Construction Industry

Insurance For Construction Company

Construction insurance is appropriate for many different industries that are involved in the construction of new buildings, whether they are residential or commercial structures. Regardless if you are a general contractor (GC), plumber, electrician, landscaper, HVAC, drywall, masonry, or any other of the many types of sub-contractors that are involved in renovations and new construction, you will need the minimum general liability and workers compensation insurance. Often you will be unable to get work without evidence of these policies.

 

 

The nature of the construction industry is unique, as are the various types of coverage needed to shield your business from expensive claims or lawsuits that may arise as you conduct your operations year after year.

Understanding Independent Contractors Insurance

Whether it is building houses, commercial buildings or other structures, general contractors have a lot of responsibilities on their shoulders. General Contractors are responsible to oversee all construction operations from ground zero. A lot could go wrong between dealing with schedules, coordinating with subcontractors, to hiring labor and ordering construction materials. General Contractor Insurance gives the general contractor peace of mind so they can focus on the construction without the hassle of worrying about operational risks.

The major insurance policies for a GC to consider are:

  • General Liability Insurance
  • Commercial Property Insurance
  • Commercial Auto Liability Insurance
  • Professional Liability Insurance
  • Builder’s Risk Insurance
  • Worker’s Compensation Insurance
  • Inland Marine Insurance (contractors equipment)
Contractor and  female worker discussing on project

Potential Risks and Liabilities

Assess these risk scenarios to understand the potential business risks of your profession. 

These scenarios will help you understand the application of Independent Contractors Insurance.

  • Scenario 1 - An employee falls from the top of the building and fractures their leg. Your Worker’s Compensation Insurance will cover medical costs and a percentage lost income.
  • Scenario 2 - A house that you are building catches fire from a lightning strike.  Builders Risk Insurance will pay for your cost to rebuild the house.
  • Scenario 3 - A client brings a guest to your construction site, the guest trips over a tool and sues you for bodily injury. General Liability Insurance comes into the picture in such situations.

Recommended Policies For Business Insurance for Contractors

Commerical General Liability Insurance

Property damage or bodily injury is likely to occur in your line of business. This insurance mainly provides financial protection against third-party property damage and bodily injury liability claims. Many clients require contractors to carry Commercial General Liability Insurance to be awarded a contract and most of the time excess or umbrella coverage is also required.

Worker’s Compensation Insurance

Workers’ Compensation for contractors is mandated in most states. State laws make the employer liable for injury to employees while on the job.  Most employers are unable to fulfill that responsibility on their own so they purchase a worker’s compensation policy. By purchasing this policy, the employer transfers the responsibility to pay lost wages, medical expenses, or death benefits to the insurance company.  Since construction has a higher rate of injury, it is important to secure workers compensation to assure employee wellbeing and comply with state law.

Commercial Property Insurance

Commercial Property Insurance is vital if your business owns assets, such as a building, furniture, equipment, computers, printers, stock and supplies. Property insurance covers loss or damage to your business owned property from covered perils such as fire, theft, wind, hail, and riot.

Commercial Auto Liability

Commercial Auto Insurance is like a package policy in a way since it can include liability for property damage or bodily injury, usually some first party coverage such as No-Fault or Personal Injury Protection and medical expense for occupants of the vehicle.  Physical damage such as comprehensive and collision coverage is included for your own vehicles. Contractors may have heavy-duty vehicles that transport construction equipment and material back and forth. If your employee runs a red light while driving a business vehicle, this policy will cover the damage to the vehicle and bodily injury of the other party.

Professional Liability Insurance

If you provide design or construction management services, you have professional liability exposures. Suppose you are remodeling a client’s private residence and some of the architectural designs included in the plans have been missed during construction by your framing subcontractor and the residence collapses. The client sues you for faulty workmanship and ensuing damage and bodily injury. Hopefully, your sub has general liability insurance but your business is also on the hook for liability, since you hired the sub and may have not properly supervised them, Since this was an omission on your part as the Construction Manager, a Contractor Liability Insurance policy will respond to such lawsuits.

Builder’s Risk Insurance

This insurance is applicable to general contractors that build structures from the ground up or even for partial renovations. Buildings in the course of construction whether residential or commercial are provided coverage on a builders risk policy.  Incomplete structures cannot be insured on a standard property policy, a builders risk policy covers damage or loss to a building under construction.  Theft, fire, wind, hail are examples of the perils insured.

Builder risk insurance is one type of several types of inland marine coverage that building contractors need. It is a specific kind of insurance policy designed to protect buildings under construction. Builder’s Risk Insurance for GCs, developers, or owner-builders is essential to prevent the financial costs associated with a property loss. It is, however often complex and frequently overlooked. Having a well-structured Insurance policy covering your renovation or new construction job is a must and needed for a successful construction risk management program.

Builders’ risk insurance for contractors helps protect construction projects from property losses due to:

  • Fire
  • Lightning
  • Hail
  • Explosions
  • Theft
  • Vandalism
  • Wind
  • Aircraft or automobile damage
  • Riot
  • And more
Contractor and a mason worker discussing on construction site

Soft costs are also insurable, these consist of expenses incurred during construction that are not associated with labor or building materials. These types of loss are directly attributed to a covered loss. Examples of soft costs include:

  • Advertising and promotional expenses
  • Interest on construction loans
  • Architects, engineers, and consultants fees
  • Real estate and property tax assessments
  • Commissions or fees for renegotiations or leases
  • Insurance premiums
  • Legal and accounting fees
  • Fees for licenses and permits

Moreover, Builders Risk insurance can be designed to compensate for lost revenue if the completion date is delayed due to another insured loss. A limit is purchased and is subject to a deductible, usually a number of days, for example, 30 days. The revenue loss after the 30 days, until the completion date, would be the amount claimed.

Comprehensive Coverage For Independent Contractors Insurance

Most contractors prefer getting an all-inclusive insurance package. Whether you are a contractor or a subcontractor, you will need independent contractor insurance. Our agents will evaluate your business needs depending on the following factors:

  • Services offered
  • Annual Revenue
  • Location
  • Number of Employees
  • Owned Commercial Property and Business Equipment

What Does Contractors' General Liability Insurance Cover?

As a contractor, it's critical to have general liability insurance protection. You can be held liable just as quickly as any other small business owner, and liability claims can be expensive. If you do not have general liability protection and a client files a lawsuit against you, you will have to pay the defense costs and damages out of pocket. This amount may be substantial enough to wind up closing your business.

Independent contractor liability insurance is simply general liability insurance coverage. It protects your business from your risk exposures by responding to property damage and bodily injury liability claims and lawsuits for covered acts.

General liability insurance for trade contractors can essentially support small firms in the event of claims arising from:

  • Property damage or bodily injury that your business causes
  • Personal Injury claims of malicious prosecution, invasion of privacy, slander, libel, and more
  • Advertising injury, such as copyright infringement in your advertising.

How Much Does Contractors’ Business Insurance Cost?

The cost of independent contractor insurance depends on the following factors:

  • The types of projects you work on
  • Where are your projects located
  • Types of licenses held
  • Your payroll and the kinds of jobs our employees do
  • Annual revenue
  • The number and types of company vehicles used for work

Choosing the Best Insurance For Construction Company

Working in construction can be highly satisfying since you are part of a team that builds and creates projects. From the owner of a large, all-encompassing construction firm to a one-man operation, it's crucial to have appropriate insurance coverage. But where do you start? Because every company in this industry is unique, it is ideal to consult with a knowledgeable insurance professional to discuss your specific business needs. There are several factors to consider when selecting suitable coverage for your business, the services offered, your business-owned building and equipment, vehicles, and your employees. Many things may influence the level and type of protection needed, including your business’s services, products, equipment, and property.

  • Size of your business - The more revenue you have and the risks involved will help determine the limits and types of insurance coverage required.
  • Nature of your operation - Do you remain focused on commercial or residential projects? Each requires specific considerations.
  • The riskiness of the work - Certain dangers will be found in every profession, but certain operations can increase those risk factors to become severe issues. For example, if you are in the roofing business, having scaffolding and ladders means your employees are more likely to suffer a fall than an employee stocking shelves easily reachable in a retail store. When your business is in a higher-risk industry, having a workplace safety program and adhering to OSHA regulations while conducting sufficient employee training is not optional. OSHA fines can break a business if you have an employee die on the job because they were not following safety protocols.
  • Types of equipment - You want to consider all the tools and equipment that are used at job sites, both large and small, owned and rented. If those tools or equipment were stolen, would you be able to replace them quickly so as not to delay a project? These items are not covered by a commercial property policy when they are not at your business location, this is another type of inland marine coverage that needs should be reviewed.
  • Bonding - If your construction firm does commercial jobs and would like to get into larger civil or private developer projects, you will need to think about Bid or Performance and Payment bonds. These bonds are a guarantee that your company has the financial position to bid on a job (easier to get a Bid Bond) and that they will also be able to complete (Payment and Performance Bond) the job. Not only is it a guarantee that the job will be completed but also that all the sub-contractors and suppliers that are owed for their products and work get paid. It’s obvious why most owners and developers want their GCs and large sub-contractors to produce these.
  • Materials at the job site - Do you ever have expensive materials or equipment delivered to a job site earlier than when the installation takes place? It could be appliances, AC units, wood cabinets, flooring, etc. What happens if there is a fire at the site or items are stolen, will it be easy to pay out of pocket to replace these? Yet another type of inland marine coverage, an Installation Floater will cover these types of occurrences.

Frequently Asked Questions (FAQ) about Business Insurance For Contractors

1. What are the general contractor insurance requirements?

When applying for a GC license in states where it is required, most people are only interested in passing the licensing examination. While the license exam is a large part of the process for obtaining the license, it is not the only requirement for meeting state and local requirements.

Though every state and municipality will have different requirements, we’ll take a look at Florida, to obtain your building contractors license, you must carry general liability insurance with a minimum bodily injury limit of $300,000 and $50,000 for property damage.

As a trade contractor, you should possess some form of general liability insurance as well to safeguard your livelihood. A single mishap could lead to a liability lawsuit that forces your business to hire a defense attorney to respond. A good way to protect your bottom line is to make sure that you have adequate liability insurance.

If you're a GC, you need contractors’ liability insurance and most likely will not qualify for a BOP. GCs can combine their general liability insurance with property coverage on a commercial package policy and add inland marine, or other coverages that may be needed.

2. What is covered under repair contractors all risk insurance?

Contractors’ general liability insurance provides coverage for third-party property damage and bodily injury resulting from your business operations and the performance of your work.

General liability coverage is appropriate for any business, automotive services, manufacturers, suppliers, retail stores, offices, contractors, and subcontractors.

3. Why do subcontractors need liability insurance?

A subcontractor could be held legally responsible for a variety of reasons. Even if they're not to blame, they could still find themselves entangled in an expensive legal situation. Having subcontractor liability insurance can protect them against this kind of threat, too. Subcontractors might even need insurance to secure certain contracts, particularly when dealing with government entities.

Insurance for subcontractors is highly recommended not only for the financial protection it provides, but even for the advantage, it brings to the table when bidding on contracts.

4. Do I need workers comp insurance if I am an independent contractor?

Oftentimes, state laws mandate that companies purchase workers' compensation insurance depending on the number of their employees.

This question must be answered according to the state where you are located since each state has statutes and regulations regarding workers’ compensation requirements and they vary.

A truly independent contractor may be able to complete an exemption form that prevents that independent contractor unable to collect workers’ compensation benefits.

Workers' comp can help IT, consultants, and independent contractors:

Construction work generally has a higher risk of employee injury than many other industries and it is recommended for any construction employer to purchase workers’ compensation even if there is only one employee. Medical care and lost wage benefits can quickly add up if a contractor is injured on the job. Remember, just because the state may not require the purchase of a workers’ compensation policy, that doesn’t mean an employer is off the hook for providing an injured employee the state-mandated benefits due to that employee.

  • Satisfy the requirements of a contract for a client.
  • Pay for the costs associated with work-related injuries if there is a medical need.
  • In rare cases, follow state laws.
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