Do you operate a construction company? If so, you know that your business is more at risk for injuries and property damages than most industries. In fact, on a average day in the United States, two people die from injuries linked with construction sites, and 20 percent of workplace deaths are related to construction work.
We're not trying to scare you. It's just important to recognize you're in a business with more risk than many others so you can take the right steps to protect your livelihood and that of your employees. Here are four of the main types of insurance policies a construction contractor must have, along with a few considerations and warnings.
General Liability Coverage
Also known as commercial general liability (CGL) insurance, general liability insurance is the insurance policy that's the most common. This type of policy provides insurance against liability that's related to property damage and bodily injury. For example, it protects your company's assets and pays for medical costs and other obligations. It also covers expenses from property injuries and damages by your employees or those caused by you.
Builder's Risk Insurance
This type of commercial insurance policy is designed to protect people insured from various hazards during the construction process, such as fire, storms, hail, lightning, wind, and vandalism. In most cases, general contractors are required to buy a builder's risk insurance policy that insures them and their subcontractors.
The policy may also include the structure being built in addition to the building materials. Besides materials that are already at the building site, the coverage also includes materials that are haven't even been transported to the workplace. To determine the correct limit of insurance, consider your construction budget.
Commercial Umbrella Insurance
This type of commercial insurance, which is also referred to as "excess liability" insurance, is used for filling in gaps and exclusions to a primary policy. If you operate several large construction sites, you may want to consider an umbrella insurance policy, which is usually a supplement to a CGL insurance policy.
Keep in mind that a CGL policy is limited in what it covers, so you may need more coverage. In other words, an umbrella policy gives you additional coverage that exceeds what would be covered by a CGL policy. Let's say your CGL policy has already covered $1.5 million for a claim, but that's all it will pay. However, you still need $200,000 more. When you have a commercial umbrella policy, the remaining cost is covered.
Professional Liability Coverage
Today, an increasing number of contractors are choosing professional liability insurance. This is the result of more and more contractors doing design work. As a result, they take on even more responsibility. Because most CGL policies don't provide coverage for professional liability, a separate policy is needed. Professional liability insurance covers litigation costs from omissions and errors that can result in losing client investment or when failing to carry out your duties as a contractor.
Considerations and Warnings
- If your business involves demolition, grading, excavation, paving, tank installation, and other hazards, you may want to have pollution coverage, which covers third-party claims for property damage and bodily injury.
- When deciding on insurance requirements for a contract, consider the common risks linked with a construction job to ensure you have enough coverage.
- Furthermore, when choosing an insurance provider, consider the class of insurance carrier.
- The two classes of insurance carriers are admitted carriers and non-admitted carriers. While admitted carriers are required to conform to the regulations outlined in the state's Department of Insurance, non-admitted carriers do not have to conform to these regulations because they aren't residents. An advantage to choosing an admitted insurance carrier is that the state is responsible for covering the cost of claims that are made to an insurer.
- Consider that a CGL insurance policy does not include the cost for repairing defective work. It only covers damages that are caused from defective work.
- The top causes of deaths from construction-related accidents include falls, being struck by objects, getting stuck between objects, and electrocution.
- If you're an independent construction contractor, it's even more critical you have the right insurance coverage. This is because you're the sole proprietor, making your personal items at risk when you're facing legal disputes.
Commercial Insurance Solutions from Harbor America
At Harbor America, we offer a wide range of commercial insurance solutions. Starting a new business can be risky, and this is especially the situation for construction contractors. Download our free eBook and find out more about how you can protect your business.