Owning and operating a business is often exciting, challenging, and rewarding. It also comes with added responsibility and accountability. Every contractor strives to perform at a high level for their customers. Still, a client may think you’ve under-delivered or even wronged them in some way. In the event this happens, are you doing everything you can to protect your business?
Do I Need Construction Liability Insurance For My Business?
Many contractors today are still formed as a sole proprietorship or a partnership. These types of business owners put not only their business but their personal assets at risk as well. A general liability policy will help protect you and your business against financial disaster. It is generally the main coverage needed to protect a construction business and its owner(s).
Even if you formed a limited liability corporation (LLC), it’s possible to be held liable as the owner of the contracting business. Signing a personal guarantee or operating irresponsibly is just a couple of potential problems. Comprehensive general liability will protect against:
- Lawsuits against you or your business
- On-site property damage
- Bodily injury that occurs on a construction site
This includes legal defense and settlements up to the limits of the policy.
Having general liability insurance is another way to foster trust with your clients. If they believe you take your projects seriously and invest in protecting them it may increase the likelihood of being hired.
What types of businesses fall under the construction umbrella?
Quite a few professions are including but not limited to:
- Concrete contractors
- Snow and ice removal
The types of coverage to consider
These are some policies to consider alongside general liability insurance:
Business Owner’s Policy
Eligible construction companies can purchase property insurance packaged together with general business liability coverage in a single policy called a Business Owner’s Policy. Such combined policies are generally available at reasonable small-business rates. Your licensed insurance professional may make this recommendation to you.
Professional Liability insurance
Professional liability insurance may be needed if your construction business offers design-build or engineering services. Also known as E&O or Errors and Omissions Insurance, this will protect against malpractice and negligence.
Builders Risk Insurance (sometimes referred to as 'Course of Construction (COC) Insurance) is a type of property insurance that protects a person's or organization's construction project(s), installations, or renovation.
Property and casualty insurance covers buildings and property against damage, theft, and other causes such as a fire. The contents and furnishing, as well as most inventories, are covered. It is important to determine rebuilding costs, restocking costs, and relocation costs if the incident could require it.
If you have employees, there is a need for workers' compensation insurance for your construction business. It provides health benefits to your employees in case a work-related injury were to occur and protects you—to some extent—from lawsuits. Laws regarding this type of coverage vary from state-to-state so be sure to be familiar with your state’s rules.
A Construction bond (also referred to as a ‘surety bond’) guarantees that the work your construction company is doing will be completed correctly in the right time frame. There are surety companies that back these bonds and will pay damages if the bonds are broken.
Inland marine insurance
Inland Marine Insurance (sometimes called ‘Contractors Tools and Equipment Insurance’) is a type of floater policy. It covers equipment & tools being transported to/from a worksite and includes storage on-site. It is not typically covered under your personal auto insurance because it is business-related.
Heavy Equipment insurance
This is often included under an inland marine policy. However, sometimes a separate policy is required for large equipment (or equipment excluded from an inland marine coverage). Some examples of equipment include bulldozers, backhoes, cranes, and so forth.
How much does construction insurance cost?
Figuring out what coverage to have in place and what limits are needed is a real balancing act. On one hand, proper insurance for construction companies is necessary to reduce the risk. On the other hand, unaffordable and unrealistic premiums are also not in your best interest as a construction business owner.
Once you know what questions to ask, it’s much easier to select optimal construction business insurance coverage and general liability insurance limits. It’s also important to understand that construction a company’s insurance rates will vary depending on your business’s needs and the work your construction business performs. The key is to work with a licensed insurance professional you trust to develop a comprehensive insurance package for your construction business.