Finding the Right Insurance for Your Construction Business
(You worry about the building, we’ll take care of the insurance.)
Whether your construction business works on skyscrapers or tree houses, there’s plenty of risks involved. And where there’s risk, there’s a need for protection from it. The right blend of coverage can help limit your financial risks from job site injuries, equipment damage, accidents and more.
Don’t worry, though. Our independent insurance agents have seen it all before and are here to help connect you with the proper protection for the right price. But first, let’s dive into the risks out there for you and talk more about the coverage you may need.
4 Types of Risk Construction Companies Face
- Property damage: Damages to company property or equipment
- Income loss: Loss of income due to business interruption from events like fire or severe storm damage
- Employee injuries: Job-related injuries, illnesses, or deaths
- Liability risks: Injuries or property damage caused to others not associated with your company
What Is Construction Insurance?
Your construction insurance can make the difference between your company turning a nice profit or losing money on a construction project. Which is why it’s so important that you’re set up with adequate and quality coverage.
The specific coverage you choose will depend upon a number of factors, like the size of your company, the number of workers you employ, and the type of work you perform.
Some of the policies you may want to consider include:
- General liability insurance: This covers your financial risk if you are responsible for bodily injury or property damage to others. If you work in construction, general liability insurance is required in order to get a contractor’s license in most states.
- Builders risk insurance: You can think of this as construction site insurance. It provides coverage specifically for on-site property damage of a site under construction. This coverage varies by company, but typically covers the construction materials you’re using on site. The coverage limit is based on the value of the structure when completed.
- Professional liability insurance: If you provide consultation, design work, or advice as a part of your professional services, this liability coverage can protect you. Also known as “errors and omissions” insurance, it’s designed to cover potential claims due to a loss that a client may experience from your services.
- Extra expense insurance: Covers the extra cost associated with renting a new location after a covered loss.
- Workers compensation: This coverage is required in most states to cover employees’ risk of job-related injury, illness, or death.
- Pays for medical diagnosis and medical treatment
- Covers about 60% of lost pay if employee misses work due to injuries.
- Commercial vehicle insurance: If you use cars, trucks, vans, or any other vehicles for business purposes, commercial auto coverage will provide protection for third-party bodily injuries or property damage you may cause while on the job.
Is a Business Owners Policy Right for You?
A business owners policy, or BOP, is a good option for some small business owners and can provide much of the construction insurance you need at an affordable rate. Your business could qualify for a BOP if you generate less than $5 million in sales and have fewer than 100 employees.
Typically, a BOP combines the following coverages:
- General liability: Normally covers up to $1 million of injury to others or damage to their property.
- Medical payments: Covers injury to others on your business property.
- Property damage: Covers your business property, such as equipment, for loss or damage.
- Business income: Covers loss of income for up to 12 months due to business interruption.
- Equipment breakdown: Covers mechanical breakdown and other causes of equipment malfunction.
- Rental vehicle coverage: Covers loss or damage to vehicles you borrow or rent.
State Licensing and Liability Coverage
Even if it’s not a state requirement, most contractors still get licensed for business and marketing reasons. You’ll likely be viewed more favorably by insurance companies and be able to secure better rates and pricing if you are licensed.
Beyond the construction training requirements, you’ll have to carry general liability insurance and workers compensation insurance. Some states also require you to be bonded, which can be provided by some insurance companies.
How Much Does Construction Insurance Cost?
The cost of your construction insurance will vary based on the number of employees you have, the kind of construction work you do, and how much business you generate. Companies that develop raw land and construct higher value projects will typically pay the most.
Normally, you will pay a percentage of payroll as your premium with a percentage upfront, and then make monthly payments after that.
Who Can Benefit From Construction Insurance?
Well, anyone who builds structures like homes and buildings for others. But specifically:
- General contractors: Oversee the whole construction project
- Heavy contractors: Construct streets, roads and infrastructure
- Home improvement companies: One-person remolders to larger renovation companies
- Specialized contractors: Masons, carpenters, framers, plumbers, and electricians
Managing Risks with Construction Insurance
As we’ve mentioned, in your line of work, you’re open to a number of different risks, like: property damage, employee injury, vehicle accidents. With the right business insurance in place, you can minimize the risk and liabilities that can put a big damper on your profits.
It’s a good idea to comparison shop before you buy to make sure you’re getting the coverage you need at a price that fits your business budget.
Of course, that can take a lot of time that very few business owners actually have. This is where an independent insurance agent can be the answer you never even thought you needed.