Construction is a high-risk industry. Many things can go wrong from simple theft to sudden catastrophic storms. Contractors need to purchase insurance to protect their business assets from unforeseen occurrences. However, with the wide range of business insurance policies on the market, it can be tough for contractors to choose the ones that are truly designed for their trade. Here are some essential types of insurance that contractors should consider.
General Liability
General liability insurance protects your business from liability in the event of an unlucky incident, thus it is sometimes referred to as business liability insurance or commercial liability insurance. General liability insurance comes into play when a third-party files a lawsuit for bodily injury or property damage against your operation. Any business that meets with clients in person or has access to a customer’s property should purchase general liability insurance to protect its assets. In addition, many established clients will only work with contractors that have general liability insurance.
Workers’ Compensation
Accidents can happen even in the safest workplaces. This is why workers’ compensation insurance is required by law in most states in the US. This insurance covers the medical costs and loss of income incurred by your employees if they get ill, injured, or become deceased due to an accident at the workplace. Companies are required to purchase workers’ compensation even if their employees have health insurance. Failure to do so can lead to fines or penalties from the state government.
Your workers are an important resource that deserve protection. But workers’ compensation is not only beneficial for employees. With a team member down, your business will have to pay for a temporary worker and struggle to maintain normal productivity. Insurance takes your injured employee’s medical costs and wages out of that equation so you have less to worry about. Furthermore, workers’ compensation insurance protects you from financial losses and liabilities if the accident results in a lawsuit.
Commercial Vehicles
Vehicles are central to a building business. Whether you are transporting employees, supplies, or equipment, a vehicle becomes a liability once you use it for work. You can suffer significant financial losses if a work vehicle is involved in an accident or gets damaged. Therefore, your business should consider commercial auto policies that cover medical bills, property damage, and legal fees. If your company leases vehicles or uses vehicle financing, you should also add gap coverage. This covers the difference between the actual value of your vehicle during the time of the accident and the outstanding sum that you owe.
Builder’s Risk
Construction is a risky business. Numerous events such as fire, inclement weather, vandalism, and theft can cause significant damage to your hard work before your building project is completed. With a builder’s risk policy, you are covered for a variety of losses including delayed completion, fire damage, structural damage, and loss of rental income. Some policies will also cover the cost of cleaning up the site. Builder’s risk policies are not standardized, so you should consult a contractor insurance broker for a comparison of the different policies available.
Excess Liability Insurance
Contractors who work on projects that are valued at over a million dollars need to get excess liability insurance to extend their coverage over the underlying liability limits. For example, if a contractor has a general liability policy that covers up to a million dollars for a project that is valued at two million, an on-site fire could leave them out of pocket for a million dollars even after insurance has been paid out. Excess liability is added in million-dollar increments and is an expected requirement for high-value projects.
Tools and Equipment
If you have company property in your vehicle at the time of an accident, it will not be covered by a commercial auto insurance policy. When your essential tools or equipment are damaged, you have to pay expensive replacement costs and still face financial losses from incurred delays. Therefore, contractors with high-value movable property need tools and equipment coverage to protect their assets from accidents, theft, or loss. Tools and equipment insurance covers tools in transit, mobile equipment such as forklifts, and computer equipment and data. You can also add additional cover for leased or borrowed assets and rental costs.
Specialist Contractors
On top of the standard contractor policies, there are also policies for specialized contractors.
For instance, roofing contractors face more challenges and higher risks than ordinary builders. Many occurrences can affect roofing operations such as water damage from heavy rain, fire damage from hot tar, and damages that result from alleged negligence during construction. Hence, roofing contractors need specific coverage and endorsements to protect their business assets from heavy financial losses.
Similarly, fire protection contractors require unique insurance coverage and endorsements. As they deal with the protection of lives, fire protection contractors can face liabilities that amount to hundreds of thousands or even millions of dollars. Coverage for fire protection contractors may include general liability, professional liability, waiver of subrogation, property damage, pollution liability, and stop-gap coverage.
Insurance is a necessity for contractors. If you are still unsure about which policies are most beneficial for your business, speak to a contractor insurance broker for expert advice and recommendations.