Construction insurance is a broad category of insurance policies that provide protection during construction projects. In fact, the term “construction insurance” generally refers to insurance that relates to construction projects, and it is not in itself a form of insurance.
There are many factors that dictate the type of construction insurance coverage that one would need for a given project or business. These factors include the person’s relationship with the project (contractor, owner, subcontractor, etc.), the type of entity that takes out the insurance (business or individual) and the type of property to be covered.
Understanding Construction Insurance
- 1 Understanding Construction Insurance
- 1.1 Builders Risk Insurance
- 1.2 Commercial and Contractor Liability Insurance
- 1.3 Auto / Commercial Truck Insurance
- 1.4 Construction of Contractor License Bond
- 1.5 Construction Obligations
- 1.6 Inland Marine Insurance
- 1.7 Work Accident Insurance
- 1.8 Best Construction Insurance Companies For Homeowners
- 1.9 The Best Construction Insurance Companies For Contractors
- 1.10 Construction Insurance Requirements
There are many types of insurance designed to protect homeowners, developers and contractors throughout the different phases of a construction project. In fact, certain types of construction insurance policies are required for many projects. In the sections below, we’ll go over the basics of construction insurance, the most common types of policies available, and when these policies would apply. If you’re already familiar with the subject or just want to find a reputable company, be sure to check out our recommended construction insurance companies below.
Types of Construction Insurance
A homeowner undertaking a construction project might seek to insure a number of things related to the project, for example, the building, materials in transit, etc. Depending on the nature of the contract, a contractor for the same project may require different types of coverage, such as general liability insurance and commercial auto insurance. Below you will find more information on the different types of coverage available.
Builders Risk Insurance
The Builders risk home insurance quotes policy, also known as construction course insurance (COC), or sometimes all perils construction insurance, is insurance coverage for buildings and other structures while they are being constructed. Other policies like home insurance or commercial property insurance will generally not cover structures during construction.
Builders risk insurance policies will generally have options to cover the following types of property of eligible builders risk client:
- Construction materials.
- Temporary structures such as scaffolding.
- Paving, fencing, landscaping.
- Lawns, trees and plants installed by the builder.
Insurers typically cover the most common types of construction projects, including:
- New residential construction.
- Home renovation or small projects (for example, replacing windows or doors).
- Model homes and content of model homes.
- Construction of commercial properties.
However, if your builders risk construction project or type of structure is unique, there may always be specialist suppliers who can offer insurance policies for your unique project. Builders’ risk insurance policies only protect against certain types of damage. As a general rule, the most basic builders risk insurance policies will cover damage caused by:
Typically, insurers offer “premium coverage” options, which cost more, but may extend coverage limits, insurable events and / or insurable property for the policy. Damage caused by earthquakes or floods will generally not be covered unless coverage for these types of events is added to the policy. Insurance providers may also specify certain exclusions in the policy that protect them from coverage for damages that arise under specific conditions or from the negligence of the policyholder.
Read our guide to construction insurance to learn more about the cost of builder risk insurance and see the best insurance companies.
Commercial and Contractor Liability Insurance
General liability insurance, sometimes referred to as commercial liability insurance (CGL) or general contractors liability insurance, is a category of insurance that provides liability protection to businesses in the event of bodily injury or property damage in the course of Business. Insurers create different versions of these policies available to construction professionals and construction insurance projects. Whether you are a homeowner, a construction company or a contractor, liability insurance policies are available to protect policyholders from unnecessary risks. Very often these plans will be advertised under the name of general contractor liability insurance or general liability insurance for builders.
Liability insurance policies generally cover a wide range of damages, including:
- Defective manufacturing.
- Work-related injury.
- Damage / defamation advertising.
Contractors or developers may in fact be required to have a minimum level of liability insurance either by law in some states or to win certain contracts that require it. Companies that do a lot of design-build projects will definitely want to purchase liability insurance in case they are sued for errors. In addition, sub-contractors are frequently required to take out liability insurance in order to work for certain general contractors.
Liability insurance policies are available from various providers for the following types of businesses:
- Residential General Contractors (CRG).
- Light Commercial General Contractors.
- Specialized contractors (HVAC, electricity, plumbing, etc).
Like constructor risks and other types of insurance coverage, certain exclusions may be defined in the policy, thus protecting the insurance company from having to cover certain types of damage or incidents.
Auto / Commercial Truck Insurance
Commercial auto insurance, or commercial vehicle insurance, is not exclusively available for construction projects. This is insurance intended to provide automobile insurance for vehicles used by businesses. The coverage provided by commercial auto insurance is intended to help policyholders avoid high costs for vehicle repairs, medical bills, or lawsuits resulting from traffic accidents.
There are several coverage options for commercial auto insurance policies that mirror the coverage options for standard auto insurance policies. Standard coverage options include:
Liability Insurance – Protects the business and employees against expenses associated with employee-caused accidents.
Physical Damage Coverage – This covers damage to company vehicles after a covered collision. This could also include comprehensive coverage, which protects against stolen vehicles, damage caused by vandalism or destruction by natural disasters.
Medical Payment Coverage – This coverage helps pay for expenses related to injuries resulting from a covered incident, including medical bills, hospital costs, ambulance costs, and funeral costs.
Uninsured Motorist Coverage – This type of coverage covers damage and injury caused by uninsured drivers. This is necessary because it is your liability insurance that covers damage and injury that you cause to others. If you have an accident with someone who doesn’t have this coverage, you still want to be covered against high medical or repair costs.
Construction of Contractor License Bond
Contractor license bonds are agreements, similar to insurance policies, that ensure that a contractor will comply with the regulations that apply to his particular contractor’s license. The main difference between this and an insurance policy is that although the contractor is the one buying the bond, the bond is designed to protect the general public and anyone with whom the contractor does business. Typically, insurance companies offer bonds, although they are not quite the same as insurance policies.
The cost of the bond to the contractor usually depends on the contractor’s income history and credit rating. And the better a construction specialist has, the less expensive the bond will be for him.
Some states, industries and types of construction contracts will require contractors to hold a contractor’s license bond, and in some cases additional bonds will be required.
To find more information on license bonds for the construction industry, see this comprehensive guide to contractor license bonds and how they work.
Construction bonds, also known as contract bonds, exist to “secure” certain aspects of a construction contract or project and, ultimately, that the project contract is guaranteed to be completed if it. is accepted. There are several types of contractual guarantees, namely:
Bid Bonds – to ensure that proposals for bids on projects are serious and that contractors can financially support the project if their bid is successful.
Performance Bonds – to ensure that contractors adhere to the standards and complete the project set out in the project contract.
Payment Bonds – to ensure that the contractor can pay subcontractors, workers and suppliers.
Maintenance Bonds – to protect the project owner against manufacturing defects or defective materials for a period of time after the contractor’s work has been completed; also known as security bond.
Subdivision Bonds – to assure a city, county or other local municipality that the bondholder will develop the property in accordance with local guidelines and requirements.
Site Improvement Bond – to provide the same guarantees as a subdivision bond, but only applies to existing structures that are being improved.
Supply Bonds – to ensure that suppliers will deliver materials, supplies, etc., as specified in the contract.
Inland Marine Insurance
Domestic marine insurance is another broad category of insurance that extends far beyond the construction industry. While the name comes from a time when this class of insurance primarily covered ocean materials and vessels, this is no longer the case.
Inland marine insurance coverage has evolved to cover many types of goods, including goods in transit, mobile equipment, goods in the care of a repairer or storage facility, goods commonly used in different places, and even computer hardware and digital information.
For the construction industry, “inland marine insurance” primarily applies to tools and equipment used by contractors and developers.
For this reason, in the construction industry it is commonly referred to as “tools and equipment insurance” or “contractor’s equipment insurance”.
These insurance policies cover many types of property used by construction professionals, contractors and developers, including:
- The contractor’s tools, equipment, clothing and supplies (hammers, drills, generators, power saws, lumber, drywall, etc.)
- Mobile equipment (excavators, forklifts, loaders, cranes, etc.)
- Rented or borrowed equipment (rented tools or mobile equipment such as electric generators and forklifts).
- Computer hardware and data (laptops, tablets, private project data).
Policies will cover items at replacement cost or at fair market value for damaged or stolen items, and incidents covered for this type of insurance would include:
- Material stolen from a construction site.
- Tools or equipment damaged during transport to a job site.
- Equipment damaged in a fire or natural disaster on a construction site.
This class of insurance may also cover other costs that could be associated with loss or damage to the contractor’s tools and equipment, including:
- Debris removal / pollution control following a covered incident.
- Costs caused by delays resulting from a covered incident.
Work Accident Insurance
Workers’ compensation insurance, also known as workers’ compensation or workers’ compensation, is insurance coverage designed to protect businesses and contractors when their employees are injured on the job. To do this, it covers the following costs after a covered incident:
- Medical fees.
- Missed wages.
- Ongoing recovery costs related to injury.
- Legal costs when an injured person sues the policyholder.
- Funeral expenses and death benefit.
Workers’ compensation insurance, like others on this list, extends beyond the construction industry, but it’s important coverage for developers and contractors who plan to employ d other people who are at risk of injury at work. In fact, workers’ compensation insurance is required by law in some states.
Insurance companies like Progressive, Nationwide, and The Hartford provide coverage for workers at many types of businesses, including general contractors, plumbers, HVAC technicians, electricians, and others.
Best Construction Insurance Companies For Homeowners
The policies that work best for business developers and building contractors will generally not be the ones that work best for homeowners and owner-builders. In general, these owners, who will also be the promoters of the project, can require their contractors to take out insurance. But they can also benefit from purchasing coverage for the project themselves. Since the project developer will be paying for the coverage anyway, it may be beneficial to research options and get the best rates and coverage available.
Homeowners want to look for insurers who have expertise in construction, but are also very strong in customer service and pricing. It is also ideal when the insurer offers coverage options with homeowners in mind. The insurers we list below are the leading providers of construction insurance for homeowners and homeowners.
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The Best Construction Insurance Companies For Contractors
Contractors and commercial developers, especially those bidding on large construction projects, are often required to carry significant building insurance while under construction coverage. Frequently, the costs of insurance policies can be passed on to the project promoter; however, cost should always be an important consideration for contractors, as savings can be passed on to the project developer and make their contract offers more attractive.
And more than homeowners, contractors may want to consider the construction expertise of their potential insurers. The more experience an insurer has with construction projects, the easier it will be for the buyer to file a claim and design the policy.
The table below lists several of the major construction insurance providers, which meet the criteria we have set out above. Each of these companies offers a wide variety of construction insurance products that should meet the needs of most contractors and commercial developers.
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Construction Insurance Requirements
Some might ask: “is construction insurance necessary?” In fact, in many cases this is not just necessary, but necessary.
Commercial auto insurance is required by law. All states and the federal government have laws that set minimum requirements for auto liability insurance. Workers’ compensation is also required by law in most states; however, the specific requirements will vary depending on the state and the number of employees in the business.
Other types of construction insurance will not be required by state or federal law; however, many construction contracts will require contractors to purchase insurance for the projects they describe. Small contractors who work directly with homeowners generally will not be required to carry insurance for the projects they undertake, and more often than not they will. But when large organizations, like local governments, universities, and large corporations outsource large construction projects, they almost always require contractors and business developers to purchase insurance coverage that protects various insurable aspects of the business. project. These costs are almost always passed on to the project sponsor, but nonetheless, the contractor must find and obtain a policy.