The high-risk level of the construction industry compels every contracting business to have the right contractor business insurance policy. Learn more about the different types of insurance coverage that might be best for you as a small business owner in this article.
What is contractors’ insurance?
Contractors insurance are policies that protect businesses in the construction industry against possible financial losses. The right construction insurance can cover most contractors’ liability, including medical expenses, legal defense costs, equipment repair or placement, medical bills for injured workers, etc. State laws and requests from a hiring construction company or general contractor may require independent contractors or subcontractors to own insurance liability coverage that can save them from financial loss due to client’s property damage or third-party injury resulting from mistakes or accidents.
Below, we review some construction insurance policies an independent contractor must carry as protection against possible claims during a construction project.
Commercial General Liability Insurance
Every business needs general liability coverage in case of third-party claims from damaged property or bodily injury. Commercial general liability insurance policies cover incurred costs from these claims, including legal costs for resulting lawsuits.
Most states demand that contractors carry this type of insurance. It’s the basic level of insurance protection for construction workers. A subcontractor can carry the general liability policy by being an additional insured in a business owner’s policy. But it’s advisable to purchase your general liability construction insurance directly from an insurance provider.
Workers’ compensation insurance
The workers’ compensation insurance (also known as workers comp) is a vital business insurance policy for every business with employees. Many states hold the concept of workers’ compensation essential and demand every business owner carries an insurance policy to protect workers. Workers’ compensation insurance covers employees’ medical treatment and lost wages when they suffer a work-related injury or illness. Without this policy, an employer may have to pay the medical bills and other benefits out of pocket.
Property damage insurance
Generally, property insurance protects buildings and equipment housed within them. However, the insurance coverage needed by an individual with personal property differs from that of a contractor handling a project. Homeowners’ insurance coverage can cover possible risks homeowners may face, but it doesn’t suffice for general contractors.
The builders’ risk insurance policy (also known as Course of Construction Insurance) is the appropriate independent contractor insurance to protect against property damage by natural disasters and other covered peril. This coverage projects buildings under construction and stops immediately when the contractor hands over the project to the owners.
Commercial Auto insurance
Commercial auto insurance is also known as auto liability or automobile liability insurance. Contractors owning one or more work vehicles must have the commercial auto policy as protection against financial obligations that may occur when the vehicle is involved in an accident causing damage or bodily injury. Commercial auto insurance pays for resulting repair and replacement costs, legal fees, and other expenses associated with the accident.
Professional Liability Insurance
Also known as Errors & Omissions insurance, covers legal expenses that result from professional negligence or mistakes. It also covers advertising injury and other negligence-related claims. It’s always advisable to carry the policy alongside General Liability most times. With a Professional Liability Insurance policy, contractors do not have to bear costs of professional negligence. Subcontractors can carry the policy as an additional insured in a general contractor’s BOP.
Umbrella liability policy
This construction insurance policy raises contractors’ insurance liability limits based on the amount of purchased additional coverage. For context, if the liability limit of your general liability or professional liability policy is $2,000,000, and you purchased a $3,000,000 umbrella policy, your total General Liability or Professional Liability policy would now be $5,000,000. The construction insurance is usually needed by contractors that face higher risks and can exceed their coverage limit easily.
How to get Contractors Insurance
Contractors can purchase construction insurance products directly through an insurance company or work with an independent insurance agent to purchase coverage. Most insurance agents work with different insurance carriers and can help you get the best deals from any of these companies.
Beyond reviewing the types of coverage a construction business needs, leveraging a reputable insurance agency can help choosing the right contractor insurance. ContractorsLiability.com is one of the best insurance agencies that can provide you with satisfactory and professional services. Contact us today to get started.
