Submitted by Schmersahl Treloar & Co
Every type of business needs at least a few insurance policies. Construction companies, however, tend to need many of them. After all, there are so many risks to guard against.
Precisely which types of coverage your company needs will depend on factors such as its size, structure and specialty, as well as the geographic area in which you operate. To help you assess what you have and what you might need, here’s a brief glossary of key policy types for contractors:
Bonding. Some project owners require construction businesses to procure various types of bonds from a surety as insurance against incomplete or faulty services. Being bonded means the surety is assuring the owner that your business is qualified and financially stable enough to perform the work.
Builder’s risk. This coverage provides financial protection against damage done to a structure still under construction — including costs resulting from fire, vandalism, weather and on-site tool or equipment theft.
Commercial auto. Commercial vehicles require separate insurance coverage because they’re exposed to more risk than personal vehicles. This coverage provides both liability and physical damage protection for fleet vehicles including cars, trucks and vans. Some policies cover legal fees and the medical costs of others if an employee is at fault in an accident.
Commercial property. This type of policy safeguards your construction company’s physical property — including tools, computers, signage and furniture — in the event of fire, broken pipes, bad weather, theft or vandalism. If you don’t need property insurance but want your equipment protected, a contractor’s tools and equipment (sometimes called inland marine) policy may be suitable.
Cyberinsurance. Online attacks, such as ransomware, are a growing threat to construction businesses. At minimum, this type of policy covers liability for a data breach involving sensitive customer information — credit card numbers, driver’s license numbers and so forth — that results in fraud or might reasonably be expected to cause it.
General liability. Often called commercial general liability, this policy type covers damages and legal costs associated with third-party injuries (not to employees) and property damage claims caused by your company or a faulty product you installed. It won’t pay to repair faulty work but can cover the resulting damage.
Professional liability. This is also called an errors and omissions policy. It covers legal costs when a contractor is sued over a mistake, such as using the wrong materials.
Umbrella. This type of policy provides supplementary coverage that absorbs costs exceeding the liability limits of another policy. Say you take on a project for which you’re contracted to carry $3 million of general liability insurance, but your insurance provides only $1 million of coverage. You could buy umbrella coverage for the remaining $2 million. Doing so may cost less than increasing the limit of your primary policy.
Workers’ compensation. A strong workers’ comp policy is essential, and often mandatory, for any business with employees. But it’s especially important for construction companies because workers face high injury risk. Coverage provides wage compensation and assistance with medical bills for on-the-job injuries or illnesses while protecting the employer from related lawsuits.
Your construction company’s insurance needs can change as your business grows or you move into other specialty areas. Work with an agent who understands the nuances of the industry and can help you identify must-have coverage. We can help you evaluate the costs.