Building Contractors Insurance Michigan Policy Information
Building Contractors Insurance Michigan. Building contractors are always in high demand. From building newly constructed residential and commercial properties to revamping existing structures with new features, there's always a need for building contractors.
Whether you work solo or you have a team of employees who work underneath you, you need to make sure that your contracting business is set up for success.
Building contractors manage the construction of a new building project or renovation to an existing building. They purchase all building materials, hire all labor, and obtain any other equipment or services needed to complete the project.
Building contractors generally specialize in constructing single family homes or commercial buildings such as factories, offices, restaurants, or stadiums. Most have permanent employees, then subcontract the remaining tasks, such as electrical, heating, or plumbing, to specialty subcontractors.
While firms whose employees do no actual construction work are commonly called "paper" contractors, they generally act as the prime contractors for such tasks as framing carpentry, structural masonry, or metal building erection, with remaining work done by subcontractors.
Once the land has been purchased and the design or architectural work approved by the property owner, the building contractor oversees the project from site preparation to its completion, including any interior finishing work. Typically, the building contractor turns the architect's design into specifications for work and materials, sets quality standards, schedules the phases of the project, and dictates insurance requirements.
The contractor solicits competitive proposals or bids from potential subcontractors and suppliers and works with the customer to award contracts to the successful bidders. The building contractor is responsible for complying with all local and state ordinances, codes and zoning requirements, including obtaining the necessary permits and purchasing the necessary surety bonds, and for workplace safety.
In addition to choosing a location as your home base, marketing your business, and developing and instituting construction plans (among a number of other things), there's another important part of operating a building contracting business that you don't want to overlook: insurance.
Why do building contractors need to be insured? What kind of building contractors insurance Michigan policies are needed and how much coverage should you carry? In this guide, you'll find the answers to these questions and more.
Building contractors insurance Michigan protects your contracting business from lawsuits with rates as low as $37/mo. Get a fast quote and your certificate of insurance now.
Why Do Building Contractors Need Insurance?
As a MI building contractor, you have a lot of responsibilities on your plate. Not only do you have to ensure that the needs of your clients are met, but you also have to ensure that you are securing the proper permits, that everything you construct is compliant with building codes, and if you have employees, that all of their needs are met; and that's just a small handful of the numerous responsibilities that you are tasked with.
You are also responsible for anything that goes wrong. If a client were to file a lawsuit against you, claiming that you didn't deliver the results that you said you would, you'll have to cover the cost of any legal fees, as well as any damages that a court finds you liable for.
If a fail to secure the proper permits, if an employee suffers a work-related injury, or if the office you operate your contracting business out of is damaged in a fire or flood, you're responsible for all of those things, too.
The costs that are associated with any issues that do arise can be exorbitant. Needless to say, if a problem does happen, you could be looking at serious financial hardships. That's why having the right building contractors insurance Michigan coverage is so important.
Instead of paying for legal fees, repairs, medical bills, etc. yourself, your carrier would cover those expenses for you. In other words, insurance can save you from serious monetary losses and potentially even help you avoid losing your business.
What Type Of Insurance Do Building Contractors Need?
There are several types of building contractors insurance Michigan coverage that building contractors should carry; however, the exact policies you'll need depend on the specific nature of your operation.
For that reason, it's a good idea to speak with a reputable broker who specializes in commercial insurance. With the guidance of an agent, you'll be able to ensure that your MI contracting business is properly insured.
Wondering about some of the types of coverages you'll need? Here's a look at a few examples:
- Commercial Property - This policy protects your commercial property - your office, for example - from damages that are related to fires, storm damage, pipe bursts, theft, vandalism, and more. It also covers anything inside of the building that may be damaged. For instance, if a pipe bursts in your office and damages the carpeting, desks, and computers, commercial property insurance will help to repair or replace any damaged items.
- General Liability - You'll also need to carry a commercial general liability policy, which covers the costs that are associated with third-party liability claims. If a vendor trips and suffers an injury while making a delivery to your office and files a lawsuit against you, this policy would help to pay for your legal defense fees, as well as any costs that a court may find you liable for.
- Products-Completed Operations - This type of insurance protects you from lawsuits that allege the completed services resulted in damage to their property or personal injuries. If a client claims that they suffered an injury as a result of poor construction, this policy would cover your legal defense fees and the damages that a court finds you responsible for.
- Workers Compensation - If any employee is injured on the job, workers' comp will pay for their medical expenses and will compensate him or her for wages that are lost if they are unable to work while recovering from those injuries.
The above-mentioned policies are just a few examples of the type of building contractors insurance Michigan you'll need to carry as the owner and operator of an building contracting company.
MI Building Contractors' Risks & Exposures
Premises liability exposures at the contractor's premises are usually limited due to lack of public access. Any outdoor storage of equipment or supplies may create vandalism and attractive nuisance hazards.
Off-site exposures are extensive as the building contractor is ultimately responsible for all injuries or property damage that results from construction operations, including those that are due to the acts or omissions of subcontractors. The area of operation should be restricted by barriers and proper signage to protect the public from slips and falls over tools, power cords, building materials and scrap.
Lack of adequate communication between the different subcontractors can cause hazardous working conditions, especially if blasting or similar hazardous operations take place. Heavy machinery used for excavation may cut power lines, disrupting service to other homes or businesses in the vicinity. Welding presents potential for burns or setting the property of others on fire if not conducted safely.
The contractor's employees can cause damage to the client's other property or bodily injury to members of the public or employees of other contractors. If there is work at heights, falling tools, or supplies may cause damage and injury if dropped from ladders, scaffolding, or cranes. Disposal of waste materials (dust, scrap, varnishes or paints) could create environmental hazards. Failure to protect equipment, building materials, and property of others left at job sites from theft and vandalism may result in a subrogated loss.
Construction sites create attractive nuisance hazards, particularly to children who enjoy climbing and vandals after operations have ceased for the day and on weekends. Safety barriers such as perimeter fencing should be used to control access to the jobsite.
Contractual liability exposures are very high for building contractors. While it is important to control physical hazards, the key to successful performance is likely to be management of contractual language. Catastrophic financial losses and expensive litigation may arise if the building contractor fails to verify that subcontractors' certificates of insurance are accurate, and the limits are adequate for both liability and workers compensation coverages. In addition, the building contractor and project owner must be included as additional insureds on the subcontractors' policies. The specific terms of the additional insured status may play a significant role in who pays for a loss.
Completed operations exposures are high due to the injury and property damage that can result from improper interpretation of building plans, use of materials that do not meet the quality standards required by design specifications, inadequate construction techniques, or lax supervision of the acts of subcontractors. Quality control and full compliance with all construction, material, and design specifications are necessary.
Inadequate monitoring of work orders and change orders may be a concern as poor record-keeping may necessitate payment of otherwise questionable claims. Inspection and written acceptance of the work by the owner or general contractor is critical.
Workers compensation exposures vary based on the size and nature of the job. When an executive supervisor is only reviewing and giving oversight, the exposure is clerical with some jobsite inspection. However, if actual construction work is done or supervisors remain at job sites continuously, the exposures increase to those encountered by each type of worker on the project.
Control of the jobsite is the responsibility of the building contractor, who may be held responsible for any injuries of subcontractors on the job. There should be strict enforcement of safety practices. Verification that every subcontractor carries adequate workers compensation coverage is important.
Property exposures at the building contractor's own location are usually limited to that of an office. Ignition sources include electrical wiring, heating, and air conditioning systems.
If the building contractor is a paper contractor, there will be no yard storage of building materials or equipment since there are no operations other than paperwork. If the building contractor is involved in framework or masonry, lumber or bricks may be stored on site, increasing the exposure to fire, inclement weather, vandalism, and theft.
Appropriate security measures should be in place to prevent unauthorized access.
Inland marine exposures include accounts receivable if the contractor bills customers for services, builders' risk, computers, and valuable papers and records for project plans, clients', subcontractors', and suppliers' information. Backup copies of all data, including building plans, should be stored off premises.
Builders' Risk is an important coverage. Besides obtaining coverage for themselves, the contractor may need to coordinate their subcontractors' coverages and terms, so limits are adequate for the overall project. There may also be contractors' equipment for owned or rented items, goods in transit for materials transported to job sites, or installation exposures if materials to be installed are delivered to the site in advance.
Subcontractors generally have their own equipment with independent coverage. However, the building contractor may arrange for the lease of larger equipment, such as cranes, for subcontractors to use, either with or without operators. The contractual agreements between the building contractor and the rental firms determine who is responsible for any damage to the rented equipment.
Equipment may be subject to water hazards, overturn, drop, and fall from heights, or being struck by other vehicles. Materials and equipment left at job sites may be subject to theft and vandalism loss. Materials and equipment left at job sites are subject to theft and vandalism loss. Equipment should be secured and rendered inoperable when not in use.
Crime exposures are from employee dishonesty, including theft of customers' goods by the insured's employee. Background checks, including criminal history, should be performed on all employees handling money. There must be a separation of duties between persons handling deposits and disbursements and reconciling bank statements.
Surety bond exposures can be high should the building contractor not comply with the terms of the contract with the customer, such as not completing the project, not completing it on time, or not paying for labor and supplies. The inability of the contractor to qualify for these bonds due to their prior experience and financial condition may indicate a moral hazard.
Commercial auto exposures may be limited to private passenger vehicles if executive supervisors simply travel from site to site. If the building contractor handles part of the construction, workers, equipment, and supplies may be transported to and from job sites. Vehicles may have special modifications or built-in equipment such as lifts and hoists.
Large materials such as air conditioners may be awkward and require special handling and tie-down procedures. Shifting of loads could result in overturn. If vehicles are provided to employees, there should be written procedures regarding personal use by employees and their family members.
MIl drivers must have appropriate licenses and acceptable MVRs. Random drug and alcohol testing should be conducted. Vehicles must be maintained, and the records kept in a central location.
Building Contractors Insurance - The Bottom Line
For more information on building contractors insurance Michigan, speak with an experienced broker who specializes in commercial insurance and understands the unique exposures that MI building contractors face.
Michigan Economic Data And Business Insurance Requirements
Business owners who are interested in establishing operations Michigan must have a thorough understanding of the state's economy. They should also familiarize themselves with any regulations and limits that state may have in place for commercial insurance.
Any entrepreneur who is thinking about starting a business in the Great Lake State first needs to determine if it's a feasible location for business operations. As such, it's important to have a keen understanding of pertinent details regarding the economy of Michigan, in addition to the types of insurance coverage that are mandatory for corporations that operate within the state.
Economic Trends for Businesses In Michigan
After a long period of stagnant job growth in the early part of the 21st century, MI has been experiencing a steady increase in employment gains. Between 2009 and 2018, the state has enjoyed a period of uninterrupted job growth; the longest stretch of job growth since World War II. According to economists at the University of Michigan. While there has been a slight decline in the rate of job growth, job creation continues and forecasters say will continue for the next two years, into 2021.
In 2018, an estimated 55,200 jobs were created; in 2019, it's expected that 35,800 jobs will be created, and in 2020, economists believe that there will be a total of 39,300 jobs created in Michigan. While that rate of growth is 1.9 percent slower than the job growth rate between 2011 and 2016, it is still a steady increase overall. In total, approximate 683,200 jobs will be created in MI between 2099 and 2020; almost four out of the five jobs that were lost during the early part of the 21st century will be recovered.
While the unemployment rate has steadily improved, it is still above the national average. In March of 2019, the national unemployment rate was 3.8 percent, while in the state of Michigan, it was 4.0 percent. Mid-Michigan has experienced the largest growth rate in the state, and according to forecasters, it looks like that trend will continue, moving forward. Industries that are expected to see the most growth include:
- Energy, due largely to research and development in clean energy
- Food and agriculture
- Transportation and mobility
- Healthcare industry
- Information and technology
In the state of MI, business owners are not legally required to carry liability insurance; but most entrepreneurs opt to invest in a General Liability or Business Owner's Policy (BOP). A commercial auto insurance policy is also required for any businesses that use motor vehicles to conduct any aspect of their business operations. Workers' compensation insurance is also required for any businesses with non-owner employees. While the following forms of coverage are not required, depending on the type of business you operate, they are recommended:
- Data breach insurance
- Business income insurance
- Commercial Umbrella insurance
Additional Resources For Construction Contractors Insurance
Learn about construction contractors insurance, including how much the premium costs and what is covered - and how business insurance can help protect your construction business from lawsuits.
- Blasting & Drilling Contractors
- Bridge Contractors
- Building Contractors
- Cable Layers
- Demolition Contractors
- Dock & Pier Contractors
- Dredging Contractors
- Foundation Layers
- General Contractors
- Road Contractors
- Sewer Contractors
- Steel Erection Contractors
- Surety Bonds
Construction contractors have substantial needs for many types of insurance coverage. Most would point to the importance of coverage for completed operations, premises liability coverage during construction operations at jobsites and professional or design errors and omissions insurance.
Such coverages can be provided only when the interests of the contractor and of the property owner are understood; particularly the contractual obligations assumed by the contractor. Next in significance is the workers compensation exposure followed by business automobile. Inland marine coverage for expensive mobile equipment, supplies, other tools of the trade and builders' risk can be vital.
Liability coverage is needed by a construction contractor in order to obtain most jobs. In addition, if a contractor wants to stay in business, it must be obtained to protect it from lawsuits due to its premises operations, off-site locations and products/completed operations exposures. Owners and contractors protective liability and railroad protective liability coverages may also be required in certain cases in order for a contractor to meets its obligations for particular jobs.
Many construction contractors do not have the usual location-specific buildings and business personal property exposures. Their business property is more mobile and, therefore, better covered with inland marine coverage forms. However, for those larger construction contractors that own buildings and/or maintain business inventory there are many coverage forms and choices available to them.
Construction contractors use their vehicles to get to and from their workplaces and jobsites. They also use vehicles to transport equipment and inventory to those locations. It is important to cover the liability of these vehicles for injury or damage they may cause, as well as to provide coverage for damage to the vehicles themselves.
Employers are required to provide coverage for injuries sustained by their employees while on the job. Construction contractors must comply with these requirements but some try to avoid them by hiring subcontractors. These subcontractors may actually operate and qualify as employees. The relationship between a contractor and its subcontractors must be carefully evaluated in order to determine if workers compensation coverage is still needed.
Minimum recommended small business insurance coverage: Business Personal Property, Employee Dishonesty, Surety Bonds, Accounts Receivable, Builders' Risk, Computers, Valuable Papers and Records, General Liability, Employee Benefits Liability, Umbrella Liability, Business Automobile Liability and Physical Damage, Hired and Nonowned Auto Liability & Workers Compensation.
Other commercial insurance policies to consider: Building, Business Income with Extra Expense, Earthquake, Flood, Leasehold Interest, Real Property Legal Liability, Contractors' Equipment, Goods in Transit, Installation Floater, Cyber Liability, Employment-related Practices Liability, Environmental Impairment Liability, Stop Gap Liability, Unmanned Aerial Vehicles (UAV) (Drones).
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