Construction Contractors Insurance FAQ

• At the minimum, construction contractors need general liability insurance.
• If they have employees they will need workers compensation in most states.
• If they have vehicles registered to the business, or use vehicles for the business purposes, they will also need commercial auto.
• There are also other specialty coverages and endorsements that might be needed based on their operations.

Package policies are the most convenient way to combine coverages. The commercial package policy (CPP) offers flexibility and choices, but artisan contractor businessowners policies are often the better choice for these contractors in this category that meet its eligibility criteria.

Types Of Construction Contractors Package Policies:

• Artisan Contractor Businessowners Policy (BOP)
• Businessowners Policy (BOP)
• Commercial Package Policy (CPP)

Contractors who own their buildings or maintain business inventory should arrange coverage using one of the property coverages listed below. General contractors may be involved with condominium projects and development, and use of the condominium coverage forms may be required.

The perils insured or causes of loss forms are the heart of the policy and should be selected based on the exposures and needs of the contractor.

Time element coverages could be important if a loss to inventory would affect or delay work at one or more jobs. Loss of business income from dependent and secondary dependent properties may also be important if a contractor uses only one or a few suppliers or has only one or a few customers.

Types Of Property Coverages:

• Building
• Business Personal Property
• Personal Property of Others
• Improvements and Betterments

Tools and equipment are vital to the operations of most construction contractors. If they stayed in one place, they could be covered under a property coverage form, but tools and equipment must follow the job and so must the coverage. The inland marine forms provide coverage wherever the items are. Because of how the items move, it is important for a contractor to periodically inventory all property in order to make sure that current items are covered and discarded items have been removed.

A number of other exposures are also covered by the versatile and flexible inland marine coverage forms such as accounts receivables, valuable papers and builders risk. The perils insured or causes of loss are broad and restrictions limited. Most inland marine forms include earthquake and flood coverage.

Types Of Inland Marine Coverages:

• Accounts Receivable Coverage
• Builders Risk Coverage
• Contractors' Equipment Coverage
• Difference in Conditions (DIC) Coverage
• Electronic Data Processing Equipment Coverage
• Installation Coverage
• Transportation Coverage
• Valuable Papers and Records Coverage

A number of coverages are available under the commercial crime coverage form and policy. A contractor may need only one or two of the coverages because of limited inventory and little on-premises exposure.

When a contractor has employees, the most important crime coverage to consider is employee theft especially if those employees can order inventory, accept payments or disburse funds. If contractors or their employees travel out of the country, kidnap and ransom coverage should be considered.

Types Of Crime Coverages:

• Computer and Funds Transfer Fraud Coverage
• Employee Theft Coverage
• Forgery or Alteration Coverage
• Inside The Premises-Theft of Money and Securities Coverage
• Inside The Premises-Robbery or Safe Burglary of Other Property Coverage
• Money Orders and Counterfeit Money Coverage
• Outside The Premises Coverage

Surety bonds are used to guarantee a promise that one party makes to another. If the promise is broken, the surety bond compensates the injured party and then seeks restitution against the party that broke the promise.

Construction contractors often make promises that stretch over many years and are worth millions of dollars so surety bonds are required before a contract can be issued. They also make promises when permits and licenses are issued so bonds are needed there too.

Types Of Surety Coverages:

• Contract-Bid Bond Service Undertaking
• Contract-Bid Bonds
• Contract-Completion Bonds
• Contract-Labor and Material Payment Bonds
• Contract-Performance Bonds
• Contract-Performance of Service or Supply Bonds
• Contract-Subcontract Bonds
• License and Permit Bonds

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.

Types Of Liability Coverages:

• Claims-Made to Occurrence Coverage
• Commercial General Liability (CGL) Coverage
• Employee Benefits Liability Coverage
• Employment-Related Practices Coverage
• Owners and Contractors Protective (OCP) Liability Coverage
• Railroad Protective Liability Coverage

Construction contractors may employ or contract with individuals who provide services that require errors or omissions coverage. Professional and errors and omissions claims are based on malpractice, errors or mistakes made in the performance of a variety of professional duties. Because these errors, omissions and mistakes are excluded in the general liability policy, the insured must purchase separate professional liability coverage in order to have much needed insurance protection.

Types Of Errors And Omissions (E&O) Coverages:

• Architects or Engineers Professional Liability Coverage
• Errors and Omissions - Miscellaneous Coverage
• Safety and Environmental Consultants Errors and Omissions Coverage

Contractors use their vehicles to get to and from their workplaces and jobsites. They also may use those vehicles to transport equipment and inventory. It is important to cover the liability of these vehicles for injury or damage they may cause, as well as providing coverage for damage to the vehicles themselves.

When a contractor works in a foreign country or outside the territorial limits of the policy, automobile coverage must be purchased in the locale where the work is being done.

Types Of Business Auto Coverages:

• Auto Medical Payments
• Business Auto Coverage
• Collision Coverage
• Comprehensive Coverage
• Hired & Non-owned Auto Coverage (HNOA)
• Uninsured/Underinsured Motorists Coverage

Employers are required to provide coverage for injuries sustained by their employees while on the job. Most employers purchase a workers compensation policy to satisfy this requirement, but it is not the only option.

Contractors may try to circumvent the coverage requirement by hiring subcontractors. However, 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.

Contractors working on, above or around navigable waters are subject to the Longshore and Harbor Workers' Compensation Act and the policy must have the appropriate endorsement that reflects that situation.

Types Of Workers Comp Coverages:

• Excess Workers Compensation Self-Insurance Bonds
• Federal Coal Mine Health and Safety Act Coverage
• Longshore and Harbor Workers' Compensation Act Coverage
• Stop-Gap or Employers Liability Coverage
• Workers Compensation and Employers Liability Coverage

Significant projects can expose contractors to significant losses. These losses can bankrupt a company if the policy limits are not adequate. Either an excess or umbrella policy is often needed to obtain the types of limits needed. If commercial general liability coverage was previously provided by a claims-made policy, purchasing retroactive excess coverage is advisable.

Types Of Excess Liability Coverages:

• Excess Liability Coverage
• Retroactive Excess Liability Coverage
• Umbrella Coverage

Many contractors are entrepreneurs who are receptive and open to new opportunities. They may become involved with international opportunities, financing options and other initiatives. A contractor may need one or more of the following coverages, depending on their operations and opportunities. A wrap-up is commonly used on large projects involving multiple subcontractors.

Types Of Specialty Coverages:

• American Expatriate Coverage
• Business Legal Expense Coverage
• Cyber Liability Coverage
• Directors and Officers Liability Coverage
• Environmental Impairment Liability Coverage
• Fiduciary Liability (Pension, Welfare and Employee Benefit Funds) Coverage
• Identity Theft Insurance Coverage
• International Insurance Coverage
• Lead Paint Contamination Coverage
• Risk Retention Group Liability Coverage
• Tax Liability Coverage
• Tender Offer Defense Expenses Coverage
• Terrorism Insurance Coverage
• Underground Storage Tank (UST) Liability Coverage
• Unmanned Aerial Vehicles (UAV) (Drones)
• Weather Coverage
• Wrap-Up Coverage