Construction Contractors Insurance FAQ. 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 automobile.
Inland marine coverage for expensive mobile equipment, supplies, other tools of the trade and builders' risk can be vital.
We wanted to provide a deeper dive into small business insurance to help our readers get a better understand of the commercial insurance policies they want and need with the Construction Contractors Insurance FAQ.
Read the Construction Contractors Insurance FAQ to learn what type of commercial insurance coverages are right for your contracting business - including liability, property, workers compensation and other specialty policies.
According to Webster's Dictionary - construction is, "the process, art, or manner of constructing something."
Construction Contractors include - but are not limited to - the following types of contracting businesses:
You can reference the Insurance Definitions, Dictionary And Glossary to better understand the commercial insurance policy terms and language used in our Small Business Insurance FAQs.
Following are some suggested commercial policies and coverages applicable for service businesses:
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:
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:
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:
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:
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:
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:
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:
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:
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:
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:
When jobsites are spread over large areas or are located in remote areas many contractors may find that the most cost effective way to supervise the sites is through the use of owned, leased or hired aircraft.
Types Of Aviation Coverages:
Larger contractors and those working on, above or around navigable waters may need special marine coverages only available under an ocean marine policy.
Types Of Ocean Marine Coverages:
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:
There are many commercial insurance policies available for Construction Contractors. To find out what types of coverage your business needs, speak to a professional insurance broker with experience in insuring construction contracting businesses.
Learn about the coverages available for specific industires with the Insurance FAQs below: