Building Contractors Insurance Policy Information

Building Contractors Insurance. 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 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 protects your contracting business from lawsuits with rates as low as $37/mo. Get a fast quote and your certificate of insurance now.

Below are some answers to commonly asked building contracting insurance questions:

What Is Building Contractors Insurance?
How Much Does Building Contractors Insurance Cost?
Why Do Building Contractors Need Insurance?
What Type Of Insurance Do Building Contractors Need?
What Does Building Contractors Insurance Cover & Pay For?

What Is Building Contractors Insurance?

Building contractors insurance is a type of insurance that provides financial protection for building contractors and their businesses. It covers a variety of risks, such as property damage, liability claims, and workers compensation, and is specifically designed to meet the needs of building contractors and their businesses.

This type of insurance protects the contractor from financial losses that may arise from unexpected events such as accidents, theft, and natural disasters, as well as legal claims made against them. It is a critical component of risk management for building contractors and helps ensure that their businesses are protected against the financial consequences of unforeseen events.

How Much Does Building Contractors Insurance Cost?

The average price of a standard $1,000,000/$2,000,000 General Liability Insurance policy for small building contractors ranges from $37 to $79 per month based on location, payroll, revenue, claims history and more.

Why Do Building Contractors Need Insurance?

As a 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 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 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 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 you'll need to carry as the owner and operator of an building contracting company.

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.

All 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.

What Does Building Contractors Insurance Cover & Pay For?

Building Contractors Insurance Claim Form

Building contractors can be sued for various reasons, including but not limited to:

Construction defects: If a contractor fails to deliver a construction project that meets the required standards, the client may sue them for construction defects. Professional liability insurance, also known as errors and omissions insurance, can provide coverage for lawsuits arising from construction defects. This insurance can help pay for the cost of defending the lawsuit and any damages awarded to the plaintiff.

Property damage: During construction or renovation, the contractor or their workers may cause damage to the property or neighboring properties, leading to lawsuits. General liability insurance can provide coverage for property damage caused by the contractor or their workers. This insurance can help pay for the cost of repairing the damaged property and any legal fees incurred in defending the lawsuit.

Delayed completion: If a contractor fails to complete the project within the agreed timeline, the client may sue them for breach of contract. Delayed completion insurance, also known as liquidated damages insurance, can provide coverage for lawsuits arising from delayed completion of the project. This insurance can help pay for any damages awarded to the plaintiff for breach of contract.

Bodily injury: Workers or visitors to the construction site may sustain injuries due to the contractor's negligence or unsafe working conditions, leading to lawsuits. Workers' compensation insurance can provide coverage for workers who sustain injuries on the construction site. This insurance can help pay for medical expenses, lost wages, and any legal fees incurred in defending the lawsuit.

Breach of contract: If a contractor breaches any of the agreed terms in the contract, the client may sue them for damages. Contractual liability insurance can provide coverage for lawsuits arising from breach of contract. This insurance can help pay for any damages awarded to the plaintiff and any legal fees incurred in defending the lawsuit.

In conclusion, insurance can play a vital role in protecting building contractors from lawsuits and associated costs. It is important for building contractors to have the right insurance coverage to protect their business and reputation.

Commercial Insurance And Business Industry Classification

1521: General Contractors - Single Family Homes

Division C: Construction | Major Group 15: Building Construction General Contractors And Operative Builders | Industry Group 152: General Building Contractors-residential

1521 General Contractors - Single Family Homes: General contractors primarily engaged in construction (including new work, additions, alterations, remodeling, and repair) of single-family houses.

Building alterations, single-family-general contractors
Building construction, single-family-general contractors
Custom builders, single-family houses-general contractors
Designing and erecting combined: single-family houses-general con-
Home improvements, single-family-general contractors
House construction, single-family-general contractors
House: shell erection, single-family-general contractors
Mobile home repair, on site-general contractors
Modular housing, single-family (assembled on site)-general
One-family house construction-general contractors
Prefabricated single-family houses erection-general contractors
Premanufactured housing, single-family (assembled on site)-general
Remodeling buildings, single-family-general contractors
Renovating buildings, single-family-general contractors
Repairing buildings, single-family-general contractors
Residential construction, single-family-general contractors
Rowhouse (single family) construction-general contractors
Townhouse construction-general contractors

1522: General Contractors-Residential Buildings, Other Than Single-Family

Division C: Construction | Major Group 15: Building Construction General Contractors And Operative Builders | Industry Group 152: General Building Contractors-residential

1522 General Contractors-Residential Buildings, Other Than Single-Family: General contractors primarily engaged in construction (including new work, additions, alterations, remodeling, and repair) of residential buildings other than single-family houses.

Apartment building construction-general contractors
Building alterations, residential: except single-family-general
Building construction, residential: except single-family-general
Custom builders, residential: except single-family-general contractors
Designing and erecting, combined: residential, except single-family-
Dormitory construction-general contractors
Home improvements, residential: except single-family-general
Hotel construction-general contractors
Motel construction-general contractors
Prefabricated building erection, residential: except
Remodeling buildings, residential: except single-family-general
Renovating buildings, residential: except single-family-general
Repairing buildings, residential: except single-family-general
Residential construction, except single-family-general contractors

1541: General Contractors-Industrial Buildings and Warehouses

Division C: Construction | Major Group 15: Building Construction General Contractors And Operative Builders | Industry Group 154: General Building Contractors-nonresidential

1541 General Contractors-Industrial Buildings and Warehouses: General contractors primarily engaged in the construction (including new work, additions, alterations, remodeling, and repair) of industrial buildings and warehouses, such as aluminum plants, automobile assembly plants, pharmaceutical manufacturing plants, and commercial warehouses.

Aluminum plant construction-general contractors
Building alterations, industrial and warehouse-general contractors
Building components manufacturing plant construction-general
Building construction, industrial and warehouse-general contractors
Clean room construction-general contractors
Cold storage plant construction-general contractors
Commercial warehouse construction-general contractors
Custom builders, industrial and warehouse-general contractors
Designing and erecting, combined: industrial-general contractors
Drycleaning plant construction-general contractors
Factory construction-general contractors
Food products manufacturing or packing plant construction-general
Grain elevator construction-general contractors
Industrial building construction-general contractors
Industrial plant construction-general contractors
Paper pulp mill construction-general contractors
Pharmaceutical manufacturing plant construction-general contractors
Prefabricated building erection, industrial-general contractors
Remodeling buildings, industrial and warehouse-general contractors
Renovating buildings, industrial and warehouse-general contractors
Repairing buildings, industrial and warehouse-general contractors
Truck and automobile assembly plant construction-general contractors
Warehouse construction-general contractors

1542: General Contractors-Nonresidential Buildings, Other than Industrial Buildings and Warehousesl

Division C: Construction | Major Group 15: Building Construction General Contractors And Operative Builders | Industry Group 154: General Building Contractors-nonresidential

1542 General Contractors-Nonresidential Buildings, Other than Industrial Buildings and Warehouses: General contractors primarily engaged in the construction (including new work, additions, alterations, remodeling, and repair) of nonresidential buildings, other than industrial buildings and warehouses. Included are nonresidential buildings, such as commercial, institutional, religious, and amusement and recreational buildings. General contractors primarily engaged in the construction of industrial buildings and warehouses are classified in Industry 1541.

Administration building construction-general contractors
Auditorium construction-general contractors
Bank building construction-general contractors
Building alterations, nonresidential: except industrial and
Building construction, nonresidential: except industrial and
Church, synagogue, and related building construction-general
Civic center construction-general contractors
Commercial building construction-general contractors
Custom builders, nonresidential except industrial and
Designing and erecting, combined commercial-general contractors
Dome construction-general contractors
Farm building construction, except residential-general contractors
Fire station construction-general contractors
Garage construction-general contractors
Hospital construction-general contractors
Institutional building construction nonresidential-general contractors
Mausoleum construction-general contractors
Museum construction-general contractors
Office building construction-general contractors
Passenger and freight terminal building construction-general
Post office construction-general contractors
Prefabricated building erection, nonresidential except industrial and
Remodeling buildings, nonresidential except industrial and
Renovating buildings, nonresidential except industrial and
Repairing buildings, nonresidential except industrial and
Restaurant construction-general contractors
School building construction-general contractors
Service station construction-general contractors
Shopping center construction-general contractors
Silo construction, agricultural-general contractors
Stadium construction-general contractors
Store construction-general contractors

Building Contractors Insurance - The Bottom Line

For more information on building contractors insurance, speak with an experienced broker who specializes in commercial insurance and understands the unique exposures that building contractors face.

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.

The construction industry is a high-risk industry that requires business insurance to protect against potential losses. There are several reasons why the construction industry needs business insurance:

Liability risks: Construction projects often involve working on other people's property, which can lead to potential liability risks if any damages or accidents occur. Liability insurance helps to protect against these risks by providing coverage for any legal fees or damages that may arise.

Property damage: Construction projects can also be at risk for property damage, whether it's the company's own equipment or tools, or the property being worked on. Commercial property insurance including inland marine helps to cover the cost of repairs or replacement of any damaged property.

Worker injuries: Construction is a physically demanding industry, and accidents and injuries are a common occurrence. Wrokers comp helps to cover the cost of medical treatment and lost wages for injured workers.

Financial losses: Construction projects can be disrupted by a variety of factors, such as weather, delays, or changes in scope. Business insurance helps to protect against financial losses that may occur as a result of these disruptions.

Overall, insurance is an essential component of the construction industry as it helps to protect against a range of potential risks and losses. Without it, companies in the construction industry would be vulnerable to financial ruin and may not be able to continue operating.

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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