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A Guide to Buying Construction Insurance in California

What Is Construction Insurance?

Construction insurance comprises a mix of policies designed to cover all the aspects of construction work. This includes coverage of tools, property that’s on the job site, employees, and all other components of construction work. Due to the varying size and scope of construction projects, an insurance policy that suits one construction company may be inadequate for another company. Therefore, you should work with an experienced insurance agent who’ll help you craft a construction insurance policy that’s tailored for your specific needs.

Why Do You Need Construction Insurance?

Construction is inherently risky, with hazards ranging from on-the-job injuries to property loss or damage. These hazards expose contractors to liability risks which construction insurance can help protect against. To shield your business from the risks, you should get a policy that’s designed to protect against typical industry hazards, especially those that are particular to CA.

There are several common man-made and natural hazards in California. Each of these different hazards can pose a risk to your construction business. Let’s take a closer look at four common hazards.

  • Earthquake and Wildfire DamageCalifornia is vulnerable to wildfires, earthquakes, and excessive rain. These natural hazards can create dangerous conditions for your workers, cause significant damage to your equipment and job sites, and even disrupt your operations.
  • Employee Injury – Construction work entails a lot of potentially risky work, from working on unstable surfaces at great heights, using dangerous equipment, to exposure to elements. These conditions can lead to injuries or even fatalities and is a risk that you should be aware of and protect against.
  • Business Interruption – Nature’s elements like earthquakes and wildfires, or even man-made catastrophes can force you to halt your operations, leading to loss of income.
  • Damage Resulting from Defective Work – Errors made during and after construction can result in structural damage, on-site injuries, or damage to the surrounding property. For instance, heavy excavation machinery can cut power lines, disrupting service to businesses and homes in the vicinity. Welding exposes workers to potential burns and can cause fires.

With adequate coverage in place, you can protect your workers and projects from unexpected disasters.

What Are the Construction Insurance Requirements in California?

General contractors are required to hold several types of insurance, depending on the kind of construction work they handle. For instance, if you own vehicles that you use for work, you’re required by law to carry commercial auto insurance.

If you have a commercial lease for a physical location, your property manager might require you to buy general liability insurance. The state of California requires all general contractors with employees to carry workers’ compensation insurance. Moreover, depending on the specifics of your construction work, you may need surety bonds and builder’s risk insurance.

What Does Construction Insurance Cover?

Here are the various insurance coverage options.

  • General Liability: General liability coverage protects against third-party property damage and bodily injury claims.
  • Workers’ Compensation: This covers the financial ramifications of an employee being injured or dying due to a work-related incident.
  • Professional Liability Insurance – Also known as Errors and Omissions Insurance, this policy covers claims relating to financial losses suffered by clients due to your professional services, advice, or consultation. This coverage is vital if your work entails design work, advice, and consultation.
  • Builder’s Risk Insurance: This covers the materials used and the structure(s) at your job site, from the start to the end of the construction projection. Theft/damage to the materials and the structure is typically covered. In many cases, builder’s risk insurance also covers financial losses resulting from disruption of your construction work.
  • Inland Marine Insurance – This covers tools and equipment when being transported on land via a truck, or when temporarily stored by third parties. This coverage is especially important if your work entails moving around high-value tools and machinery.
  • Pollution Coverage – This protects against bodily injury and property damage claims caused by pollution in connection with your construction work.
  • Commercial Auto – This covers bodily injuries and damage to your company vehicles in case you or any of your employees cause an accident.
  • Umbrella Liability Coverage – This offers coverage for liability charges that exceed the limits of your existing liability policies. Umbrella liability coverage can apply to various types of policies, such as pollution and commercial auto.

How Much Does Construction Insurance Cost in California?

The cost of your construction insurance varies depending on the size of your construction company and the kind of construction projects you undertake. For instance, a construction firm that primarily carries out sidewalk paving may pay about $25,000 annually. Conversely, a single construction worker undertaking similar construction work may pay a few thousand dollars per year. This is because there is no need for workers’ compensation insurance and there is less equipment to cover. A large construction firm that handles big projects such as dams and stadiums will likely pay millions annually.

The construction insurance cost is calculated based on the following factors:

  • Size and scope of the project
  • Company revenue
  • Number of employees
  • Location of the projects. You may pay more if you’re working on a project close to the Pacific Coast where you need flood coverage.

Tips on How to Buy Affordable Construction Insurance

You may enjoy construction insurance discounts if you practice the following:

  • Strive to maintain a clean safety record
  • Consistently deliver quality work
  • Maintain a low claims history
  • Maintain professionalism
  • Work with a knowledgeable agent

Construction insurance bundles policies that cover various construction-related insurance needs. At Artisan Insurance Solutions, our experts will help you find a construction insurance policy that suits your construction business. For more details, contact us today.

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