With more than 150,000 recorded accidents every year, the U.S. construction industry is one of the most dangerous industries in the country. Considering the high risk involved, it is prudent to purchase the right business insurance policy if you own a construction business. One of the most important insurance policies for contractors operating in this space is contractor insurance, which basically covers bodily injuries, property damage, and third-party liabilities. With that in mind, here’s a detailed guide to contractor insurance in 2021.
Categories of Contractor Insurance
The following are the categories of contractor insurance that should guide you on what coverages to purchase for your business. Take note that no two contractor insurance policies are the same, and hence, buy what your business needs.
Tier 1: Basic Insurance Coverage
These policies are necessary if you are a contractor that runs small operations and projects that don’t require extensive coverage. They include:
- Workers’ comp – If you have employees, this policy protects your workers from bodily injuries that occur in the line of duty. It protects you from possible lawsuits that employees can file citing negligence.
- Commercial auto insurance – In case you have construction automobiles, this coverage will be necessary. It covers damage to those vehicles and bodily injuries that may result in an accident.
- Contractors’ general liability – This policy provides coverage for third parties who get injured on the construction site.
- Products and completed operations insurance – Even after project completion, accidents and injuries can still occur at the site. Fortunately, this policy covers any third-party injuries that happen after the project is complete.
- Equipment coverage – This policy is necessary if you own construction equipment since it covers the costs of damage and theft of the equipment.
- Property insurance – If you own real estate property such as storage units and large buildings, consider purchasing property insurance to cover them in case of a natural disaster.
Tier 2: Additional Coverage
Because they provide extensive coverage, these coverages are mostly mandatory if you are handling big projects. They include:
- Leased equipment coverage – As the name implies, this policy covers the construction equipment that you rent for your business.
- Employment practices – This coverage protects you from lawsuits that employees may file citing violation of their rights in the form of discrimination, sexual harassment, and wrongful termination.
- Liability umbrella coverage – This policy fills the liability insurance gaps in your general liability insurance, commercial auto insurance, and workers’ comp.
- Hired and non-owned coverage – This insurance policy covers all rented automobiles in case of accidents.
Tier 3: Coverage for Large Projects
These coverages are necessary if you intend to work for industry-leading companies.
- Contractors E&O – Also known as contractors’ professional liability insurance, this policy covers errors that may result if your business offers construction consulting services or hires subcontractors.
- Pollution/Environmental – This policy covers environmental pollution caused by your construction operations.
According to the International Risk Management Institute (IRMI), an additional insured endorsement provides coverage for additional insureds that are not listed in the general liability policy. It limits the liability exposure of the named party while protecting your business as a contractor. Since each additional insured may require coverage on a different form, a blanket additional insured endorsement is the best option.
Considerations to Keep in Mind While Employing:
While workers’ comp is not mandatory for independent contractors in California, you should protect them with suitable insurance coverage. In other words, independent contractors are just like your employees, only that you may not have a lot of control over them, and hence, you need to cover them with the right insurance policy. Additionally, consult your insurance provider concerning the insurance needs for independent contractors.
Just like your employees, subcontractors can also get injured during your construction project. As such, they also need protection in the form of insurance coverage. With this in mind, find out what limitations you have on your current coverage and add endorsements to protect your subcontractors.
Other Considerations to Keep in Mind for
Your construction business can be termed small if you have less than 10 employees and don’t usually handle large projects. If you fall in this category, the most important insurance policies are the business owner’s policy (BOP) and workers’ compensation insurance. While workers’ comp protects your employees from work-related injuries, the business owner’s policy covers property damage, general liability, as well as damage that occurs on goods on transit.
While there’s no accurate definition of a medium-sized business, most insurance providers refer to companies with 50 to 200 employees as mid-sized. If you run such a business, high chances are that you will handle large construction projects. As such, ensure you buy the right contractors’ insurance that is necessary for your business. Don’t be afraid to pay more, provided you can access enough and suitable insurance to cover your business. You should also consider adding endorsements such as pollution coverage, employment practices, and errors and omissions coverage to your existing insurance coverages.
As a large contractor, you will most likely deal with big projects that require extensive coverage. Therefore make sure you to buy enough coverage. Specifically, buy any insurance policy that a typical contractor needs but with extended coverage.
To protect your construction project against the hazards associated with the construction industry, purchase the right contractor insurance policies. For easy and convenient contractor insurance services, contact the experts at Artisan Insurance Solutions today. We will help you get the right coverage for your needs. We are here to help you with all your coverage needs today!