If you own a construction business, you need construction insurance. Every small business needs insurance, but construction companies have unique risks that usually aren’t covered by general liability business insurance.
Construction companies still need to carry general liability business insurance, which covers medical and legal fees if someone is injured at your place of business or if someone sues you. But most construction companies also need additional insurance to meet their unique needs.
Here are three important things you need to know about construction insurance.
1. Liability Insurance Can Fall Short
Your traditional general liability business insurance covers your place of business, such as your office or warehouse, and it covers the risk of bodily injury or property damage there. But it doesn’t cover any contractor property or any equipment at work sites.
Imagine that you have a portable storage unit full of power tools and other equipment on a job site. Over a holiday weekend, when no one’s working at the job site, someone breaks into the storage unit and steals everything inside. By the time your crew returns to the job site, much of your equipment has been scattered at pawn shops around the city — and some it’s probably already been resold. Unfortunately, because the theft didn’t occur at your primary place of business, the stolen equipment isn’t covered by your general liability insurance.
Imagine, now, that your company has almost completed the construction of three homes in a new subdivision and that you have contracts to close on them in the coming weeks. A lightning storm causes a fire in the neighborhood, which spreads and severely damages all three of your properties. Because the fire didn’t damage your primary place of business, your losses aren’t covered by your general liability insurance.
To ensure that your construction business will be covered against these and similar risks, you’ll need to purchase separate insurance designed for construction companies’ needs.
2. Construction Insurance Types Vary
Different types of construction insurance meet different needs, such as jobs in progress, construction equipment and materials. The right type of insurance for your company will depend on the kind of work you do and where you perform it.
Commercial construction insurance. If your construction company builds new homes or office buildings, it’ll need commercial construction insurance to cover in-progress buildings, your business’s property and any property in transit between various jobs. This coverage addresses the needs of complex construction operations with high property values and multiple locations.
Construction equipment insurance. Construction equipment insurance provides broad protection for graders, cranes, bulldozers, front-end loaders and other large construction equipment. If you’re buying construction equipment insurance, check to see if there are any restrictions on boom length or weight of load; if there are, make sure that your equipment meets the coverage requirements. If your equipment is damaged or stolen, construction equipment insurance covers repairs or replacement, and it covers the expenses that can accompany the loss of equipment, such as renting substitute equipment, debris removal and pollutant cleanup.
Builder’s risk insurance. Most construction companies need builder’s risk insurance, which covers buildings under construction (including foundations) and temporary structures and materials that are on-site, in transit or in temporary storage. Builder’s risk insurance protects your construction company’s interest in the equipment, the value of your property and your materials when they’re in use. Coverage continues until a project is completed and the owner has signed off on it. A builder’s risk policy could also protect against risks such as theft, earthquake, government action, weather or water damage and mechanical breakdown. Some insurers let you tack on additional coverage for the costs associated with things like site preparation, re-erecting scaffolds and debris removal.
3. Insurance Can Be Bundled
Depending on what your construction company does, you might need more than one type of construction insurance. And the amount of coverage you need will depend on the value of your project or materials.
If you’re a remodeling contractor or a deck builder and you work for homeowners at their homes, you might only need enough construction insurance to cover your tools and equipment, as the homeowner is responsible for insuring their property. But if your business owns the property where you’re working and it owns heavy construction equipment, you might need a combination of construction insurance types to ensure that you’re fully covered.
If your construction company needs more than one type of insurance, you might be able to purchase them in one insurance bundle. Some insurance companies offer construction packages that bundle commercial property coverage, equipment coverage and general liability coverage in one convenient package, and you can usually tack on additional items and adjust limits as needed.
Talk to a commercial insurance agent to find out which types of insurance you can bundle together and whether you can save money by purchasing an insurance package. Look for an insurance agent or company with a lot of experience working with construction companies, as they’ll better understand your needs and provide tailored advice. If the prospect of paying insurance premiums seems daunting, a construction business loan or a line of credit can be a low-cost way to manage the day-to-day costs of doing business. You might even be able to get one if you have less-than-ideal credit.
Owning a construction business comes with many unique risks. Make sure that you have the appropriate coverage in place to manage those risks so that you can focus on your work and ensure continued success.