If you work in the construction industry, you know that there are certain inherent risks you always face, regardless of whether you’re a small business or sole proprietorship. Thus, it’s critical to be adequately protected against these liabilities with construction insurance. The most effective way to do this is by acquiring insurance.
There are several different types of coverages that are available to contractors and other construction professionals, including builders’ risk (course of construction) insurance, general liability insurance, commercial auto insurance, and workers’ compensation insurance. Depending on the state you work in, requirements for construction insurance may vary.
However, these types of coverages are often highly recommended. Failure to purchase construction insurance can have severe consequences for your business and the projects you work on. Here is a close look at this subject.
Consequences Of Not Having Construction Insurance
If you don’t have construction insurance, there are four major risks your business faces:
Damages Caused By Subcontractors
Many contracting jobs (building, painting, electrical system installations, etc.) are inherently risky because they include work performed by subcontractors. These professionals can sometimes cause damage by performing inadequate or incomplete work or by failing to follow safety procedures.
In these cases, you may likely be held responsible because you accepted the subcontractor’s services. You can demand restitution for these damages, although the most advisable course of action is to obtain general liability insurance.
Injuries on construction sites (slip-and-falls, becoming trapped in between objects, electrocution, etc.) are extremely common, often more so than in other industries. Workers on job sites can also sustain illnesses due to inhalation of fumes or exposure to hazardous materials. Therefore, it’s important to obtain workers’ compensation insurance.
Without this type of coverage, you may become indefinitely responsible for paying an injured or sick subcontractor or employee’s medical bills. If you’re working on a residential project, it’s also possible for the property’s residents to become injured due to negligence from subcontractors or freak accidents. Consequently, it’s essential to have general liability insurance coverage.
In some cases, property and individuals unrelated to your construction project can be impacted by your contract work. For instance, a falling object such as scaffolding or debris can injure a pedestrian. Similarly, repairs performed on a sidewalk can lead to an accident involving a passer-by and one of your employees. General liability coverage can help shield you from third-party claims against your business, regardless of whether they arise from intentional acts or accidents.
The majority of construction firms and contractors offer certain guarantees for the jobs they complete, typically by assuring clients that the work performed on their property is guaranteed for a specified period of time (e.g. 10 years). These guarantees can cover costs associated with the quality of materials or labor.
However, this is often not enough to fully ensure clients are protected. It’s still possible for the quality of a construction project to suffer over time due to the appearance of mold, expanding windows, or a leaky roof. These are known as “latent liabilities” and can represent a significant financial risk if you’re a contractor, as a client can sue you if their property has an issue before a guarantee period is up.
By purchasing construction insurance, you can minimize the probability of these risks occurring and be more likely to secure contracts, all while protecting your staff. Be sure to choose your limits and deductibles carefully by evaluating your business’s unique needs and risks. It may be helpful to request two or three quotes from each insurance company you contact so that you can properly weigh your options.
Get Construction Insurance From JMG
Reach out to the professionals at JMG Insurance Corp for more information on the consequences of not having construction insurance. Since 1916, we’ve been dedicated to providing high-quality insurance solutions to clients throughout Connecticut, New Jersey, New York, Hawaii, and Massachusetts. As an independent agency, we work closely with several well-known, reliable insurance carriers.
At JMG, we understand that many different types of injuries and damages can occur at construction sites. Therefore, you will benefit substantially from purchasing construction insurance if you’re a contractor, no matter how many employees your business has. Our policies include two main areas of coverage: builder’s risk insurance and general liability insurance.
The former coverage will protect your structures from vandalism, theft, and storm-related damage. (For larger projects, we also offer “premium coverage.”) The latter coverage will shield you against claims associated with faulty workmanship, job-related injuries, advertising injuries, and defamation.