Construction insurance is a requirement for most construction projects. Without a reliable policy, you are at high risk of being turned down for contracts that you are otherwise fully qualified for. Insurance may seem like a burden, but it plays an important role in protecting you and your business from high costs related to medical costs, legal fees, and property repair and replacement. This review discusses the importance of construction insurance.
What Is Construction Insurance?
Construction insurance is a commercial insurance policy specifically tailored to meet the needs of a construction contractor. An insurance policy is often required in order to be in compliance with state laws and regulations, and contractors without an insurance policy may not be eligible to receive a license and/or work on certain construction projects.
What Does This Insurance Include?
Policies are personalized for each contractor and the specific needs they have. The most common coverages that are generally included in a insurance policy are:
- General liability insurance
- Builder’s risk insurance
- Worker’s compensation insurance
- Commercial auto insurance
General liability insurance is often the primary component of a construction insurance policy. This includes financial coverages for issues such as property damage or bodily injury. Builder’s risk insurance, which is more specific for construction professionals, protects you from damage that occurs at the construction site to structures, equipment, etc. Worker’s compensation and commercial auto insurance are also often necessary for insurance as well.
Additional coverages may also be necessary depending on the contractor’s situation and their type of license. For example, construction crews that work on larger projects may need to protect themselves financially with umbrella insurance that carries a higher coverage limit. This not only helps mitigate financial risk, but it can help secure larger contracts by showing prospective clients that you are adequately insured.
What are the Benefits of Construction Insurance?
Of course, the primary purpose and benefit of all commercial insurance policies is to mitigate the financial risk of businesses. Several ways that insurance can protect you financially are that it:
- Protects you from injury
- Protects you from property damage
- Allows your employees to receive protection
- Reduces the coverage requirements for legal fees
- Covers medical costs related to workplace injuries
Workplace accidents are, unfortunately, an understood risk of working within the construction industry. While contractors are strongly encouraged to take all of the necessary safety precautions to keep themselves, their employees, and their subcontractors safe, accidents can still occur.
Construction insurance, particularly policies that include worker’s compensation and general liability insurance, can protect the contractor and their employees from high costs related to medical expenses, legal fees, and property damage repair and replacement.
What Are the Risks of Not Having Construction Insurance?
Perhaps the biggest risk construction contractors face without a reliable insurance policy is the loss of contracts they would otherwise have a good chance at obtaining. This is because contractors, especially those that receive multiple bids, check the insurance coverages of each bidder. Having the best construction insurance coverage is a great way to separate yourself from the rest of your competition.
However, with that said, the only law-required insurance coverage you are obligated to obtain are worker’s compensation and commercial auto insurance. If you do secure a contract without adequate insurance coverage for property damage, injury coverage, etc., then you are at a much higher financial risk if any incidents were to occur while on the job site. In many cases, the costs can add up to tens of thousands of dollars that you may be responsible for covering out of pocket if your insurance is not sufficient in covering your risks.
Who Needs Construction Insurance?
As mentioned, commercial auto insurance is required for any construction professional that uses a vehicle for commercial use. Worker’s compensation is required for anyone who hires crew members to assist with construction projects. Depending on the area you live in and who your prospective clients are, you may be required for other coverages as well. The most notable types of construction contractors that require construction insurance are:
- Flooring installers
- Roofing professionals
The best way to determine if you are required to obtain or could benefit from an insurance policy is to discuss your specific situation and needs with a licensed insurance agent.
Speak With Our Insurance Team at JMG Insurance Agency
If you have questions about your insurance needs or understand your coverage requirements and are ready to begin your policy, then contact one of our insurance agents at JMG Insurance Agency by giving us a call or sending us a message. We are more than happy to answer your questions and concerns and help you customize your policy based on your specific insurance needs.