Construction contractors deal with risk on a daily basis. Insurance helps cushion the blow of losses or construction site hazards. To illustrate the importance of insurance, most states require that general contractors purchase insurance before becoming licensed.
However, there are several types of insurance that contractors can purchase. We’ve created a list of the most common types of policies and types of construction contracts available to contractors. Then we discuss the contractor insurance cost and what type of information you’ll need to provide to get a quote.
General liability insurance
General liability insurance protects businesses from damages caused by injury, property damage, theft, or faulty work. It protects independent contractors on the job and at their shop or office. It covers third parties, other than employees, and damage to property that doesn’t belong to you. General liability provides coverage from loss of tools or equipment when they are stored at your shop or office. This type of coverage is often required for general contractor licensing.
General liability insurance pays for medical bills, property damage, legal fees, and judgments.
Commercial automobile insurance
Commercial automobile insurance protects company-owned vehicles used for work or transporting tools and materials. Whether you have a single company vehicle or a fleet, you need this coverage. Coverage can be expanded to include attached equipment like ladder racks and toolboxes. In general, however, tools and materials are not covered by this type of policy.
Commercial automobile insurance pays for medical costs, vehicle repairs, and rental car expenses.
Workers compensation insurance
Workers’ compensation insurance protects your employees if they are injured or become sick on the job. This type of insurance is required once you hire your first employee. Generally, owners and partners are not covered by workers comp insurance. This coverage also includes employer’s liability insurance, which protects the company if an employee sues them over an injury or illness. Rates are based on a company’s past safety record.
Workers comp insurance pays for medical costs, lost wages, and employer’s liability.
Builders risk insurance
Builders risk insurance, also called an installation floater, covers installed materials and equipment before a project is completed. It provides coverage during the progress of the project, before the owner moves in and provides their own property insurance. It protects all the installed work from damage due to fire, theft, vandalism, or other acts of God.
Builders risk insurance pays for damage repairs and equipment replacement.
Inland marine insurance
Inland marine insurance protects building materials and equipment while they are in transit, in storage, or at the job site (before installation). It includes coverage for portable tools, building materials, laptops, tablets, etc. The policy protects tools and equipment from theft, damage, or vandalism. It also includes the cost of temporary measures to keep the project on schedule.
Inland marine insurance covers replacement costs for materials and tools, and any temporary measures needed to keep the project on schedule.
Equipment rental insurance
Equipment rental insurance protects independent contractors who rent or lease equipment or tools. It’s usually purchased directly from the rental company and is prorated for the time the general contractor has the piece of equipment or tool. However, contractors can purchase a separate policy to cover all their rental needs.
Equipment rental insurance pays for damage repairs and provides for equipment or tool replacement when necessary.
Professional liability insurance
Professional liability insurance covers you and your company if you make a mistake in your professional services, like design services. It’s also known as errors and omissions insurance (E&O). Contractors who provide in-house design services will want to purchase this type of insurance.
Professional liability insurance pays for damage repairs and reconstruction costs.
The cost of an insurance policy is based on several factors. It varies according to the type of work and the amount of risk. Other factors that affect the contractor insurance cost include:
- amount of coverage required
- number of employees (for workers’ compensation coverage)
- number and type of company-owned vehicles (for commercial auto coverage)
- number and type of equipment and tools
- past claims history
The best way to purchase general contractor insurance is to find a construction insurance agent who can get quotes from multiple insurers. Using a construction insurance agent ensures that you get the best options for your company and competitive pricing.
To get an insurance coverage quote, you’ll need to provide the following information:
Basic company information – business property location, industry, business owner information and experience, details of the business operations, gross annual sales
Employee information – number of employees, annual payroll costs, subcontractor costs
Tools and equipment – materials used, tools or equipment over $1000 in value, portable computer equipment
Claims history – number of claims in last five years, date of claims, the amount paid to settle
Based on the information you provide, your business insurance agent will offer multiple policy options for general contractors software and help you select the best one for your company.
Business Insurance is a necessary expense for all general contractors. Construction is a risky business and has its construction challenges, and insurance helps cover the costs of that risk. If you need help selecting the proper insurance coverage for your company, contact a local insurance agent or construction bidding websites for the best rates and advice.