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What does construction business insurance cover?

construction business insuranceConstruction business insurance takes different forms with different types of construction contractors, but its basic purposes remain the same for all types of contractors. Those include protecting the contractor from liabilities arising from conducting their businesses.

A small contracting company that accepts only small residential construction jobs has needs that are very different from the large commercial contractor specializing in multimillion dollar projects. Only the details differ, however. Both types of construction companies require the same types of basic liability insurance coverage.

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Builders Construction Insurance

This type of insurance is more of a program than it is a policy, incorporating several different types of individual policies to create a comprehensive insurance program that protects the construction contractor at every turn. A Builders Construction Insurance program for a large construction company likely will include:

  •  Contractors liability insurance that protects against third-party claims
  •  Builders risk insurance that insures against damages that may occur during the course of a construction project
  •  Worker’s compensation insurance that protects against claims of workers injured on the job
  •  Commercial auto insurance that provides liability insurance for company vehicles and the vehicles owned by employees but used on the job
  •  Property insurance that guards against the theft or destruction of materials stored on the job site
  •  Heavy equipment insurance that protects the construction company from damages arising from the operation of heavy equipment
  •  Contractors’ omission and errors insurance that protects against the consequences of design flaws or errors in design execution
  •  Pollution liability insurance that guards against any unforeseen environmental effects of a specific construction project

A smaller and more informal construction business will have less need for nearly all of the types of the construction business insurance listed above. Obviously, a construction business specializing in residential room additions will have different insurance needs than a large commercial construction business that accepts no small residential construction projects.

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Risk and Cost Tradeoffs

Virtually any construction business can insure its operations, outcome and employee benefits issues at any level. Cost is the primary issue. As example, there is little need for a small business specializing in small residential jobs to carry any contractor omission and errors liability insurance. On the other hand, there is no justification for a large commercial construction company not to have omission and errors insurance coverage.

Determine which Policies are Needed

The key for the efficiently managed construction business is to determine which types of construction business insurance it needs to have included in its construction business insurance program. All companies are individual, construction insuranceand so every company will have its individual needs based on the markets it serves and the way it operates.

If no employee is required to use his own vehicle in the course of company work, then of course the company has no need for insuring any employee’s car when used for company business. A smaller construction company may not have a fleet of company trucks and cars for employee use, and does require its employees to use their own vehicles for company business. Obviously, that company will need additional auto liability insurance. Where this is the case, employees must understand that the construction company is not paying for their auto insurance, but is buying only the additional insurance required when the vehicle is being used for commercial purposes.

The tradeoffs between risk and cost can provide the basis of decisions in several areas of business operation. It may be that insurance cost differences can be the deciding factor in whether the construction business provides vehicles for employees. The same is true for tools. Most small construction companies require workers to have and use their own tools, but may fail to realize that the cost of insuring those tools – and the effects of their use – during working hours may be greater than the cost of providing tools and insuring the company’s own property.

The Bottom Line

More insurance is better than less insurance, of course. All businesses need to operate as efficiently as possible, and today, it can seem that carrying more insurance rather than less is an inefficient use of financial resources. That perception lasts only until a costly problem occurs, however.

For every construction business, the bottom line is that construction business insurance is a risk management tool. Any company needs to insure against risks that have a high probability of occurring – such as an employee traffic accident or theft of materials from a job site – but may be able to get by in other areas where there is less risk. Every construction business owner needs to compare rates on the various types of individual insurance that applies to his specific construction company. Lower rates can translate to high levels of coverage, and of course, more coverage always is better than less.

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