If you work on any construction projects, you will need insurance. Often, this insurance is referred to as “contractors insurance,” but, there are actually several different types of insurance available; and not all types apply to the job at hand. Before you take on a contractors insurance policy, make sure that it’s the right type of insurance for the job.
Below are descriptions of the different types of insurance available, to help you determine the best coverage for your needs.
Liability Insurance
Liability insurance protects against accidents, injuries, and property damage on the job site. This type of insurance is essential for most construction jobs because it protects you from the financial liability if something happens to anyone on the job site, or if a part of the building or property at the site is damaged. The protection goes beyond just the items on the site and can even cover property and people that are normally not on the site.
For example:
If you are working on a construction site on a college campus and a student wanders onto the site, after hours, and is injured. Or if a teacher’s vehicle is damaged while driving through a construction zone. Although, in both instances, those people might be on the site without permission, they can still try to sue for injuries or damage.
The types of liability coverage available vary depending on the type of work you are doing.
For example:
If you are working in residential construction, you might get residential building insurance. On the other hand, if you are a roofing contractor, or a designer, you might get liability insurance specific to that type of work.
Builder’s Risk Insurance
Builder’s risk insurance covers a structure while it is under construction. Unlike liability insurance, it does not protect against financial liability from accidents, injuries, or damage incurred on the job site. Instead, this type of policy protects the structure from damage from things like fire, theft and vandalism.
For example:
If someone breaks into the construction site and steals the copper piping and wiring from a building under construction, builder’s risk insurance would cover the cost of replacing those items.
General contractors usually don’t need to get this type of insurance, unless they are also the builder. Sometimes, the client that has ordered the build will get this coverage.
Contractor Bond
A contractor bond is a guarantee of contractor integrity, quality of work, and contractor performance. It does not protect you from financial liability in the event of an accident, injury or property damage, but it provides assurance to the client that the job will be completed properly, and in a timely manner.
Government contracts tend to require contractor bonds, and some private-sector projects are also starting to require them. On the one hand, you should consider not getting a bond unless your client requests it; on the other, having a bond could give you a leg when bidding against a competitor who doesn’t have one – because it means that your work is guaranteed.
However, unlike other forms of insurance, the contractor will need to have some kind of collateral to back up the bond.
Equipment Coverage
Equipment covers damage to any equipment and machinery at the job site. This is different from liability insurance in that it only covers the equipment, and not the job site or the people working the site.
For example:
If you rent a forklift and it breaks down during the normal course of the job, equipment coverage will cover the costs of repairs and maintenance. However, if someone is injured by the forklift, the equipment coverage will not cover those costs.
This type of coverage is essential if you need to invest in a lot of large equipment to complete the project.