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Construction Insurance Policies: A Complete Guide

There are many different kinds of insurance policies designed to protect all involved parties from financial fallout in the construction industry. Each policy has different allocations for developers, contractors, employees/workers, and owners. Let’s discuss the basics of construction insurance and the most common types of insurance coverage used.

What Is Construction Insurance?

Construction insurance is a broad topic with multiple facets and categorizations, but the most important aspect is who takes out the insurance coverage. In this case, two policies stand out; owner Controlled Insurance Programs or contractor Controlled Insurance programs. Choosing between OCIP vs. OCP (owners and contractors’ protective liability coverage) can be a daunting task, but they both cover the same basic risks.

Types of Construction Insurance

Builder’s Risk Insurance

This type of insurance is also called Course of construction insurance or construction all-risk insurance. It covers buildings and other structures while they are under construction. Builders’ risk insurance cover differs from commercial property insurance in that commercial property insurance does not cover the buildings under construction.

Commercial and Contractor General Liability Insurance

This type of insurance is also called General liability insurance, contractor general liability insurance, or general commercial liability. This cover provides liability protection to businesses in case of injury or property damage during the construction period. They will cover injury caused by faulty workmanship and advertising injury or defamation. Developers, remodelers, light commercial- general contractors, general residential contractors (RCG), and handyman businesses are just some of the businesses that can benefit from this insurance contract.

Errors and Omissions Insurance

This insurance cover is also called professional liability insurance. It provides cover for your business against claims arising from errors or mistakes made in the cause of their work. Errors made in calculations during construction can later necessitate costly repairs. In this case, the owner may sue the contractor for the discrepancy and costly repairs. The good news is that the errors and omissions insurance will settle everything.

Commercial Truck Insurance

Every construction company uses trucks and other machinery to move construction materials from one place to the next. A commercial auto insurance policy shields the contractor from financial fallout when a truck breaks down during a project, attracting hefty repair costs. It also protects against lawsuits emanating from auto accidents.

You can get this coverage option in one of three types:

  • Liability coverage
  • Medical payments coverage
  • Physical damage coverage
  • Uninsured motorist coverage

Insured vehicles include pickup trucks, dump trucks, flatbed trucks, cement mixers, bucket trucks, straight trucks, and pump trucks. It is important to note that commercial truck insurance falls under the commercial auto insurance cover category.

Inland Marine Insurance

This type of coverage takes care of property in transit or property in the custody of a repairman or storage facility. It also covers mobile equipment that can be put to use in different locations and stored at different storage facilities depending on location. Because this cover applies to tools and equipment used by contractors and developers, it is often referred to as tool and equipment insurance or contractor equipment insurance.

There are many more insurance covers available for contractors and owners. Some insurance companies may even offer custom covers for clients.

Construction Insurance Policies Q&As

Do I need builder’s risk insurance?

If your client has not applied for a Contractor’s liability cover, you need to get a builder’s risk policy. You need insurance to cover the cost of damages from natural disasters and other unforeseen circumstances.

This insurance cover is especially important if you work on a long-term construction contract that necessitates the use of expensive machinery and supplies. It is also important if you work on a contract basis where failure to deliver on time could cost you money. In some parts of the country, a builder’s risk insurance cover may be a legal requirement to run a construction company.

Is a contractor financially and legally liable for subcontractors?

Most sub-contractors work on a project on a temporary basis. They are brought on to help speed things up, keeping the project on track. It is important to ensure the subcontractors have their own insurance to avoid unnecessary financial strife. Always check for valid insurance covers to ensure your construction company is safe.

What is a completed product cover?

A completed product cover is a separate insurance policy that covers damages instead of repair costs. It also covers deterioration and any other financial implications that may occur, leading to a lawsuit for failure to deliver as promised.

What is worker’s compensation insurance?

Most states require that a company take out some form of compensation insurance for their employees. This cover will take care of medical expenses and lost wages if employees are injured while working on a construction project and are unable to continue working. The cover also covers the costs of additional lawsuits and settlements resulting from workplace-related accidents and injuries.

 

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