When most companies think of insurance, they typically only think of their general small business insurance policy. But, if you are a construction company owner or manager, there are a few extra things to consider.
The construction industry requires more insurance than other types of companies. This is because construction projects are considered higher-risk entities in the eyes of most insurers. While we know that you take safety seriously, coverage of different properties and expensive equipment calls for above-average premiums.
This article will give you a quick rundown on different types of insurance policies, specific to the construction space. You will also find out what kind of insurance comes with your purchased or leased construction equipment.
Must-have insurance policies for construction
We’ve listed the policies that are typically required or commonly considered as basic for a construction business. These policies will safeguard you from losses most of the time.
- General Liability: This construction liability is pretty common, and the coverage protects your business if it’s responsible for anything like property damage, bodily injury or incorrect work.
- Business Vehicle and Commercial Auto: Protects vehicles used in your business that transport tools and equipment. You can also add coverage to your policy that allows you to cover permanently attached equipment such as bolted toolboxes or racks. If you lease equipment, your lender will typically insure it for you. AFG provides default insurance as part of your lease, but you can always switch to the provider of your choice.
- Workers’ Compensation: Covers employee medical costs and a percentage of lost wages if they get injured at work.
- Professional Liability: helps to pay for alleged work oversights that cause a client to lose money. If someone says you didn’t deliver the promised services, they can ask you to pay for any losses. Professional liability can help cover the costs to defend your business and/or fix the problem.
- Builder’s Risk/Course of Construction Insurance: This is property replacement coverage. This insurance is specialized property coverage that is applicable to buildings in progress. Your policy should be tailored for your business and project. Course of Construction insurance is another name it goes by. It is applicable to:
- The restructuring of existing buildings, such as the addition of a staircase
- The construction of a new building from the ground up
- The renovation or refurbishment of an existing building
Why extra coverage is a good idea?
We understand that insurance premiums take a significant chunk of cash flow that could, potentially, be used in revenue-generating activities. Even though paying premiums isn’t necessarily amusing, additional coverage has its benefits.
- Take the guesswork out of your budget. Knowing that almost every possible deviation from the plan is covered by the insurer enables precision in your budget. When your projects involve multi-million material, handling, and equipment costs, extra coverage will bring you peace of mind.
- Safety sells. Developers are more likely to contract a reliable builder. Showing the extra coverage to your customer is a great selling point that will earn you serious projects.
- Save time and money down the road. Insurance comes in handy when something goes awfully wrong. Sometimes, acknowledging and covering a mistake can be much easier on your business than a dispute in court.
Good-To-Have Construction Insurance Policies
Now that we’ve established the insurance solutions a construction company requires, here are some optional coverage opportunities to consider:
- Pollution and Environmental Liability Insurance: Provides coverage if you’re liable for a pollution incident that occurs at a job site. If you bring chemicals or fuel tanks for refueling equipment onto a job site, it creates the risk for potential pollution to occur.
- Inland Marine Insurance: The name of this policy may cause some head-scratching. The early days of moving goods from one place to another involved transport by ship, hence “marine insurance” was needed for the property on board. The term commonly used today is “floater”, a policy that covers gaps between other policies.
- Contractor License Bonds or Surety Bonds: Some cities and states require that contractors obtain a license and permit bonds to ensure that customers receive the services and completed work that’s been promised. It’s a legally binding contract that also helps ensure that the contractor will pay for any materials and labor required to complete the job and not leave the customer holding the bill.
- Cyber Insurance: One of the fastest-growing types of business insurance involves protecting your company’s data. As construction firms rely more heavily on technology the need to protect all that data increases.
How to choose a construction insurance policy?
Insurance companies are different. Some of them focus on a specific segment, for example, construction, others – cover all kinds of businesses. Here are a few things to take into account when selecting an insurance provider:
- History and experience. Find out how long a company has been in business and if it has made the news recently. Companies with a proven track record tend to be more reliable and could offer better premiums & coverage.
- Convenience and availability. If you have to wait on an 800 line, that’s a sign your claim could take a while to be processed. Timely payouts are crucial to the construction industry and other companies operating on the clock. Ask if you could be assigned a personal manager and if you could get their direct phone number and email address.
- Cheaper isn’t always better. You are paying
- Finally, coverage. Find out what exactly is covered and in what situations. For example, a worker breaking your company’s equipment is entirely different from a tree falling on the machine. Make sure you understand how coverage works and what your responsibilities are.
Consider using multiple insurers for different policies to achieve better coverage and lower your premiums.
Similar to insurance, equipment purchasing can be hard on the bank account. And just like insurance providers, choosing the right lender is crucial. AFG has been financing construction equipment and project costs since 1998. We understand the industry and the equipment used by contractors. Get in touch with your Personal Account Manager today to learn more about your funding options.