There are three things that anybody in the trades, such as construction and being a contractor, needs in order to properly run their business. These three things are to be licensed, be bonded, and be insured. This article will discuss this third need and what types of insurance those who own construction and contracting firms need to be aware of and what they are protecting themselves and their businesses against.
What Types Of Insurance Is Needed By Construction and Contracting Companies
Commercial Property Insurance
Both construction companies and contractors have business property that can be stolen or destroyed in a peril like a fire. Commercial property insurance helps recover from these types of losses. This type of insurance protects against accidental direct physical loss of the property that a construction or contracting business uses to operate such as tools and small machinery.
Building Property Insurance
Construction and contracting businesses sometimes own buildings such as offices, warehouses, garages, and other types of buildings. They can insure these buildings against losses by buying an insurance policy that covers these buildings against the loss of a multitude of losses with exclusions against earthquakes and floods.
Commercial General Liability Insurance
A coverage that every contractor and construction company absolutely needs is general liability insurance. This type of insurance protects a business owner and his company against lawsuits due to accidents or other types of mishaps that can result in the course of operating their business. This type of policy insures against claims that involve both bodily injury as well as property damage. Read more about commercial liability insurance.
A Business Owner’s Policy
Most small business construction and contracting businesses opt for a business owner’s policy, or BOP. This combines a general liability policy and property insurance policy together plus business interruption insurance together in a package that is more affordable than buying these insurance policies separately. Business interruption insurance protects a business in case they suffer a covered loss that prevents them from engaging in their business operations for a period of time.
Inland Marine Insurance
This coverage provides protection for materials while they are in transport which is important for those businesses that transport a lot of items to and from job sites. This is important for construction and contracting companies as they could be often transporting construction materials to job sites on a regular basis. This coverage also covers materials that are stored in a warehouse owned by a third party. The types of claims that are most often covered by insurance companies under inland marine insurance are collisions and theft of the goods on board a vehicle.
Commercial Auto Insurance
All construction and contracting businesses use a vehicle in order to conduct their business operations. Commercial auto insurance provides protection in case one of their vehicles is involved in an accident or another type of covered loss. The most important coverage on this type of policy is liability coverage which provides coverage in case the driver of the company’s vehicle is found to be at fault in the event of an accident. Another type of coverage that can be included is uninsured motorist in case the company’s vehicle is hit by an uninsured or underinsured driver
Commercial auto insurance policies can also include comprehensive coverage which covers the company’s vehicle for any damage that doesn’t involve a collision as well as theft. Collision coverage is another type of insurance coverage that can be purchased which provides protection in case a vehicle is damaged due to the driver’s negligence. There are also other optional coverages under a commercial auto insurance policy such as towing and roadside assistance as well as rental car reimbursement.
Workers compensation insurance is a required coverage for any business that employs other people. It is particularly important for those in the trades such as construction and contracting as employees tend to face a higher than normal risk of injury on the job. If a worker is injured on the job workers compensation pays for their medical bills, time lost working, and other expenses as a result of not being able to work. This is a required insurance coverage in all states as it protects both employees and employers in the event of a worker getting injured.
How Much It Costs To Insure A Contracting or Construction Company
Depending on the type of construction or contracting company the average cost of a policy can differ across the United States. For a $1,000,000 general liability policy it can range from $350 a year to $700 for a typical small business. One of the main factors in determining the premium is the revenue of the company as more revenue implies more business activity which means more risk. The industry and specialty of a business also matters in how much the premium is as well as where the business is located. Another factor that can play a large role is the claims history of the business as those companies that have claims will likely have more risk of claims in the future resulting in their being charged more for their insurance.
A commercial property insurance policy or building insurance property policy is largely dependent on the value of what it is insuring, which is the same for inland marine insurance policy. Most small business owners can expect to pay around $500 a year but if they are working on large projects this will likely be higher. A BOP policy to cover both general liability and commercial property will likely cost around $650-700 a year for most general contractors.
An inland marine policy will likely cost around $550 a year for most general contractors and construction specialists. Commercial auto insurance is entirely dependent on the number of vehicles, the coverage, and the driving records of who is operating the vehicles. However, the median premium for this type of insurance policy is $1800 to $2900 a year assuming a $1 million liability limit.
Workers compensation insurance can be expensive for a construction or contracting business as injuries are relatively higher than most types of businesses. People in this profession tend to deal with dangerous tools as well as sometimes dangerous conditions like being on roofs. The premiums differ based on what the contractor does including different class codes such as carpentry, masonry, plumbing, and other specialties. This is a required coverage in most states. In some states this insurance coverage is purchased directly from the state government which includes Washington, Ohio, North Dakota, and Wyoming. In other states it is purchased from insurance companies instead. The average sized small business can expect to pay around $6000 a year for this type of insurance policy.