Contractors need numerous insurance policies to protect them and their clients from potentially devastating losses in the course of a construction project. This includes workers compensation insurance for employees, property insurance for damage to a client’s property caused by the contractor, coverage for the contractor’s own property, commercial auto insurance for the contractor’s vehicles, and bonds to guarantee the project’s satisfactory completion.
- Builder’s risk insurance
Builder’s risk policies specifically cover buildings while they are under construction. These cover typical perils, such as fire, storms, theft, vandalism, and equipment failures. It is important to note that a typical homeowners or commercial property policy for a completed building will not usually cover the same structure while it’s under construction. Builder’s risk policies also cover the contractors materials and equipment in case they are damaged or go missing, and can even cover financial losses resulting from project delays.
- Construction bonds
Construction (or contract) bonds are a type of surety bond contractors provide to guarantee that their project will be completed to the client’s satisfaction, and that the contractor is liable if it is not. There are several types of construction bonds, including:
- Bid bonds: These provide a guarantee that a contractor will fulfill the proposal, or bid, as they have submitted it to the client. If the contractor fails to complete the job as per their bid, the client can make a claim on the bond for damages.
- Payment bonds: These guarantee that a contractor’s employees, subcontractors, and suppliers will still get paid even if the contractor fails to pay them for whatever reason, including bankruptcy.
- Supply bonds: These guarantee that suppliers will deliver the building materials and other supplies they promised in their contract.
- Performance bonds: These ensure that the contractor will perform the job to the quality standards they promised in their bid and they will be liable if they do not.
- Maintenance bonds: These act as a warranty on the contractor’s work after the project is completed. If the contractor’s work is found to be shoddy or defective after the fact, the client can make a claim.
- Contractor license bonds: Contractors are required to purchase these as a condition of getting their contractor license, to make sure they uphold the standards of the licensing board.
- Workers compensation
This legally required coverage is vital to any business, but especially one as high-risk as construction. Most importantly, workers compensation policies cover workers’ medical expenses if they are injured on the job. But these policies can also cover lost wages and legal liability that come about as the result of work-related injuries. Many insurers will also help employers implement safety programs to reduce the chance of on-the-job injuries in the first place. Here at Kamm Insurance Group, we have our online training program Verticlimb, where we offer courses related to construction work such as fall protection, machine guarding, and personal protective equipment.
- General liability insurance
General liability insurance for contractors offers liability protection to the contractor in the event of property damage or bodily injury. General liability insurance policies for construction companies usually cover damages relating to defective workmanship, equipment damage, work-related injuries, and defamation.
- Contractors equipment insurance
This is a policy specifically designed to cover a contractor’s equipment if it is damaged or stolen. Many contractors use expensive, specialized equipment, so they shouldn’t rely on just a general property policy to cover them. This includes tools, heavy machinery, and even a contractors computers and plans. These policies typically cover both owned and leased equipment.
- Errors and omissions (E&O) insurance
This policy covers financial damages resulting from mistakes the contractor or its employees make in the course of their work. This can include costs due to incorrect measurements, delayed work, or mistakes in ordering supplies.
Contractors are exposed to a lot of risk in the course of their work, so they need to make sure they have sufficient insurance coverage to protect them. Our commercial lines team has decades of experience in insurance and bonds for construction projects, and we would be happy to help you get the coverage you need to protect your work and your livelihood.