2021’s Most Common Insurance Policies for Construction Projects
If you are a contractor, you have some experience with construction insurance, whether it be bonding, workers’ compensation, or general liability. And because construction projects are huge undertakings, you understand the importance of having specific insurance policies in place.
In construction, because each project is unique, no contractors have the same insurance policy. These different policies can also focus on various aspects of the construction project. For example, the materials, the transport of those materials, the people working on the project, and other liability requirements.
This article will summarize the most common insurance policies required for a Commercial Construction Project in 2021 and explain how these policies work and why they are necessary.
The most common requirements for insurance in construction in 2021 are:
1. Commercial General Liability or General Liability Insurance Coverage:
Commercial General Liability (CGL) is a broad type of insurance that protects the project from damage and any claims because of injury on the premises during business hours. CGL covers claims originated from:
- Bodily injury.
- Property damage.
- Unsatisfactory project completion.
- Personal and advertising injury.
- Faulty workmanship.
Commercial General Liability requirements encompass contractors, and sometimes subcontractors. Falling under the umbrella of General Liability, there are other policies that are required for construction projects:
- Errors and Omissions and Professional Liability Insurance: Covers the work of the professionals around your project. For example, if the architect made a mistake that generated a monetary loss, a claim could be made for professional liability.
- Commercial Umbrella Insurance: Provides an extra layer of protection and acts as an extension of other liability policies you may have in place. It is commonly used for cases where the claim may exceed the amount of coverage available.
- Commercial Auto Insurance: Covers vehicles involved in the construction project for damages and the drivers in the event of an accident.
2. Builder’s Risk or Course of Construction Insurance:
Course of Construction Insurance is coverage for the structure in construction. It can also include coverage for materials, whether already on-site or waiting for installation or transportation to the job site. This policy covers:
- Building materials and scaffoldings.
- Paving and fencing.
- Outdoor fixtures and landscaping installed by the builder.
If the type of structure being built is out of the ordinary, Course of Construction insurance may not cover it because this coverage focuses on the more common types of structures.
On another note, damages from earthquakes or flooding will not have coverage as part of Builder’s Risk Insurance, unless coverage for those types of events is added to the policy.
3. Workers’ Compensation Insurance:
This coverage is often required by the state and is especially important in construction because accidents unfortunately happen.
This type of insurance policy covers the employees working on the project in case of an accident or injuries while on site. Workers have benefits like medical care and repayment of lost wages, and employers have the assurance that they have coverage if the employee sues.
Workers’ Compensation covers:
- Medical expenses.
- Recovery costs related to an injury.
- Legal fees in the event of a lawsuit for the policyholder.
- Funeral costs and death benefits.
4. Inland Marine Insurance:
These are a broad class of insurance policies that cover the transportation of materials, property in transit, and mobile equipment. According to Construction Coverage, an organization with the goal of helping professionals and homeowners make better decisions before breaking ground on a project, “the name comes from an era when this class of insurance covered primarily ocean-bound materials and vessels.”
In construction, this type of insurance also covers the tools and equipment used by contractors and developers. This coverage includes protection for:
- Tools, clothing, and supplies: For example, hammers, electric saws, wood, bricks, generators.
- Mobile equipment: For example, forklifts and loaders.
- Computers used on the job site.
Inland Marine insurance in construction covers either the replacement cost of the items or repairs if necessary. Usually included in the coverage are stolen equipment, damaged equipment in transport, or damaged equipment in a natural disaster or fire. They also may cover costs from delays caused by the time taken to recover from the incident.
5. Contract Bonds:
Bonds are not insurance policies, but they protect against losses. Bonds protect assets in case the job is not completed. They can also provide protections for subcontractors, vendors, suppliers, and other businesses with which the company works. They are a form of “guarantee” for the project to be completed, that is why they may be required by the project owner before the project is even started.
The types of contract bonds are:
- Bid bonds: To ensure serious bid proposals that contractors can financially support.
- Performance bonds: To ensure that the contractors adhere to the standards and finish the project on time.
- Maintenance bonds: To protect the project owner from faulty workmanship or materials for a length of time after the contractor’s work is completed.
- Supply bonds: To assure that suppliers will deliver materials and supplies, as contractually specified.
Complex Projects Demand a Simple Tool
As discussed, construction projects are enormous. They demand a lot of time, people, resources, and are expected to be completed in an agreed amount of time. Delays are impossible to avoid, although they can be minimized. Insurance is there not only to protect the project, and the people associated with it but also to help financially in the face of delays or incidents. Whether the delay or incident was caused by human error, negligence, faulty quality, or even natural disasters, protection is always necessary, and therefore it is vital to know what insurance policies the project can count on, as well as the policies held by people working there.
This is where SmartCompliance can make a difference. Our comprehensive software is the perfect solution that allows issuance, tracking, and collection of certificates of insurance. See SmartCompliance in action by requesting a demo here.