Construction insurance policies that offer protection throughout the duration of construction projects are classified under this broad category. In actuality, “construction insurance” is not a distinct type of insurance; rather, it is a general term used to denote insurance pertaining to construction undertakings.
A multitude of insurance policies are specifically formulated to safeguard property owners, developers, and contractors during the multifaceted stages of a construction endeavor. Certain varieties of construction insurance policies are, in fact, mandatory for a significant number of undertakings.
We will examine the fundamentals of construction insurance, the most prevalent policy types, and the circumstances in which they are applicable in the sections that follow. Whether you have prior knowledge on the subject or simply wish to identify a reputable organization, we advise you to review the construction insurance providers listed below.
Categories of Construction Insurance
When a property owner commences a construction project, they may wish to insure various aspects of the endeavor, such as the structure itself, materials during transport, and so forth. The coverage requirements for a contractor working on the same project may vary depending on the contractual terms. For instance, commercial auto insurance and general liability insurance may be necessary. Detailed descriptions of the available categories of coverage are provided below.
1. Builders Risk Insurance
Builders risk insurance, alternatively referred to as course of construction (COC) insurance or construction all risk insurance at times, provides protection for structures and buildings during the construction phase.
During construction, other policies, such as householders or commercial property insurance, typically do not provide coverage for structures. Typically, builders’ risk policies offer coverage options for the subsequent property types:
- Buildings and structures
- Temporary structures such as scaffolding
- Paving, fencing, outdoor fixtures
- Lawns, trees and plants installed by the builder
In general, insurance companies provide coverage for the following prevalent categories of construction projects:
- Residential new construction
- Residential remodeling or smaller projects
- Model homes and model home contents
- Commercial property construction
Notwithstanding this, specialty providers might still be able to furnish insurance policies tailored to your particular construction project or structure type. Policies for builders’ risks provide protection against a restricted range of damages.
Standard builders risk insurance policies typically provide coverage for damages resulting from perils such as theft, vandalism, fire, or weather. However, numerous insurers provide “premium coverage” alternatives that incur an additional expense but have the capacity to expand the policy’s coverage limits, insurable events, and/or insurable property.
Generally, damages caused by inundation or earthquakes are not covered unless additional coverage is purchased for those perils. In addition, insurance providers may include exclusions in the policy that preclude coverage for damages resulting from policyholder negligence or certain conditions.
2. General Liability Insurance
A category of insurance known as general liability insurance, contractor general liability insurance, or commercial general liability (CGL) insurance, safeguards enterprises against liability in the event that property damage or grievous injury occurs in the course of conducting business.
Diverse iterations of these policies are produced by insurance providers and made available to construction professionals and construction projects. Liability insurance policies are accessible to property owners, contractors, and other construction firms as a means of safeguarding policyholders against avoidable risks.
These plans are frequently marketed under the names “general liability insurance for contractors” or “contractor general liability insurance.” Typically, general liability insurance policies provide coverage for a wide variety of damages, which may include:
- Faulty workmanship
- Job-related injury
- Advertising injury and defamation
In some states, contractors and developers may be obligated to maintain a specific quantity of liability insurance simply to comply with the law or in order to be awarded contracts that specify such coverage. Numerous design-build project contractors will undoubtedly desire liability insurance to protect themselves in the event that they are sued for errors.
Subcontractor liability insurance is often a mandatory requirement for subcontractors to perform work for specific general contractors. A wide range of providers offers general liability insurance policies designed specifically for the following categories of construction enterprises:
- General contractors
- Architecture and engineering firms
- Specialty contractors
- Handyman businesses
Similar to builders’ risk and other forms of insurance coverage, the policy will likely specify certain exclusions that safeguard the insurer against the obligation to provide coverage for particular types of incidents or damages.
3. Errors & Omissions Insurance / Professional Liability Insurance
Errors and omissions insurance, alternatively referred to as professional liability insurance, safeguards organizations against legal liabilities stemming from allegations that their operations contained errors or lapses. An instance of negligence on the part of an engineer in the computation of a structure’s structural prerequisites could force the proprietor to endure expensive repairs in the future. In such a scenario, the proprietor could initiate legal action against the engineer to recoup the expenses. The engineer’s E&O policy may then provide coverage for the claim.
Specialized contractor E&O policies, which bear resemblance to contractor general liability insurance in that they provide coverage for claims stemming from executed work, typically encompass a more restricted range of claims. A contractor errors and omissions policy will typically provide coverage for monetary losses, excluding property damage and bodily injury claims.
4. Truck and Commercial Auto Insurance
Commercial vehicle insurance, commonly referred to as commercial auto insurance, is not limited to construction endeavors alone. The purpose of this insurance is to furnish protection for vehicles that are utilized by enterprises. The purpose of commercial auto insurance is to safeguard policyholders against prohibitively expensive vehicle repairs, medical expenses, and litigation that may arise as a consequence of automobile collisions.
Commercial auto insurance policies offer a variety of coverage options that are comparable to those found in standard auto insurance policies. Options for standard coverage consist of:
- Liability Coverage – This protects the company and employees from expenses associated with accidents caused by employees.
- Physical Damage Coverage – This covers damages to company vehicles after a covered collision. This could also include comprehensive coverage, which protects against stolen vehicles, damaged from vandalism, or destruction from natural disasters.
- Medical Payments Coverage – This coverage helps to pay for injury-related expenses resulting from a covered incident, including medical bills, hospital fees, ambulance costs, and funeral expenses.
- Uninsured Motorist Coverage – This type of coverage covers damages and injuries caused by uninsured drivers. This is necessary because it is your personal liability coverage that covers damages and injuries that you cause to others. If you get into an accident with someone who does not hold this coverage, you still want to be covered from high medical or repair costs.
Progressive and other insurance providers provide coverage for a wide variety of commercial vehicles, including those frequently utilized in construction endeavors.
SOURCE: Construction Coverage