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Today all contractors working with insurance companies need to know what insurance policies they need to invest in before starting a project. While some have a laundry list of policies they traditionally buy before starting a project, others are more conservative about what they choose.
However, the right amount and type of insurance do not have to be more than a few different types. In fact, you can get by with three main types of insurance policies, which we’ll go into below.
What Is Construction Insurance?
Risks can include damage to the construction site, injuries to workers or third parties, equipment failure, natural disasters, and more.
There are various types of construction insurance and those used by businesses in the construction industry. The most common of which are:
Construction insurance helps to mitigate a lot of financial risks associated with accidents or other incidents during the construction.
In some cases, these losses can be significant enough that they could put the company out of business. Construction insurance can help to mitigate these risks by providing financial protection and allowing the construction company to continue its work without interruption. Additionally, many project owners and clients require that contractors have appropriate insurance coverage before starting work, so having insurance can help a contractor win contracts and maintain good relationships with clients.
Builders Risk Insurance Policy
Builders’ Risk Insurance, also known as Course of Construction insurance, is a type of property insurance policy that provides coverage for buildings or structures that are under construction or renovation. This type of insurance policy is designed to protect the owner or contractor from financial losses due to damage to the property during construction.
The policies typically cover damage or loss to the building or structure, as well as the materials, supplies, and equipment used in the construction project. Coverage kicks in when construction work starts and will end when the project is completed or when the project is handed over to the client. The policy covers damage or loss due to a variety of causes, including fire, theft, vandalism, wind, hail, and other perils.
The cost of repairing or replacing damaged materials or property can be significant, often leading to delays or cost overruns in the construction project. The policy helps mitigate these risks and provides financial protection to the property owner or contractor in case of loss or damage.
Usually, the insurer will offer what’s called “premium coverage” options, which will cost more, but also extends the coverage limits of the policy and the insurable property. Damage from earthquakes, flooding, and other types of natural disasters is covered unless coverage for the events is added to the policy.
We advise that home owners buy a policy that provides them with the most coverage, because the little extra they pay will ensure they are covered in the event something goes wrong.
Commercial & Contractor General Liability Insurance
Commercial and contractor general liability insurance are two types of insurance policies that provide coverage for businesses and contractors. The policy helps shield against third-party claims of bodily injury, property damage, or personal injury. While they share a couple of similarities, there are some key differences between these two types of insurance policies.
Commercial general liability insurance, also known as CGL insurance, is a type of insurance policy that provides coverage for businesses against third-party claims of bodily injury or property damage. The policy covers a wide range of risks and liabilities, such as slip-and-fall accidents, product liability claims, and advertising liability claims.
Contractor general liability insurance, also known as CGl insurance, is a type of insurance policy that provides coverage for contractors against third-party claims of bodily injury or property damage that occur during their work. This type of insurance policy can cover a wide range of risks and liabilities, such as damage to a customer’s property or injury to a third party on a job site.
The main difference between these two types of insurance policies is that commercial general liability insurance is designed to provide coverage for businesses that operate in a non-construction industry. The contractor general liability insurance is specifically designed for contractors and construction-related businesses. Contractor general liability insurance typically includes coverage for risks that are unique to the construction industry, such as damage caused by heavy equipment or faulty workmanship.
Both types of insurance policies are important for businesses and contractors because they provide financial protection in case of third-party claims. Not having this insurance, businesses and contractors may be exposed to significant financial losses that could threaten their operations or even their solvency. Having commercial or contractor general liability insurance, businesses and contractors can protect themselves from all of the above risks and liabilities, allowing them to continue operating with peace of mind.
Errors & Omissions Insurance
Errors and omissions (E&O) insurance, also known as professional liability insurance, is a type of insurance policy that covers businesses and individuals providing professional services or advice. This type of insurance policy is designed to protect against financial losses that may result from a claim of negligence or inadequate work.
E&O insurance is typically needed by professionals such as doctors, lawyers, accountants, architects, engineers, and consultants. This type of insurance policy can provide coverage for a wide range of risks and liabilities, such as errors, omissions, or negligence in the professional services provided. Failure to meet professional standards, breach of contract, or misrepresentation is also covered by the policy.
The best thing about these policies is that they can be customized to meet the specific needs of the individual or business. The coverage limits, deductibles, and exclusions can be tailored to the specific risks and liabilities associated with the profession or industry. Some E&O insurance policies may also include coverage for legal defense costs and other related expenses.
It is also worth highlighting that E&O insurance is different from general liability insurance. General liability insurance provides coverage for third-party claims of bodily injury or property damage, while E&O insurance specifically covers claims of professional negligence or inadequate work. So, it is important to know the difference between the two. You can also consult with an insurance mitigation company to help you decide what policies will work best for your project.
Other Types of Policies Needed By Contractors
Contractors working with insurance companies will often find that sticking with one company often means they will get the best deal. Many insurers are willing to offer discounts when a contractor commits to purchasing multiple policies. However, an insurance agent may also help with finding the best deal.
However, in addition to the above, there are other bonds that will need to be put in place for construction work to be carried out.
Construction Bonds
Construction bonds are a type of surety bond used to ensure that a construction project is completed according to the terms of a contract. When a construction project is undertaken, the owner of the project typically requires the contractor to obtain a construction bond to guarantee that the project will be completed as specified.
There are three common types of construction bonds:
Bid Bond: This type of bond is used during the bidding process for a construction project. It provides financial protection to the owner in case the contractor fails to accept the project after winning the bid.
Performance Bond: This bond guarantees that the contractor will complete the project as per the agreed terms of the contract, including the quality of workmanship, within the agreed time frame.
Payment Bond: This bond is intended to protect subcontractors and suppliers of the project by guaranteeing they will be paid for their services and materials even if the contractor defaults.
If the contractor fails to fulfill the terms of the contract, the construction bond can be used to compensate the owner for any losses. The cost of a construction bond is usually a percentage of the total project cost paid by the contractor and factored into project expenses.
Workers’ Compensation Insurance
Workers’ compensation insurance is a type of insurance that provides benefits to employees who suffer work-related injuries or illnesses. This insurance is designed to protect workers by providing medical benefits, rehabilitation services, and wage replacement in case they are unable to work due to injury or illness.
Benefits of workers’ compensation insurance include:
Businesses in the construction industry are, for the most part, required to carry workers’ compensation insurance. Then there is also the fact that many project owners will require that the contractor or company they are working with carry the insurance policy. However, this isn’t project-specific and most times, the premium for it is paid annually or monthly, depending on how the policy is set up.
What Does Insurance When Undertaking Construction Work Cost?
Contractors working with insurance companies are often concerned about what insurance will cost them because the costs need to be factored into the project’s pricing. Unfortunately, there is no straightforward answer to this question since construction insurance encapsulates different policies and can be purchased by varying policyholders. Furthermore, developers, property owners, and contractors purchasing the policy also have options when it comes to what level of coverage they need.
What Affects The Price of Construction Insurance?
There are several factors that affect the cost of construction insurance. While the policies are sold independently and thus may vary in what they cover, the pricing is influenced by a couple of factors, such as:
• Experience of the contractor or the business
• Credit history of the policyholder and business
• Size of the project
• The coverage limits and, thus, the deductibles.
• Location of the contractor and business
Sure, a couple of other factors may affect the cost of construction insurance policies. However, these factors are the most commonly considered by underwriters.
Undertaking any type of construction work is a significant undertaking. There are several moving parts that need to be accounted for before, during, and after the project. Having insurance is essential because, with so many moving parts, things can go wrong, and when they do, insurance steps in to cover the loss, thus allowing businesses to continue operating without taking the financial hit.
Highland offices are located at the following addresses:
Insurance claims can be a complicated process, and one of the most important steps is writing an accurate estimate. An estimate is a document that outlines the cost of repairs or replacements for damaged items.
After a hurricane has wreaked havoc on your property, navigating the insurance process can seem overwhelming and stressful. But by following some essential steps – outlined in this blog post – you’re equipped to ensure that you receive full compensation for damage caused by the storm.
Today all contractors working with insurance companies need to know what insurance policies they need to invest in before starting a project. While some have a laundry list of policies they traditionally buy before starting a project, others are more conservative about what they choose.
Just about every home and business owner fears a fire. Not only because it can be fatal for people living in the home but also for those around it. In addition, fire damage can devastate a home, if not restored in time and professionally, can lead to a ton of frustration and heartbreak.
If you have damage to your property or are looking for a renovation, Highland Construction and Restoration is here to help.
If you have damage to your property or are looking for a renovation, Highland Construction and Restoration is here to help.
1409 Clinton Rd
Fayetteville, NC 28312
