10 Types of Construction Insurance Builders Should Know
Construction insurance requirements differ based on the project, the owner’s expectations and the contractor’s tolerance for business risks. Most projects will involve some combination of the following.
- Builders Risk Insurance. This insurance covers damage during construction (e.g., a severe storm causes damage to framing). Most other types of insurance don’t apply to damage to unfinished structures.
- Wrap Insurance (OCIP/CCIP). Wrap policies package several types of construction insurance coverage into a single policy, making it easier for contractors or owners to budget for and manage project insurance. Packages are owned and controlled by project owners (OCIPs) or contractors (CCIPs).
- Workers’ Compensation Insurance. Most states expect construction companies to maintain this coverage to protect workers from the financial consequences of treatment and lost work time. The cost depends on the nature of the work and the company’s safety record.
- Subcontractor Default Insurance. If a subcontractor fails to perform the work they agreed to, doesn’t meet project standards or delays the project, this coverage can reimburse a construction manager or general contractor for costs related to the subcontractor’s performance.
- Inland Marine Insurance. This insurance has a misleading name; it has nothing to do with water. It covers construction-related items being transported by trucks and trains, along with components and materials that another company is temporarily storing.
- Pollution Liability Insurance. Construction incidents that lead to pollution can be dangerous and expensive to remediate. If a contractor does or neglects something on a job site that contributes to a pollution event, the policy covers the costs for property damage, injuries and any associated legal defense costs.
- General Liability Insurance. This construction all-risk insurance coverage addresses common risks such as a non-worker being injured on your site, damage to a third party’s vehicle or other property, or something that happened during construction that later caused damages or other business-related issues such as copyright violations.
- Professional Liability Insurance. Often referred to as errors and omissions (E&O) coverage, professional liability insurance pays legal fees and settlements if you are sued over the quality of work, missed deadlines or something a sub did on the project site.
- Commercial Auto Insurance. Some people view accidents with construction vehicles as an opportunity to pursue a big-dollar lawsuit. Ensure your vehicles (and those used by contractors on your project) carry all state-required insurance coverage. Consider carrying additional liability coverage.
- Construction Bonds. These are legal promises that you’ll accomplish what you say you’re going to in a way that meets the other party’s expectations. Construction bonds are often required for public works and other government projects.
Construction insurance isn’t a one-policy-fits-all product. Every company’s needs are different. Choose an insurance partner that understands your industry and can determine what you need for your business risks.
Patty Cosman (patty.cosman@hylant.com)
Managing Director – Real Estate
Hylant (www.hylant.com)
