Insurance Policies a Subcontractor Should Have

If you are new to the construction industry, you might think that the company or person you contract under will have a general liability insurance policy or other insurance coverage that will be enough to cover you and your work. On the other hand, you may assume that the business owner’s policy, the person for which the work is being done, covers you while you are on their property. Unfortunately, neither of these options is the case. In fact, you just like any other construction company will need a few different types of insurance to stay safely in business. There are at least four main types of insurance that you will need to to be safe as well as two or three others depending on your business and field in the construction industry.

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General Liability Insurance

The most common out of all policies, this type of insurance is the most vital that you can get. General Liability will cover all the bases a basic company needs and should be looked at first, right when your business forms and begins looking for work. Commercial general liability coverage is not a construction-specific insurance, however, it’s typically required to begin bidding on any project and can often have certain requirements for coverage. Business owners should know that if they are getting this coverage as a construction business, they could end up paying more in fees and monthly costs for the same level of coverage as compared to other safer industries. This is due to the higher risks that construction faces when looked at in comparison to other industries, especially if you work in a particularly high risk filed of construction such as heavy civil highways.

Commercial General Liability insurance usually covers things like:

  • Property damage
  • Medical payments
  • Personal injury
  • Advertising injury
  • Bodily injury

Due to the uniqueness of each business, often times it’s best to call insurance agents directly for an insurance quote. This is because free quotes are unable to be customized for exactly what you need. Calling the agent should be free in the same way an online quote is.

Worker’s Compensation

This insurance is often required by many states no matter what industry you are in. In construction, you may also have specific laws that have to be met when it comes to coverage and packages. This is done to ensure that the workers that have jobs in this high-risk industry have a safe workplace. In short, workers’ compensation is an insurance that covers the medical costs of an employee that suffers an injury while working.

Commercial Auto Insurance

Chances are, you have a car that you use for your business. You might even have a fleet of cars and trucks that are used by your employees to get to and do work on your sites. That’s why commercial auto insurance is so important. It’s true, your own insurance may cover the truck you use for both life and business. However, it’s safer to list any truck or vehicle you use for business on your business auto insurance policy and separate your two lives. Should someone else drive your vehicle even rarely for business the importance of this is more than doubled. If you get this type of coverage, you can be protected from accidents that damage or harm you and yours as well as damages caused by an employee driver to the site. If legal issues arise, this coverage can even help with those and help to protect you from loosing or paying losses to an extent.

Surety Bond

This bond serves more like an insurance policy that the client that you work with needs. It makes you look safe though protecting your client against liability and malpractice, should you leave or do something wrong on purpose. It’s very helpful for small business owners that want to hire construction work but normally couldn’t take the risk of something going bad themselves. It helps guarantee the project will be completed the way you said it would when you said it would even if you can’t.

As an example, if you back out of a contract no matter what reason,  you have left work that a client now needs to find someone new for. If you had a surety bond, the policy you got would cover the costs that the client would accrue when finding a new contractor to do the work you left. Due to the past pervasiveness of contractors that disappear before completing work, these contractor-specific bonds are very typically asked for in bids for clients.

Umbrella Insurance

Completely optional, this coverage is as simple as can be. Umbrella insurance helps to cover the same things that your current policy already covers. Many times it is used with a lower coverage-level policy to create a cheaper insurance cost while covering the same thing as before.

Builder’s Risk Coverage

This is an insurance that covers the loss of tools, trucks, or other property you may own on site for a project. This insurance very common and is taken out as short-term policy that covers just one job each time. Oftentimes, codes or city officials can make it required to bid on a project but if not, you have the option to decide if you want to get it or not.

Professional Liability

Often called Errors and Omissions insurance or O&E Insurance in the industry. This insurance is very important but can cover the mistakes made by your workers on the actual products you create. It helps to protect you from any potential lawsuit costs associated with those actions. Most business owners will consider this insurance to be required, however, at the end of the day you might not need it as many general liability policies provide this coverage.