Single-family home contractors specialize in a trade such as roofing, flooring or HVAC installation. Anything can go wrong at a work site, from weather-related disasters to personal injury or vandalism.
Adequate coverage protects the single-family home contractor’s business from financial disaster, and clients require contractors to have residential construction insurance. We’ll steer you through the maze of what’s out there so that you can confidently choose the exact coverage you need.
If you’re in this line of work, having insurance for home construction companies is absolutely necessary.
Your insurance coverage must be agreeable to your client. You’ll want to have your attorney present any time you sign a contract, and he or she may also have some input regarding your insurance policy.
But there are some basic coverages that everybody in the construction industry usually agrees on.
General liability is the main coverage you will need. We suggest that you purchase general liability with products-completed operations.
The general liability part of a "general liability with products-completed operations policy" protects you if you damage rented commercial space or if an employee causes bodily harm or property damage. It protects you against reputation-related lawsuits that involve libel or slander. It also protects you if you’re slammed with an advertising injury lawsuit. Those involve either copyright infringement or false advertising.
The products-completed (product liability) part of this policy ensures that your general liability protections against injury and property damage claims continue after you've complete the job.
The construction company insurance cost may seem too high if you’re an independent 1099 contractor. However, independent contractors need insurance protection as much as any other small business owner does.
Without basic coverage, one lawsuit could put the owner out of business. Independent contractors need to purchase independent contractor liability insurance, which is a type of general liability coverage for contractors.
The following are seven additional types of coverage you will want to consider for your construction business:
1. Primary and Non-Contributory: No matter who is negligent, this policy covers you for any mishap. Your policy is treated as the primary one, and no other policies will be tapped.
2. Additional Insured: The other company wants to be an additional insured on your policy because your policy would ensure that it is used and taken to its limit before the other company’s insurance policy pays.
3. Workers' Compensation: Nearly every state requires workers' compensation insurance. This insurance covers you in the event that an employee gets hurt on the job.
4. Commercial Auto: This policy will compensate you if your construction or contracting business vehicle gets into an accident or is damaged by weather-related incidents, vandalism or when broken into.
5. Contractor’s Tools and Equipment: This policy will pay some of the cost to repair or replace your contractor's tools and equipment if they are damaged, lost or stolen.
6. Waiver of Subrogation: This waiver ensures that your insurance company won’t seek reimbursement after settling a claim that it shouldn’t have had to pay.
7. Subcontractors: Subcontractors need to have the same insurance that you have so that they’ll follow the same contract requirements that your employees do. If they breach the contract that you have, you may not get paid for the job you did.
Although they are many, the coverages mentioned above do not fully insure you against every mishap. You may want to add one or more of the following four types of professional liability insurance to the main coverages you’ve selected:
1. Professional Liability/Contractors E&O: We’re all human. This policy protects home designers from lawsuits in the event they make an error or omission or are negligent.
2. Umbrella/Excess: You may wonder, "How much general liability insurance do construction companies need?" Well, you need enough to do the job, and some policies don’t provide enough coverage. An umbrella/excess policy supplements your general liability, EPLI or commercial auto policy.
3. Professional Liability: Your company may be sued if you make a professional mistake or oversight, such as missing a deadline. This policy covers such issues.
4. Builder’s Risk: This insurance covers the costs of fire, vandalism or other damage that’s done to your construction project. It is necessary coverage because commercial property insurance does not cover claims on homes that are being built, renovated or remodeled.
When you add up all the materials, equipment, labor and professional fees, you realize that it costs thousands to millions of dollars to construct buildings.
Depending on how many investment dollars are wasted when the unthinkable happens, you could lose an obscene amount of investment.
That’s where builder’s risk, also called course of construction, insurance comes in. This insurance covers both residential and commercial structures into the millions of dollars while they’re being built, renovated or remodeled.
You and/or other parties can purchase builder’s risk insurance for between 1% and 4% of the construction cost. Usually, the landowner obtains it; however, other people would require the contractor to have this insurance when it comes time to bid on valuable projects.
The building owner, site engineer and/or project manager may also decide to get this insurance.
You can purchase this policy while your project is less than 30% of the way completed. Coverage remains in place for 90 days after you complete the project or on the day the new owner takes possession of it.
Builder’s risk covers the following:
Of course, there are exclusions and limitations that come with a builder’s risk policy.Misfortunes not covered in a builder’s risk policy include:
General liability does not give you full coverage, yet purchasing general liability and other residential construction insurance individually can be expensive.
If you need to bundle your insurance policies or receive other assistance, call us at (646) 844-9933 or visit us online to schedule an appointment. Our CoverWallet consultants will get you what you need at the lowest possible price.
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