Construction risks and 5 insurance policies you need
Understanding what your risks are and how to address them is essential to protecting your employees and your business
Construction and contracting businesses face a wide range of risks. That’s true of all small businesses, of course, but there are aspects of construction work that increase the potential for claims.
Job sites are busy places buzzing with activity, where it’s easy for someone using a power tool or operating heavy equipment to become distracted and cause an injury or property damage. Also, weather can be a factor in some instances, creating less-than-optimal work conditions or causing workers to hurry, which increases the chance of an accident.
But job site injuries and property damage aren’t the only risks. Incidents like accidents involving company vehicles or confidential information about clients being stolen by a hacker can occur.
For these reasons, it’s imperative that construction and contracting business owners get and maintain adequate small business insurance. However, as Peter Shelley, president at small business insurer biBERK (part of Warren Buffett’s Berkshire Hathaway Insurance Group) points out, “Because there is tremendous variability in what these types of companies do and how they do it, construction risks are often covered by multiple policies, each focused on a different type of risk. Our licensed insurance experts are available to assist business owners if they need help determining the right policies for the type of work they do.”
Understanding what your risks are and how to address them is essential to protecting your employees and your business. Fortunately, as Shelley notes, “Obtaining the multiple policies your company needs is easier and less time-consuming than it may sound once you have a general understanding of small business insurance for construction companies.”
Common Construction and Contracting Business Risks
For construction companies and contractors, the most common business risks—and the types of insurance that protect you from them—include:
Employee on-the-job injuries and illnesses
An employee arrives at a new construction site, takes two steps into the work area, and is struck by debris from collapsing scaffolding. You hope this type of thing never happens, but it’s the reason that workers’ compensation insurance is required by law for most small businesses in most states and has to be in place before the first shovel of dirt is turned or nail is driven. Sometimes called workman’s compensation insurance, this type of policy helps pay bills associated with a work-related injury, including medical care and lost wages.
Damage to customer property and injuries to non-employees
Even the most careful workers make mistakes that can damage customer property. For example, a welding torch that was thought to be extinguished is not and sets fire to the building your crew is working in. General liability insurance can cover the cost of repairs. Similarly, if a client slips and breaks their arm while visiting your office, a “GL” policy may cover liability that results from the accident.
Bodily injury and property damage liability associated with the use of company vehicles
An employee is driving a company vehicle to get supplies and strikes a pedestrian. A commercial auto insurance policy can cover costs related to the person’s injuries, including legal defense costs. This type of insurance also can cover claims associated with your vehicle hitting or being hit by objects, injuries to passengers in your vehicle, and property damage caused by your vehicle, among others.
Loss of sensitive client data
You arrive at your office one day to find that a hacker has gained access to your computer and stolen sensitive customer information. If you have cyber insurance, purchased as an add-on to other coverage like a general liability policy, it can cover costs when data has been stolen and fraud has occurred or there is a reasonable expectation that it might occur.
Exceeding the limit of an existing policy
The right small business insurance policies can protect you from typical claims. However, it’s possible for an especially large claim to exceed the limits of the policy that addresses it. In that instance, an umbrella insurance policy can kick in to cover the difference. For example, referring back to the job site fire scenario mentioned above, if the claim totals $175,000 and your general liability policy has a maximum of $150,000, an umbrella policy could cover the additional $25,000. In many cases, purchasing umbrella insurance is more cost-effective than increasing your policy limit.
So, in summary, every construction or contracting company should consider these types of insurance, in addition to others if appropriate:
- Workers’ compensation
- General liability
- Commercial auto
- Cyber add-on coverage
It’s also helpful to know that general liability and commercial property insurance can be combined into what’s known as property & liability insurance or a business owners policy (BOP). A contractor might purchase this type of policy if, for example, they have a storage facility or workshop and want property coverage for the buildings and their contents. This can be a convenient way to manage a variety of risks in one policy.
Understanding Small Business Insurance Policy Endorsements
Construction business owners wanting to tailor their insurance coverage to their specific needs can do so using what are called endorsements or riders. An endorsement modifies an insurance policy by adding or deleting specific types of coverage.
For example, the tools and equipment you use in your work aren’t covered by property & liability insurance at the base level of coverage. However, you can add an endorsement to protect those items while they are on the job site, being transported, or temporarily in storage between jobs.
Insuring a Construction Business Today Is Easier Than Ever
“The challenge of ensuring that your construction company is properly protected can seem daunting,” adds Shelley. “However, many small business insurance providers like biBERK now enable you to get insurance quotes, buy policies, and file claims all online.”
This makes it easier than ever to get the coverage you need. And since online providers often have very competitive rates (biBERK’s are up to 20% below other providers), there’s no reason your construction company should go without proper protection and the peace of mind that comes with it.