Construction insurance is a range of policies designed to protect both employees and clients from harm during construction projects. Some of this insurance is required by law, and some insurance is required by the construction contract. Even when it’s not required, it’s an excellent idea for contractors and others who work on construction projects to get some level of insurance coverage.
- Top 6 Providers of Construction Insurance
- Types of Construction Insurance
- What Affects How Much You’ll Pay for Construction Insurance?
- How Much does Construction Insurance Cost?
- What is Course of Construction Insurance for Homeowners?
Top 6 Providers of Construction Insurance
- CoverWallet: Best for Comparing Online Quotes
- The Hartford: Best Overall
- Hiscox: Best for small companies
- Chubb: Best for larger companies
- Next: Best for online quotes
- Nationwide: Best for Customer Service
CoverWallet: Best for Comparing Online Quotes
CoverWallet is a digital business insurance broker. They work with several leading business insurance companies. One advantage of working with CoverWallet is that in a matter of a few minutes, you are able to compare several quotes from their partner companies after filling in their quote form. This makes the quote comparison process very simple and easy for you.
After purchasing several construction insurance policies of different insurance companies through CoverWallet, you will be able to manage these policies on one place, the CoverWallet dashboard. They provide great digital features in the dashboard to save you time and efforts in managing all of your construction insurance policies in one place.
The Hartford: Best Overall
The Hartford has a wide range of policies for your construction business. They have underwriters specifically for construction business, and The Hartford was one of the first companies to specialize in small business insurance. They have almost 4,000 customer reviews, with 4.8 out of 5.0 stars, so their customer service and claims servicing seems to be excellent. Unlike many insurance companies, you can read them all on their website.
Hiscox: Best for small companies
Hiscox specializes in small business insurance, and if you work in construction, they can tailor policies to your specific industry. They have flexible payment options and good customer service reviews. You can get a quote online if you have information like payroll, number of employees, and estimated total revenue.
Chubb: Best for larger companies
If your company earns more than $30 million in revenue, Chubb may be a good fit for you. They have a wide range of policies and levels of insurance to choose from, and they rank above average in customer satisfaction, ranking third overall on J.D. Power’s Small Commercial Insurance Study for 2019.
Next Insurance: Best for online quotes
Next insurance has the easiest online quoting system we’ve used. In just seconds, they’ll have an estimate for you. You can get a certificate of insurance the same day you buy a policy, and you get a 10% discount if you bundle. They have a 4.7 out of 5 rating for customer service based on 100,000 reviews.
Nationwide: Best for Customer Service
Nationwide is a large commercial insurer, so whatever policies you need, they’ll have. They earned the top spot on J.D. Power’s Small Business Commercial Insurance Study for 2019. Also, they include equipment breakdown insurance in their Business owner’s policy for construction, which is great for anyone in the construction industry. You can’t get a quote online, so you’ll have to speak to an agent to get covered.
>>MORE: The 5 Best Providers of Business Insurance for General Contractors
Types of Construction Insurance
The following include the most common types of insurance you may need as property owner or contractor.
- Course of construction insurance
- Construction Liability Insurance or General liability insurance for construction companies
- Commercial auto
- Inland marine
- Contractor license bonds
- Construction bonds
- Workers’ compensation
Course of Construction Insurance
Also called builders risk insurance, this covers buildings while they’re under construction. It covers things like:
- Building materials
- Foundation
- Lawns, landscaping installed by the builder
- Scaffolding
Builders risk only cover damages from:
- Fire
- Weather-related damage
- Vandalism
Construction Liability Insurance or General Liability Insurance for Construction Companies
General liability insurance covers injuries to third parties (although not to your employees) and property damages. This is necessary if you work in construction because the potential for being sued for faulty workmanship or building errors is high.
If you work as a builder or a contractor, you’ll need construction liability insurance or general liability insurance. The risk of someone getting injured on a construction site or you causing some damages to a third party property due to your construction work is very high, get yourself protected with a good construction liability insurance policy.
How Much does Construction Liability Insurance Cost?
It depends on how large your business is, how many employees/subcontractors you use, and what your estimated revenue is. At the minimum, you should probably have a $1 million occurrence, $2 million aggregate policy for general liability insurance. Other policies you need will be added to that, but keep in mind, construction is inherently risky.
>>MORE: The 6 Best Providers of General Liability Insurance for Small Businesses
Commercial Auto Insurance for Construction Companies
Anytime you use a vehicle for business reasons, you’ll need commercial auto insurance. Otherwise, any accidents or damages you cause while driving may not be covered, and if you injure someone in an accident, they can sue you and your business.
If you are in construction business, the needs of transporting tools and people to and from a construction site is frequent, you need to get commercial auto insurance to have proper protection for your vehicles used for these purposes.
Inland Marine Insurance for Construction Companies
It sounds like insurance you get if you’re building an aquarium, but actually inland marine insurance covers any property while it’s in transit to a job. It covers things like:
- Tools
- Excavators, forklifts, backhoes, etc.
- Leased equipment
- Computers, laptops, and any digital equipment
Contractor license bonds for construction companies
This ensures that you (the builder) will comply with building codes and other rules, and you’ll follow ethical business practices. In order to get a contractor’s license, you are required to have contractor license bonds. Without it, you may be fined.
Construction bonds for construction companies
This says you’ll complete the work you started and deliver the project. If you don’t complete the construction project, payout can be made to your clients from the construction bonds.
Workers compensation insurance for construction companies
Workers compensation insurance protects your employees if they are injured on the job. Since there is a high potential for injury on construction sites, this is required by many states if you have even one employee.
As you can imagine, the chance of employee injuries is probably the highest in construction sites, getting workers compensation insurance is not only compliant to the regulations but also prevents your business from going bankrupt to have to pay out to cover your employees’ injuiries.
You can also get pollution/environmental insurance to make sure you don’t damage the environment due to contamination or damages from equipment.
>>MORE: Finding Workers Comp Insurance for Independent Contractors
Do I Need a Separate Construction Equipment Insurance Policy?
If you want to have your construction equipment insured and protected just in case they are damaged or lost at a construction site or on transportation, you will need to get construction equipment insurance. They are usually included in commercial property insurance. If you get a good commercial property insurance policy, it should cover both the building of your office, office at a construction site, all construction equipment stored at your office, or construction site, or on transportation.
If you don’t need commercial property insurance, but want to have your construction equipment protected, you can get a construction equipment insurance policy. It is usually cheaper yet offers similar coverage for your construction equipment.
What Affects How Much You’ll Pay for Construction Insurance?
The type of construction you do has the biggest impact on how much you’ll pay for insurance. Secondly, the size of your construction project plays a big role in the cost of construction insurance. A construction project to build a high-rise building will pay a lot more in construction insurance compared to a house-fixing project.
Different types of construction insurance have different costs. General liability insurance costs differently from worker’s comp insurance or course of construction insurance, or builders risk insurance.
Your business location affects the cost of construction insurance too. You will pay a lot more in construction insurance for a similar project in Manhattan NY than in Houston, Texas.
There are a lot of variables that go into how much you’ll pay as a contractor or construction company owner that it’s difficult to estimate.
How Much does Construction Insurance Cost on average?
Below are some estimates of construction insurance cost:
- Construction General Liability: $500-$1,500
- Course of Construction Insurance or Builders Risk Insurance: 2-4% of the project cost
- Workers Compensation: $5,000 – $6,000 per employee
- Commercial Auto: $1,000-$3,000 per vehicle
- Inland Marine: $2,000-$3,000
These are the median range of construction insurance costs. If your business has a high risk of customer injuries or damage to a customer’s property, you’ll pay more in construction liability insurance. For example, roofers pay the most in construction general liability insurance, with an average cost of $3,590 a year, and locksmiths pay the least, at about $400 a year.
The best way to get the cheapest construction insurance is to compare quotes from a few companies. Working with a digital broker like CoverWallet and Simply Business will help you compare several quotes in one place conveniently.
What is Course of Construction Insurance for Homeowners?
Course of construction insurance is also called builders’ risk insurance. As a home owner, you will need course of construction insurance when you are building your home. It covers materials and supplies, protects against damages due to thefts and vandalism, and covers from the start to the finish of the project.
When the project finishes, the course of construction insurance policy will end. You will need a new homeowner insurance policy to cover your new home.
What is New Home Construction Insurance? Do You Need It?
Similar to the above, if we start building a new home, you will need course of construction insurance policy or builders’ risk insurance policy. Homeowners insurance doesn’t cover the risks associated with a new home construction project such as supplies, materials, theft, and vandalism.
When the home is built, the project finishes, before moving in your new home, you’ll need a new homeowners insurance policy.
What is Dwell Under Construction Insurance?
Often referred to as dwell under construction coverage, it is a rider or provision of a homeowners insurance policy. It is added to a homeowners insurance policy to add additional coverage for a home during construction. Since homeowners insurance doesn’t cover the home during construction, dwell under construction coverage will cover all risks associated to the construction in a home, including materials, supplies, theft, and vandalism.
Adding dwell under construction coverage will increase the premium of the homeowners insurance policy due to the increased risks during construction. And it is usually added for a short construction project from 1-3 months. If a construction project is longer than 3 months, homeowners are required to obtain a builders risk insurance policy or a course of construction insurance policy.
Do I Need Flood Insurance During Construction?
Yes, you do. The good news is that if you have a comprehensive course of construction insurance or builders risk insurance policy, flood coverage should be included in the policy. You need to read through your policy carefully to ensure flood coverage is included.
In addition, you need to be sure to understand the definition of flood in the policy. Some carriers can be very technical about the sources of water and how it travels into your home during construction. If you are not careful, the policy might provide some implicit exclusion of flood.
Lastly, you need to review the flood coverage details carefully to ensure it provides sufficient coverage in the following areas: extend of the site, ordinance and law, soft costs, and business income.
Last Thoughts
Construction workers and contractors know that almost anything can and will go wrong during the course of a building project. Even if general liability insurance weren’t required, you should get it to protect yourself and your business.
