Jobs in the construction industry are some of the most dangerous on the market, and construction company owners need to make sure they have the proper insurance policies to cover every possible scenario and incident.
To make things more complicated, construction companies often work with independent contractors instead of full-time or part-time employees, and this distinction has insurance implications. How you hire your employees comes into play regarding the various insurance policies you need as a construction company.
Involving contracted employees in your company’s insurance policies may require extra paperwork or policy extensions. You may also need to filter applicants to ensure the contractors you hire to hold the right kinds of insurance policies themselves. But first, you must understand the different types of insurance you may need as an employer of independent construction contractors.
Workers’ Compensation Insurance
Workers’ comp is an insurance policy that can cover medical bills and provide a partial or full salary replacement for workers that suffer a physical injury on the job or develop an illness caused by their work conditions.
Workers’ comp laws differ from state to state, and because of the risky nature of construction work, many states have specific regulations surrounding construction workers’ insurance coverage.
In many states, employers are not obligated to provide workers’ comp insurance for contract workers. Independent contractors or subcontractors may be required to purchase their own insurance in some states, depending on their contract stipulations. Familiarizing yourself with your state’s laws surrounding contractors and workers’ compensation is essential if you want to employ contract workers.
General Liability Insurance
Construction business owners also need to prepare for accidents caused by their employees or contractors working on a project. If the business injuries a third-party, such as your client or a passerby, general liability insurance can cover medical costs and legal expenses. The insurance also covers property damage caused by your business.
It’s important to note that general liability insurance policies don’t always cover independent contractors. Be sure to discuss general liability contractor insurance with your insurance agent when purchasing a general liability insurance policy or business owners policy (BOP) that includes general liability coverage.
Contractors Professional Liability Insurance
Contractors’ professional liability insurance is often purchased by larger contractors who hire various third-party professionals such as designers and engineers.
As explained by Investopedia, “The professional liability policy offers third-party liability protection, first-party indemnity, as well as pollution liability. Damages that are covered include economic loss and costs associated with repairs.”
Commercial Auto Insurance
In the event of an automotive or machinery accident, commercial auto insurance provides partial or complete coverage for the vehicle’s property damages and repair or replacement costs. It can also include personal injury payments if someone is injured while driving a vehicle insured under the policy. The policy includes both vehicles you own and those leased by your contractors for business purposes.
Since most construction work requires the use of vehicles and heavy machinery to accomplish, it’s crucial to have full coverage for any damage done to or by those machines, so incidents don’t backfire on your company.
Inland Marine Insurance
Construction businesses can purchase inland marine insurance to cover incidents that might occur when transporting goods, supplies, machinery, or equipment from one area to another. Unlike standard property damages insurance, inland marine also covers damage to your equipment that occurs off-site during transportation.
Contractor Pollution Liability Insurance
Pollution liability insurance covers the fees and damages resulting from a pollution incident, including bodily harm, property damage, and cleanup costs. Many construction projects include the use of potentially harmful and toxic materials and chemicals such as cement, fuel, and industrial-grade sealants and adhesives.
Because these substances can cause environmental harm in the event of a leak or spill, it’s wise to be insured against any damages. When you’re hiring contractors for a project with the potential for pollution or environmental harm, make sure to ask whether they have pollution liability insurance and consider stipulating it as a necessity in their contract.
Getting the Right Insurance Policies Early On
Construction business owners not only have to ensure that their company has the right insurance policies—but they also have to hire the right contractors and make sure they have appropriate coverage. Running a company in the construction industry entails risk, maybe more so than any other industry. But to offset those risks, employers and contractors have more insurance policy options that can protect them.