What Insurance Does a Construction Company Need?

December 13, 2023

Most businesses require some kind of insurance, but in the construction industry, it’s particularly important.

There are substantial risks, so you want to ensure your business is fully protected. With that in mind, a construction company can benefit from multiple types of insurance. Understanding the options available will help you make the right choice.

What insurance does a construction company need? Keep reading to find out.

Construction Project Risks

As construction insurance can vary, it’s important to understand the most significant risks. Some of these include:

Construction or design defects
Equipment damage or theft
Worker and third-party injuries
Delays

These can incur serious financial losses, so suitable business insurance is highly recommended.

Types of Construction Insurance

Construction companies can differ, so the best insurance for one may not be the best for another. Before choosing an insurance policy, you should understand the different options available.

General Liability

This protects against several common risks, such as:

Third-party bodily injury
Third-party property damage
Copyright infringement
Damages caused by completed construction

If one of these occurs at your worksite, general liability insurance will cover the costs of property repair/replacement or any medical bills. The risk of injury and damage is higher in the construction industry than in most others, which is typically considered essential.

Workers’ Compensation

This helps protect your employees by covering medical bills or lost wages if they can’t work due to a job-related injury or illness. These aren’t uncommon in the construction industry, making this very important. In New Jersey (like most other states), construction companies must have workers’ comp insurance.

Commercial Auto

Company vehicles are standard in the construction industry. This will cover medical bills, property damage, and legal expenses from auto accidents. This includes vehicles on the road and those used during construction projects.

Builders Risk

Also known as course of construction insurance, this covers any damage to a building during construction. This can come from things like vandalism, fire, or extreme weather. Most policies cover people and equipment, but you’ll need this type to protect unfinished structures.

Contractor’s Tools and Equipment

Construction companies rely on their tools, and contractor’s tools and equipment insurance will keep them covered. It protects against theft, loss, or damage for various tools, though only if they’re under five years old. Business insurance can provide similar protection, but typically only up to about $10,000, so you might want this for better coverage.

Professional Liability

This protects your business from lawsuits regarding the quality of work that you (or any subcontractors you hire) produce. It can cover court fees, lawyer fees, and settlements, regardless of whether you’re at fault.