Construction firms often must brace for unexpected hitches when it comes to completing a project. A job's progress can change with a few drops of rain or a stubborn piece of equipment.
Similarly, owners in the business face a truckload of insurance risks that can determine the fate of their entire operation. Historically, coverage focused on the obvious setbacks - an injured crew worker and property damage. But in today's lawsuit-happy marketplace, firms need more protection to ensure longevity.
Insurance companies offer a broad selection of plans designed to safeguard construction operations of all sizes.
Builders Risk Insurance
This type of policy, sometimes referred to as Course Of Construction Insurance, covers damage to a specific development and related building materials, often defined as those pieces slated to become a permanent part of the structure. Builders Risk usually goes into effect from the start of work and continues right up to the project's completion.
Coverage limits are based on the overall cost of the project. Generally, these policies pay for damages up to the completed value of the structure. This excludes land worth. While some might confuse builders risk with property insurance, the two actually are quite different on paper.
As where property insurance policies tend to only cover the owner and mortgage lender, builders risk is a shared plan. Specifically, it protects all involved in the development - the owner, architect, contractor, subcontractors and lenders. On average, builders risk covers against fire, vandalism, vehicles, aircraft, explosion, wind, theft, lightening, and hail. Still, a general Builders Risk policy does not cover damage to equipment or tools.
With the advent of the digital age, Property Insurance products have changed quite a bit. Database information, digital designs and much more can be hacked into with a few clicks of a mouse button. For this reason, insurance providers offer plans that place a value on intangibles such as research, development information, etc., as well as on physical property. Premium terms and conditions typically vary depending on the property type and worth.
Contractors Equipment Floater Insurance
This insurance policy covers mobile equipment that moves from one job site to the next on a regular basis. Equipment Floaters usually protect against fire, theft, vandalism, lightning, explosion, windstorm, earthquake, bridge collapse, flood and collision.
Contractor Equipment Insurance
Many of the tools used in the construction industry come with a fairly steep price tag. It's not uncommon for a piece of machinery to cost upwards of several thousand dollars. Contractor Equipment Insurance covers damages against higher-end property. Items might include loaders, graders, bulldozers, cranes, forklifts, power shovels, backhoes, compressors and more. Under certain polices, the covered equipment can be owned, rented, leased or borrowed.
Workers Compensation coverage is a must - literally and figuratively. In an industry where operating heavy machinery is all in a day's work, construction firms need to select solid policies. More importantly, owners and managers should know exactly what the product provides.
Some insurance firms offer extended benefits through their workers compensation plans. Coverage can include loss control services, risk management services, surety bonding, monitored claim handling, client education on how to avoid workers comp fraud and more.
Contractors Professional Liability Insurance
This coverage, also known as Design-Build Errors and Omissions, safeguards against expenses accrued when defending design-related litigation. Many industry insiders urge general contractors to obtain some form of this coverage. After all, they usually are the "key players" plaintiffs want to pursue in structural design lawsuits. In other words, lawyers know general contractors likely can afford a heftier settlement than a single sub-contractor!
Claims can range anywhere from: The contractor partook in improper screening and hiring processes when selecting subcontractors - therefore resulting in flawed craftsmanship, to unapproved changes to the overall design at some point during the project. Clearly, these are issues the architect or structure designer could not control, resulting in the claim ending up at the general contractor's doorstep. Contractors Professional Liability Insurance tends to come in two forms: permanent policy and project-specific policy.
Contractors Pollution Liability Insurance
It's not uncommon for crews to rupture a sewer main or gas line while digging on a job site. Other than slowing down work and traffic flow, such an incident also can have costly environmental repercussions. Imagine paying the price for contaminated soil disposal or remedying an oil spill from an older piece of machinery.
Pollution claims are fairly common and can be extremely pricey to resolve and defend. Contractors Pollution Liability coverage provides insurance against just that: the financial loss and liability related to pollution from a covered project. These plans usually include coverage for third-party claims over related bodily harm and property damage. Moreover, they often cover all property damage and cleanup costs related to the environmental damage. Such policies tend to come in two forms: One or multi-year project terms.
Key Person Insurance
Smaller construction firms operating on the experience of a key person should definitely explore this insurance option. This coverage compensates a business for financial losses stemming from the death or extended absence (injury/illness related) of a vital role player.
It's important to note that Key Person Insurance does not pay for the actual losses related to a person's incapacity, but instead provides the business with a fixed monetary sum. The policy holder usually selects the amount of money to be paid to the business. This coverage is designed to allow employees, and the business as a whole, to continue to function for a period of time while addressing the absence.
Since there appears to be some similarities in the many construction insurance packages offered, it's always wise to seek out a knowledgeable agent before making any final decisions. Having too much or too little coverage can be a costly mistake.