For anyone working in the construction industry, specific insurance policies must protect themselves and their business. Insurance is necessary to ensure you are financially protected. Proper risk management dictates that you need both builders’ risk insurance and construction general liability insurance.
A lot of the time, people confuse these policies as interchangeable, but they are not. For example, builders risk insurance covers materials, equipment, and property. For construction projects, you need to have both insurance policies to ensure that all potential exposures are well protected.
What is Construction Insurance?
Construction insurance is a broad term that categorizes insurance policies that protect contractors during construction projects. Many factors can dictate the type of construction insurance a contractor might need for their business or project, such as the type of entity purchasing the insurance and the kind of project needing coverage.
Types of Construction Insurance
During projects, a property owner and contractor will seek to ensure things related to their project, for example, building materials in transit. Contractors for the same project will require different coverage, typically including builders risk and general liability insurance. Below is more information on what these insurance policies cover and the difference between the two.
Builders Risk Insurance
Builders risk insurance covers equipment, materials, and property related to the building being built. Builder’s risk insurance protects the contractors’ equipment, property value, and materials used during construction. The coverage with this policy continues until the project is completed and signed off on.
Builders risk insurance covers damages that might result from the following:
- Fire or explosion
- External Theft
- Lightening stroke
- Vehicle or aircraft crashing into the structure
If damaged by the following coverage is excluded:
- Weather-related damage to property left unprotected and in the open
- Water damage, including flooding
- Government activities
- Mechanical breakdowns
- Faulty planning, design, materials, or quality
- Contract penalties
Builders risk insurance was created to cover the material, equipment, and property related to the contractor’s construction. Typically, most builder’s risk insurance policies do not cover equipment or tool liability, workplace accidents, or property damage belonging to anyone else. The policy protects the contractor’s interest and equipment.
Contractors General Liability Insurance
The contractor’s general liability insurance covers risks dealing with bodily injuries or property damage. This insurance policy does not cover the contractor’s property or equipment. The contractors’ general liability insurance protects against possible accidents and any liability that may arise from them. The policy may cover for damage, including explosion, fire, underground work, or collapse connected to the project insured.
It is essential for anyone in the construction industry to have construction general liability insurance. This insurance protects if a general contractor is accused of having caused injury or property damage and neglect. Having to defend yourself against any lawsuits is extremely expensive and could put your operation under. Having general liability insurance assists with legal fees, so you can keep your business running and avoid financial devastation.
General liability insurance generally will cover even if the following occur:
- Renting commercial space that becomes damaged
- Someone is injured on your property
- You are sued for false advertising, slander, libel, or copyright infringement
- You or your employees cause property damage or injury
Exclusions of genera liability insurance can include:
- Errors of omission
- Lawsuits involving something other than property damage, bodily injury, personal injury, or false advertising
General liability insurance is available for the following types of construction businesses:
- Residential general contractor
- Trade/specialty contractors (HVAC, electrical, plumbing, etc.)
- Light commercial general contractors
General contractors or developers might be required to have a minimum level of insurance liability depending on their government’s laws and regulations in the area they live and work.
Both the builders’ risk and general liability insurance are beneficial for a contractor in the construction field. It’s essential to not overlook one insurance over the other, and they are both critical to anyone working in the construction business and cover yourself and your business.
Builders risk insurance and general liability insurance coverage will have specific exclusions defined in the policy. These exclusions protect the insurance company from having to cover certain types of incidents and damages. It is important to read the fine print in your policy, ensuring you have the right coverage for your project needs.