Small construction businesses require several of the same types of insurance coverage that larger businesses need. In addition to this, there are types of coverage available that are specific to the construction industry.
Property Coverage
Property insurance might be needed to provide coverage for any real property owned by the company. This coverage might also be needed to cover any personal property that is used for the business.
The largest amount of property loss for a small contractor is often equipment that is taken to varying sites and valuable machinery. Standard property insurance doesn't always provide coverage for such items, so it's necessary to purchase floaters from contract insurers for those tools and equipment.
Speak with our agents and review resources such as Insurance Options for Construction Projects to learn what types of floaters are available and to determine which ones are the best choice for an individual business.
Keep in mind a building steadily increases in value as it is constructed; to ensure it is covered properly, consider a special policy called Builders Risk Insurance and related commercial options like Construction Insurance (Commercial).
Liability Coverage
Every small business needs liability coverage. In today's litigious environment, nearly anyone can file a claim stating they were injured by or at a specific business, so it's important to be prepared with a good liability policy.
Some small construction businesses might want their subcontractors to purchase Owners and Contractors Protective Liability (OCP) coverage. This insurance protects a business owner or property owner from liability arising from the negligence of independent contractors or subcontractors, while the subcontractor purchases the policy.
For a broader view of policies that fit small contractors, see Small Business Insurance and then review the specifics with your carrier or ask an agent.
Business Vehicle Coverage
Personal auto policies often cover some business use, but if a vehicle is used primarily for business the personal policy is unlikely to provide full protection. A personal policy will not cover vehicles owned by the business.
It is important to insure business-owned vehicles with a commercial auto policy designed for business use. If an employee or owner uses a personal vehicle for business and an accident causes injuries, the injured parties can sue the insured individual personally, and personal limits may be insufficient.
Contact your insurance representative to determine appropriate limits and policy types for vehicles and equipment.
Frequently Asked Questions
What is a floater and why might I need one?
A floater is an insurance add-on that covers movable business property like tools or equipment taken to job sites; it protects items not covered by a standard property policy.
When should I consider Builders Risk Insurance?
Buy Builders Risk Insurance when a structure is under construction or renovation to cover materials, temporary structures, and the changing value of the project during building.
Do subcontractors' policies cover my business?
Owners and Contractors Protective Liability (OCP) can extend protection to a property owner for a subcontractor's negligence, but you should verify coverage and endorsements before work begins.
Can I use my personal auto policy for business deliveries?
Occasional business use may be covered under a personal policy, but regular business use or business-owned vehicles require a commercial auto policy for adequate protection.