Construction Insurance

Depending on the work you do, you may need additional types of construction insurance. A complete risk management plan for a construction project might include:

• Builder's risk insurance: Also called course of construction insurance, this policy helps pay for damage to a structure in progress and construction materials.
• Contractors pollution liability insurance (CPL): This policy protects contractors against legal costs related to pollution, such as a lawsuit about excessive dust raised at your construction site.
• Inland marine insurance: Commercial property insurance only covers items at your business address, so you may need inland marine insurance for items in transit or at a job site. Coverages include contractor's tools and equipment insurance and installation floater insurance for materials awaiting installation.
• Commercial umbrella insurance: When your underlying general liability, commercial auto, or employer's liability policy reaches the limit on a claim, umbrella insurance activates to provide additional coverage.
• Mobile equipment endorsement: This type of coverage insures tractors, backhoes, and other construction vehicles not covered by standard auto insurance.

The requirements for licenses, permits, and bonds depend on the type of work you do and the laws in your state. For example:

• You may need a license to do certain types of work, such as plumbing, roofing, or electrical work. General contractors also typically need a license. These requirements vary by state.
• You might need a permit for a specific project. For example, building a structure of a certain height, or converting one type of room into another, could require a permit. Again, this depends on your state laws.
• Bonds help you secure contracts. Several types of surety bonds are common in construction, including bid bonds, performance bonds, and payment bonds. They act as a guarantee that you'll fulfill the terms of a contract. You may need one to bid on a project, apply for a license, or work with a specific client.

In many cases, your insurance needs are determined by licenses, permits, and bonds. For example, general contractors often need to buy commercial general liability insurance in order to get licensed in their state.

Buying insurance only when you need it may seem like a good idea. However, there are several reasons you should maintain continuous coverage:

• Insurers increases their rates when you start and stop coverage. Insurance companies like consistency. If you cancel a policy, they might be unwilling to sell you another policy, or decide to charge more for the same coverage.
• Some policies won't provide coverage for a project after you cancel them. Claims-made policies, such as professional liability insurance, only cover claims made while the policy is active. If you're sued for a completed project after you've canceled coverage, you won't be covered—even if you were insured while you did the work.
• You could lose your license. Some professional licenses require insurance, which means you're at risk of losing your license if you cancel your policy. It might be difficult or even impossible to get the license back, depending on the circumstances.

Remember, you're responsible for any business-related losses while you don't have commercial insurance. That includes:

• Work-related auto accidents. For that you need commercial auto insurance, or hired and non-owned auto insurance (HNOA) for vehicles used by your business but not owned by it. Your personal auto policy will only cover a commute.
• Work-related medical expenses. Your personal health insurance won't cover injuries that are related to your job, which is why you need workers' compensation insurance. It's also required by law in most states.
• Accidents and damages at your home. Homeowner's insurance won't provide coverage if a client is injured at your home or your construction equipment is stolen. That's why you need general liability insurance and commercial property insurance—or the two together in a business owner's policy.