The Common Insurances Construction Contractors Must Have
Construction insurances are required for every single construction project. In many instances, it is a requirement to have some sort of specific coverage in order to be awarded. Construction insurances can provide coverage for material, risks, natural disasters, employees, and even your own business. However, the insurance industry along with the construction industry is always looking to comprehend and provide the latest coverage of every single and unique situation. There are many instances that property owners or project developers will require you to get some of these in order to be qualified to participate in their bidding process.
A good builder liability insurance coverage can protect against injuries, accidents, or property damage suffered on the job. Furthermore, construction workers can accidentally damage property mishandling materials and tools, or while the remodeling process is underway. This article presents a thorough understanding of the benefits, limitation, and risks of this type of insurance.
The builder's risk insurance policy will pay for damages up to the coverage limit, but how much will it cost me? The limit must accurately reflect the total completed value of the structure (all materials and labor costs, but not including land value). Extensions of coverage may be provided for certain situations and under specific conditions. An important exclusion which should be read in its entirety excludes coverage for damage resulting from faulty: design, planning, workmanship, and materials.
A performance bond will protect the owner against possible losses in a case a contractor fails to perform or is unable to deliver the project as per established and the contract provisions. Sometimes the contractor defaults or declares himself in bankruptcy, and then in those situations, the surety is responsible for compensating the owner for the losses. However, be aware that as a contractor you will always be responsible for everything, so be sure to read this on how to protect yourself.
The hold harmless agreement protection will vary depending on the jurisdiction that the contract is being executed. In some cases, the hold harmless agreement will protect the contractor from claims brought by corporations or companies not forming part of the agreement. Choose from any of these three types of hold harmless agreement types.
If the bid bond obligations are not met, the principal, usually referring to the contractor and the surety is liable for the bond jointly and severally. There are penalties that apply for failure to comply with bond obligations.
The payment bond forms a three-way contract between the owner, the contractor and the surety, to make sure that all subcontractors, laborers, and material suppliers will be paid leaving the project lien free. A Payment Only Bond is rarely requested and is billed usually at about 50 percent of the regular premium.
A professional liability covers errors caused by the contractor’s negligence while performing its duties under the specified agreement. The insurance will cover your litigation expenses if your errors and omissions resulting in loss of client investment or if you fail to perform your contractor duties.
Flood Insurance: How to File Your Flood Insurance Claim
Flood insurances typically have a queue of 30 days, before entering its coverage period, to avoid insurance solicitations only when a flood event is expected. Depending on where your business or project is located, you might need to carry one of these.
Why Is Construction Insurance Needed?
As you can see there are many types of situations on which you will need to provide evidence of your policy. By completing jobs on time, being responsible, and keeping a solid business operation you can get extra benefits like smaller premiums and deductibles in your insurances.