What Insurance Do You Need For a Construction Business?

General liability insurance protects contractors when clients or visitors get injured on job sites, or when construction work damages adjacent properties. We recommend $2 million per occurrence and $4 million aggregate for most construction businesses, though larger commercial projects may require $5 million or more.

Real-Life Coverage Scenario: A framing crew accidentally knocked over scaffolding that crashed through a neighbor's fence and damaged two parked cars. The property owner tripped over debris and broke her wrist. Costs totaled $8,500 in vehicle repairs, $6,200 for fence replacement, $23,000 in medical bills and $12,000 in legal fees. General liability insurance covered all $49,700.

Required by law in most states once you hire your first employee. Construction has one of the highest injury rates of any industry. Workers' comp pays medical costs and lost wages when employees get hurt on the job, from falls off ladders to equipment accidents. Coverage amounts are set by state law based on your payroll and job

classifications.

Real-Life Coverage Scenario: A roofer fell 15 feet from a ladder, suffering a fractured pelvis and broken arm. Emergency surgery, hospitalization, physical therapy and six months of recovery totaled $127,000 in medical expenses plus $38,000 in lost wages. Workers' compensation covered the entire $165,000, protecting both the injured employee and the business owner.

Required by law in 49 states for business-owned vehicles. Construction crews rely on trucks and vans to transport workers, materials and equipment to job sites. A $1 million combined single limit for liability plus comprehensive and collision coverage protects you when company vehicles cause accidents or get damaged, from rear-ending another driver while hauling materials to theft of your work truck.

Real-Life Coverage Scenario: A company truck loaded with lumber ran a stop sign and collided with a sedan, injuring two passengers. The accident resulted in $54,000 in medical bills, $28,000 to replace the totaled sedan, $19,000 in truck repairs, $7,500 in damaged lumber and $15,000 in legal costs. Commercial auto insurance covered all $123,500 with only a $1,000 deductible.

Builder's risk insurance covers buildings under construction from damage or loss during the building process. This policy protects construction projects from theft, vandalism, fire, wind, hail and other covered perils until project completion. Coverage should equal the completed value of the structure, ranging from $100,000 for residential renovations to $5 million or more for commercial projects.

Real-Life Coverage Scenario: A severe windstorm hit overnight during a home addition project, ripping off the newly installed roof and damaging framing. Stolen copper piping added to the losses. Total damages included $42,000 in roof replacement, $18,000 in framing repairs, $11,000 in ruined drywall and insulation, $3,800 in stolen copper and $8,000 in project delays. Builder's risk insurance covered all $82,800.

Tools and equipment insurance (inland marine insurance) covers construction equipment, tools and materials at job sites, in transit or in storage. Construction businesses invest heavily in equipment, from power tools and generators to excavators and scaffolding. Most contractors should carry $25,000 to $100,000 in coverage, depending on equipment inventory value.

Real-Life Coverage Scenario: Thieves broke into a job site trailer overnight and stole $18,500 worth of power tools, including nail guns, saws, drills and a generator. The same week, a skid steer loader tipped over on uneven ground, causing $31,000 in mechanical damage. The contractor faced $49,500 in losses. Equipment insurance reimbursed the full amount within two weeks, minus a $1,500 deductible.