Your small construction business needs several of the same insurance coverages as any other business, as well as other types of insurance specific to your industry. If possible, use an insurance agent who has experience with your type of business and who works with insurance companies that specialize in construction risks. Your agent may be able to find policies that package property and liability coverages in one policy specifically to meet the needs of small construction firms.
You may need property insurance to cover the real property your company owns and the personal property used in the business, such as office furnishings and computers. Your biggest personal property loss exposures, however, may involve valuable machinery and equipment that moves around from job to job and is not covered by standard property insurance. Such movable property is insured by contracts insurers call “floaters.”
An installer’s floater covers all kinds of machinery and equipment during transit, installation and testing at the purchaser’s premises. Even building materials may be covered, but the more usual coverage is for equipment or machinery that only contractors install, such as heating or air conditioning. The policy can be written to cover a single job or on a reporting form, meaning that you provide the insurer with information about each new contract you undertake.
A contractor’s equipment floater insures any type of movable equipment not meant to move on public highways. This includes such things as cranes, cement mixers, engines or power drills.
A tools and equipment floater covers the insured property, wherever it is used, and may include such items as hand tools, power drills, hoisting machines and power pumps.
While under construction, a building has an ever-increasing value as more of it is completed. To assure the building is covered relative to its value at the time of a loss, there is a special type of policy, known as Builders Risk Insurance. With this policy, if a tornado destroys the building when it is half finished, the policy (if it is for replacement value) covers one-half of the value the building would have had if completed. If a tornado wipes out the building when it is three-fourths finished, the policy covers three-fourths of the completed value. Alternatively, you can report an actual amount for value completed to the insurance company each month. That is the amount of coverage should a loss occur that month.
Since there is always a possibility that someone will file a lawsuit against you claiming to have been harmed by your work, you will almost certainly need liability insurance.
You may want to require your subcontractors to have Owners and Contractors Protective Liability Coverage (OCP). This coverage protects either a property/businessowner or a general contractor from possible liability arising from the negligent acts of an independent contractor or subcontractor hired to perform work on behalf of the insured. The actual purchaser of the policy is the independent contractor or subcontractor, but the protection is for the benefit of the property/businessowner or general contractor for whom the work is being done.
BUSINESS VEHICLE INSURANCE
Your personal auto policy probably provides coverage for some business use of your truck or other vehicle. A personal auto policy is unlikely to provide coverage, however, if the vehicle in question is used primarily in business. It will not provide coverage for any vehicle owned by a business. For those vehicles you must have a business auto policy.
Should you be driving your personal truck for a business purpose and get into an accident for which you are liable, an injured person could sue you personally. Will your personal auto policy have enough coverage to pay all the damages? If not, a lawsuit may be filed against your business. If you use personal vehicles for business, you want to be sure you have high enough limits to protect your business. You should discuss this with your insurance agent.
WORKERS COMPENSATION INSURANCE
States have varying rules about when an employer must provide workers compensation insurance. If you have three or more employees, you should check with your state department of workers compensation to see if you are required to provide workers comp insurance.