The construction industry is a risky field to work in. The hazardous construction materials, sharp objects, steep drops and heavy equipment make it difficult for contractors to work hassle-free. Besides, failure to perform safety risk assessment can lead to the most expensive errors.
Statistics show that construction is one of the most accident-prone industries. While accidents are inevitable, insurance allows contractors to help affected workers and safeguard their businesses from lawsuits and financial losses.
In this post, we will share six things that every contractor should know and understand about insurance.
The Need For Insurance
Unexpected emergencies such as accidents, injuries and even the death of workers can leave construction contractors facing financial strain. The insurance policy provides monetary backup and protects contractors from financial burdens.
Furthermore, state or federal law mandates construction companies and contractors insure their workers to acquire business licenses. So, complying with federal law is crucial to operating the business without litigation.
Key Types Of Insurance
Here are six key types of coverage options for contractors.
1) General liability policy
Commonly called commercial general liability (CGL), the general liability policy helps contractors cover property damage and employees' physical injuries. For instance, if a contractor does electrical work in a house and it catches fire, the general liability policy will cover the damage to the property and workers involved in the project.
There's another commercial general liability policy that covers damage arising out of completed operations. For example, if the electric work catches fire a year after the completion of the project, the policy will provide coverage.
2) Commercial auto policy
This insurance policy covers the liability caused due to the business automobiles. Contractors held responsible for an at-fault accident can benefit from this policy.
3) Workers' compensation policy
This policy offers compensation for workers injured during construction work. The compensation plan includes lost wages, medical bills, and other financial losses.
4) Installation floater or contractor equipment policy
Contractors require carrying heavy construction equipment and tools from project to project. These tools, especially the expensive ones, may get damaged or stolen during the commute. The contractor equipment policy provides coverage for construction equipment and tools. Several policies even offer installation coverage for equipment.
5) Excess liability policy
The insurance policies, such as general liability, commercial auto insurance, or workers' compensation, usually have a monetary limit of around $1 million. The excess liability policy provides additional coverage to meet the needs of the contractors.
6) Contractor pollution policy
Construction companies may cause pollution during their operations. For instance, the work may cause the discharge of pollutants on land, the environment, or any nearby waterbody. This can lead to massive financial losses or even bankruptcy. This insurance policy helps contractors by providing cleanup costs, fines, and more.
Insurance Limitations For Heavy Construction Work
As the chances of mishaps are high in heavy construction projects, the insurance options for contractors are limited.
What projects are heavy construction projects?
Heavy construction projects include commercial property work, crane operations, road and bridge construction and more. Contractors handling big projects should connect with experienced insurance brokers for advice.
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The Gravity Of Providing Timely Notice
Most insurance policies need contractors to give insurers notice at the earliest opportunity. The insurance company may not provide coverage in case of delayed claims.
If contractors report timely and the insurance company denies a claim, the matter is subject to legal proceedings. Contractors may file a legal case against the insurance company. All they need is to present respective evidence for the claims.
So, while buying insurance policies, contractors should inspect their guidelines and coverage options. If the policy requires them to report to the insurer within a few days, they should comply with their rules. This can help them protect their business and its reputation in the long term.
Construction Insurance Policy Exclusions
Here are a few insurance policy exclusions that contractors should evaluate.
1) Work exclusions
Several policies pay for the property damage but deny paying for the loss of the contractor's work. For instance, if poor electrical device installation during construction burns down a building, you would be compensated for the physical loss. The insurance firm will not provide compensation to reinstall or buy the electrical device.
2) Premises exclusions
Several policies may restrict coverage to several construction locations. So, contractors should specify the location clearly while signing a legal insurance agreement. Else, this can lead to massive financial losses.
3) Operation exclusions
Construction contractors that provide additional services like cleanup and plumbing should specify everything to the insurer. The insurance company may deny the claim if issues arise while performing subsidiary operations.
The Urgency Of Creating Employee Safety Programs
Contractors need to pay hefty premiums for insurance. The best way to minimize them is to manage the experience modifier by creating a culture of employee safety.
What is an experience modifier?
Experience modifier predicts the total claims a company will experience based on its history and industry. According to The National Council on Compensation Insurance (NCCI), construction companies with high experience modifiers need to pay more compensation premiums than contemporaries.
To ensure employee safety, create a workplace that complies with OSHA guidelines. Provide your workers with safe construction equipment. Besides, conduct training sessions to guide them on how to use complex machinery. This can help you maintain a good track record and reduce experience modifier and premium expenses.
The right insurance policy can prove to be a game-changer for contractors. It provides financial security to workers and protects construction businesses from financial crises.
The workers may feel less fearful while working on risky projects. Financial backup can imbibe a sense of confidence, thereby helping them complete complex operations successfully. The best part? This can help you maintain a good reputation in the marketplace.