Residential and commercial contractors all need construction contractor insurance. This is not a negotiable requirement. It will often spell the difference between getting and losing a contract.
Any party who contracts services to others needs contractor insurance. This is required when contracting services to the government on the federal, state or city level. It is also most often required by private entities from contractors.
In effect, contractor insurance protects all parties involved in a contract. Those who hired the contractor are assured that any damage or injury on persons or property caused by the contractors work will be paid for by the insurance. The contractor is assured that he will not have to pay for claims on such damage or injury from his own pocket. It also protects him in case he is wrongfully sued.
Contractor insurance generally covers the contractor, the party who contracts the services and any member of the public directly affected by the work of the contractor. It should offer full protection against accidental damage caused to equipment and property, as well as full liability protection to cover all medical, legal and compensation costs. If a contractor has more business than is covered by the policy, extra coverage can be applied for in the areas of public liability and professional indemnity.
Contractor insurance does not, however, cover deliberate errors and negligent acts on the part of the contractor. If the contractor shows a consistent pattern of negligent behavior, the insurance company will not extend coverage.
Normally, contractor insurance covers only the period during which the contracted work is being done. Some work, however, may give rise to issues many years afterwards and the contractor still runs the risk of being sued even then. He could already be retired by that time. Contractors should, therefore, apply for additional insurance to cover such eventualities. This could be in the form of a run-off insurance policy or an extension of the liability clause of the existing contractor insurance.
Construction contractor insurance specifically covers all the risks involved in the construction of a commercial or residential building. This covers compensation for builders risk, demolition liability insurance, professional indemnity insurance, public liability, employers liability and accidental death of a worker due to construction default or structural fault such as the collapse of walls in the construction site.
Builders risk covers claims and legal fees against damage to the building while construction is going on. Demolition liability insurance covers claims against damage caused by the demolition done in the course of construction.
Professional indemnity insurance covers claims and legal fees against professional negligence. This is different from deliberate errors and negligent acts. Professional negligence refers to not having produced the quality of work that the contractor has represented himself to be qualified for.
Public liability, as mentioned earlier, covers claims and legal fees for injury or damage caused by the contractors work to a third party or members of the public.
Employers liability covers claims and legal fees against injuries or illness incurred by the contractors employees in the course of their work. This extends to cases of accidental death of employees in the construction site.
The typical cost of contractor insurance ranges between 0.5% and 1% of the total coverage. Among the factors involved are the industry of the contractor, the specific companys business turnover, the amount of coverage required, the probability of the company facing any legal action, and, of course, the insuring company.
Construction contractor insurance is a necessary investment for all residential and commercial contractors. It will protect them, their employees, their clients and the public at large. It will also show proof of their professionalism.
