Contractor Liability Insurance Explained for Construction SMEs

Contractor Liability Insurance Explained for Construction SMEs

16th July 2018

Last week we brought our readers some important news on insurance, with a leading insurance broker advocating that insurance price comparison websites should be stopped from offering quotes to small construction companies.  With comparison websites a popular method of finding all types of insurance nowadays, Managing Director of Construction Insure, Mark Herbert claims that independent contractors are being tempted into buying cheap insurance deals which may not cover all of the work they undertake for customers.  As promised last week, today we’re going to take a more in-depth look at the different types of insurance for construction contractors. 

Construction insurances are required for every single construction project and in some instances some type of specific coverage is required.  Construction insurance can provide cover for material, risks, natural disasters, employees and even the contractor’s business. 

CONTRACTOR LIABILITY INSURANCE – a good builder liability insurance coverage will protect against injuries, accidents or property damage suffered on the job.  A good construction liability insurance will protect your business from lawsuits or damages made by claims during the construction process and will offer your business the following benefits:

  • Protect your business against injury and/or property damage
  • Liability insurance will help you to cover costs and damages after a judgement has passed
  • You will benefit from the security of knowing that both your assets and your employees are protected.

There are a wide range of circumstances under which your contractor liability insurance may be used, including the following:

  • Injury Claims – the policy may be used to pay for medical expenses, funeral, and court-awarded compensation claims, though it shouldn’t be confused with workers’ compensation coverage.
  • Damage Claims – the insurance will protect you if your company damages the customer’s property or if your business is responsible for the customer being unable to use that property.
  • Product Claims – these are claims relating to damages caused by equipment installed by your company.

The cost of your liability insurance will depend on the perceived risks with the type of work being carried out.  The amount of liability insurance is directly related to the amount of money that the contractor is executing, and it’s recommended that you have insurance coverage of two to three times the amount of construction project budgets.

Contractor liability insurance has limitations and you should set limits for each occurrence and limits for aggregated values.  Limitations should also be set for fire damage to property under construction and medical expenses for injured workers on the job site that may not be covered under workers’ compensation.  Damages covered should also include liability for personal and advertising injury in case of claims that your promotional advertising may cause the homeowner to incur a financial of personal loss.

No matter how large or small the job, in the construction industry it is vital to have adequate levels of insurance coverage against liability.  Getting the right type of insurance for your construction company is vital to protect your business now and in the future.  Don’t be tempted by the aggregator/comparison websites when seeking an insurance policy – discuss your requirements with a reputable insurance broker who specialises in providing insurance coverage in the construction industry.