Construction company business insurance

Why do construction businesses need insurance?

Construction companies face higher risk than many other industries, due to physical labor, heavy equipment and other common job-site hazards. Insurance is a necessity to protect against financial losses caused by those hazards.

“For small business owners, it’s essential to prepare for the unexpected and protect what matters most, like employees, buildings and property, vehicles, critical data, incoming revenue and more,” says Brian White, vice president of product strategy at specialty insurer AmTrust Financial. “The right insurance policies enable stability and peace of mind so business owners can focus on running and growing their business.”

What insurance coverage does a construction company need?

There are various commercial insurance policies that cover construction businesses. The exact mix you’ll need depends on the type of work, number of employees, and whether vehicles and equipment are part of operations.

How does general liability insurance protect construction businesses?

General liability insurance covers third-party claims of bodily injury, property damage and advertising injury. This policy covers a settlement or judgment with the injured party, as well as your legal fees and court costs.

For example, if a client is injured at a job site or a contractor accidentally damages a customer’s property, general liability insurance can help cover the resulting expenses.

Is workers’ compensation insurance required for construction companies?

Workers’ compensation insurance is required in most states for construction businesses with at least one employee.

It covers an employee’s medical treatment and partial lost wages if they become sick or injured while performing work-related activities. This coverage is especially important in a high-risk industry like construction.

When does a construction business need commercial auto insurance?

Commercial auto insurance is required in nearly every state for business-owned or leased vehicles.

It covers a business’s financial responsibilities if a driver causes an accident while driving a business-owned or leased vehicle.

What does contractor tools and equipment cover?

Contractor tools and equipment insurance helps pay to replace or repair movable construction tools that are accidentally damaged, stolen or lost. Some insurance policies also cover tools and equipment rented for specific construction projects.

When is professional liability insurance necessary for construction companies?

Professional liability insurance, also called errors and omissions insurance, covers claims related to negligence, business error, misrepresentation or poor business advice. It pays for a settlement or judgment and your legal expenses.

How much does construction insurance cost?

Construction insurance costs vary by policy type, business size and risk exposure. Below are average costs based on data from small business insurance broker Insureon.

Policy type	Average premium per month	Average premium per year
General liability insurance	$82	$984
Commercial property insurance	$67	$804
BOP (combines general liability and commercial property coverage)	$98	$1,176
Workers’ compensation insurance	$254	$3,054
Commercial auto insurance	$173	$2,076
Professional liability insurance	$74	$888
Contractor tools and equipment insurance	$14	$168

What factors affect construction insurance premiums?

Several factors influence how much construction businesses pay for insurance, including:

Business location
Number of employees
Annual revenue
Claims history
Policy types
Coverage limits
Deductibles
Insurance company

Expert Insight"The cost of business insurance depends on many factors, and some policy types are more expensive than others. Before you purchase any insurance policy, compare quotes from a few different insurance companies to find the best coverage at the most affordable rate."

Which insurance companies offer coverage for construction businesses?

There are many reputable insurance carriers that sell coverage to construction businesses, including:

Erie offers contractor business insurance, with policies covering pollution liability, builder’s risk and workers’ compensation. Policies also cover damage from earthquakes, employee theft and water backup.
The Hartford offers custom insurance solutions tailored to construction businesses, including multiple coverage options such as builder’s risk insurance, installation coverage and contractors’ pollution liability coverage.
Liberty Mutual has been insuring construction businesses for more than 100 years. The company offers unique benefits to policyholders, like dedicated service teams, construction attorneys and risk management resources.
State Farm was ranked second among commercial insurance companies for overall customer satisfaction by J.D. Power. State Farm offers a variety of policies for construction businesses and contractors, such as completed operations coverage and surety bonds.

How do you choose the right construction business insurance?

To find the best construction company insurance carrier, it’s important to compare multiple companies. Consider the following when comparing insurance for construction companies:

Coverage options: Look at the coverage options and choose an insurer that offers the types and amounts of coverage you need based on your potential risks.
Customer satisfaction: Look at a company’s reputation and customer satisfaction ratings from reputable industry organizations, like J.D. Power and the National Association of Insurance Commissioners (NAIC).
Financial strength. Choose an insurance company that has an excellent or superior financial strength rating from AM Best. Financially stable insurers can meet policyholder obligations and pay claims.
Online tools. If you prefer to handle your insurance needs online, look for insurance companies that offer online tools, such as policy management, claims, live chat and risk management resources.
Cost. Before you purchase business insurance, get personalized rate quotes from a few different carriers. This will help you find the cheapest premium for the type and amount of coverage you want.

How can construction businesses get the best insurance coverage?

Use these strategies to get the best insurance coverage for your construction or general contractor business:

Consider your unique risks. Think about the risks that your business faces based on your industry, services, location and number of employees. Purchase policies that cover the potential risks you face and choose coverage limits that offer adequate financial protection.
Find out what coverages are required. Your construction business might be required to carry certain types of insurance to satisfy local laws, client requirements or lease agreements. Make sure to get the policies you need and provide certificates of insurance to relevant stakeholders, like your landlord.
Read the fine print of your policy. Every commercial insurance policy has different exclusions. It’s important to read the fine print of your policy so you understand what is and isn’t covered. You might need to purchase other policies or add endorsements to fill gaps in your basic coverage.
Compare quotes. The cost of business insurance depends on many factors, and some policy types are more expensive than others. Before you purchase any insurance policy, compare quotes from at least a few different insurance companies to find the best coverage at the most affordable rate.

What our expert says

Q: What’s one of the big benefits of having the right small business insurance?

Brian White Vice President of Product Strategy at specialty insurer AmTrust Financial

"The right insurance policies enable stability and peace of mind, allowing business owners to focus on what they are most passionate about and do best – growing and running their business – without fearing how these unexpected events could impact them financially."

Frequently asked questions

What insurance is legally required for construction businesses?

Most states require workers’ compensation insurance and commercial auto insurance. Requirements vary by state and business structure.

Does general liability insurance cover subcontractor damage?

General liability may provide limited coverage if subcontractors are listed as additional insureds. Often, subcontractors need their own insurance policies.

Can construction businesses bundle insurance policies?

Yes. Many insurers offer business owner’s policies (BOPs) that bundle general liability and property insurance, often at a lower cost than purchasing the policies separately.