If you’re in the construction business, it’s essential to have insurance to protect yourself from potential liability. There are several types of insurance you may need, and the cost can vary depending on the size and scope of your business. Here is an overview of some of the most important types of insurance construction businesses should have.
Construction Business Insurance Policy Options & Cost
The four most common types of insurance for construction businesses are as follows:
- General liability insurance protects you from lawsuits arising from injuries or property damage that occurs as a result of your business activities. General liability insurance can also help protect your construction business’ assets in the event of a lawsuit. Typical costs are $500 to $3,000 per year for a small construction business and $5,000 to $10,000 per year for a larger construction business.
- Commercial property insurance can help reimburse you for lost or damaged property caused by fire, theft, or other covered events. Average costs are $500 to $2,000 per year for a small business policy and $2,500 to $5,000 per year for a larger commercial property insurance policy.
- Workers’ compensation insurance helps construction businesses cover the costs of employee injuries or illnesses. This type of insurance can help businesses pay for medical expenses, rehabilitation costs, and other related expenses. Workers’ compensation insurance is required in all states except Texas. Workers’ compensation insurance typically costs between 1% to 1.5% of your total payroll costs.
- Business income insurance is sometimes called business interruption insurance or business continuity insurance. This insurance helps businesses recover from certain losses caused by events such as property damage, theft, or business interruption. This type of insurance can help businesses cover the costs of not being able to operate for a period of time. It can also help businesses pay for expenses such as employee salaries, rent, and other ongoing costs.
Typical costs are $500 to $2,000 per year for a small business policy and $5,000 to $25,000 per year for a larger commercial property insurance policy.
Other types of business insurance to consider based on the specifics of your construction business include:
- Product liability insurance helps businesses protect themselves from lawsuits that may arise due to products that they sell. Product liability insurance typically costs between $1,000 and $5,000 per year.
- Professional liability insurance, also known as Errors and Omissions (E&O) insurance, helps professionals protect themselves from lawsuits. Typical costs are $1,000 to $2,500 per year for a small construction business, and $5,000 to $10,000 per year for a larger construction business.
- Employment practices liability insurance, also known as EPLI, helps construction businesses protect themselves from lawsuits that may arise from the way they employ their staff.
- Cyber liability insurance protects you from lawsuits that may arise from a data breach or other cyber incident.
- Business identity insurance protects your business from theft or misuse of your company name or logo.
- Commercial auto insurance and commercial fleet insurance protect you from lawsuits that may arise from accidents involving employees while driving for work. Vehicle insurance typically costs between $500 and $5,000 per year.
- Key person insurance or key man insurance protects your construction business from losses that may arise from the death or illness of a key employee,
- Equipment breakdown insurance can help pay for the cost of repairing or replacing damaged equipment,
While this list of insurance options covers most construction businesses, you may be required to purchase additional coverage depending on the specific nature of your construction business. Therefore, it is important to speak with an insurance company to determine which policies are right for your business.
The cost of business insurance will vary depending on the type and amount of coverage you purchase. However, business owners can expect to pay a few hundred dollars per year for general liability insurance.
It is essential to talk to your insurance company to ensure you have the right coverage in place for your construction company.
How Much Insurance Should a Construction Business Have?
This is a difficult question to answer, as the amount of insurance you need will vary depending on the type of services you offer and the size of your company. That being said, most insurance experts recommend that business owners purchase enough coverage to protect their assets in the event of a lawsuit.
When shopping for liability insurance, be sure to ask your insurance company about the coverage limits and supplemental coverage options available.
In summary, insurance is essential for any business, but it is particularly important for construction businesses. As a result, construction businesses should ensure they have enough insurance to protect their assets in case of a lawsuit. The best way to determine how much coverage you need is to speak with an insurance company or agent.