A contractor’s day-to-day work is a perfect storm of risks. They have to think about injuries on the job, destruction of a client’s property, loss or theft of tools, and more. This is where construction insurance would help. A claim could very easily put a construction contractor out of business, and even if the claim is dropped the legal fees alone can mean bankruptcy.
Unlike an office where most of the work takes place in one location, a construction contractor’s job is spread out to different sites and includes several clients, subcontractors, and workers. This multiplies the number of potential claims. Construction contractors insurance helps such businesses minimize that risk.
Construction contractors insurance is useful for a number of scenarios.
Injuries happen, making workplace health & safety critical to your business. In Canada, over 40,000 workers get hurt each year from falls alone. The Workplace Safety and Insurance Board (WSIB) offers no-fault insurance for many Ontario employers, and most construction companies are required to register with the WSIB.
In most cases, employees who pay into WSIB can’t sue their employers, but there are instances in which you can be facing claims from people who aren’t your employees. This is where construction contractors insurance is useful.
For example, construction contractors insurance helps you if a homeowner injures themselves during the renovations and brings a lawsuit against your company for negligence.
And of course, if your company isn’t covered by WSIB, you want construction contractors insurance to have your back.
Keep in mind that workplace health and safety isn’t limited to physical injuries. Emotional and psychological workplace safety are pertinent as they can affect the actions of work employees.
Running a construction company without construction contractors insurance to cover potential property damage is a foolish strategy.
When you’re in the business of tearing down walls, it’s only expected that there’ll be a few “unplanned” demolitions as well.
And you’d better believe that a homeowner whose reno budget is already stretched thin will come looking for compensation. When that happens, you’ll be quite relieved to have the right construction contractors insurance.
Construction contractors insurance isn’t just for a dented front door or a smashed window. It can also help you with claims you didn’t even know you could be confronted with like a client’s neighbour accusing you of damaging their property.
In 2014, an Edmonton homeowner claimed that work on the property next door caused $10,000 worth of damage to his home, including a collapsed fence and a sunken sidewalk.
Just this year, a woman in Regina claimed construction on a nearby school, which included heavy drilling, caused cracks in her house’s foundation and ceiling.
Even if accusations like this go to court, it’s very expensive to prove that you’re blameless. Construction contractors insurance can be a big way to offset those costs.
Property Damage or Theft
Aside from covering damages to a client or third-party’s property, you also want coverage for your office to be included in your construction contractors insurance policy.
If your office is burglarized and expensive materials are stolen or damaged, construction contractors insurance covers the cost of replacing them.
If your site burns to the ground, you’re going to need construction contractors insurance to not only help you rebuild but also pay the rent for a temporary location.
Which brings us to another way that construction contractors insurance comes in handy.
Let’s say something unfortunate like a fire or burglary does happen.
While your property insurance covers the cost of renting another office or fixing equipment, it won’t cover the revenue you lose while addressing the incident.
Including a business interruption policy in your construction contractors insurance minimizes the impact of such an event.
Auto Theft or Damage
A comprehensive construction contractors insurance package doesn’t just protect you when you’re at the office or on a site. It protects you while you’re in transit as well.
As a construction contractor, you rely on your vehicles to transport both your crew and materials from site to site. Losing even one car can hinder your ability to service your clients and put a project behind schedule.
Having construction contractors insurance for your vehicle ensures that if there’s an accident or some damage, your business isn’t paralyzed.
What Types of Insurance Should Construction Contractors Consider?
It’s important to consider the specifics of your construction company. Generally speaking, a construction contractors insurance package should contain the following policies.
|Construction Contractors Insurance Policies||What This Construction Contractors Insurance Covers|
|General liability insurance||● Personal injuries to clients
● Damage to a client’s property
● Settlements for claims of libel or slander
|Property insurance||● Rebuilding costs after a flood, fire, etc. destroys company property
● Replacement/repair costs after a burglary
● Rent for a temporary office building
|Commercial Auto insurance||● Cost of repairs or replacements after theft or damage of a company vehicle|
|Equipment breakdown insurance||● Repairs for company equipment, i.e. heavy-duty construction equipment, power tools|
|Cybersecurity insurance||● Assessing and repairing a breach
● Credit monitoring
● Legal fees
|Business interruption insurance||● Covers lost revenue from a business interruption due to a cyber breach, fire, burglary, etc|
|Completed operations insurance||● Covers claims that arise from incidents that occur after the work is completed, i.e. fire due to a bad installation|
Table: The Different Types of Construction Contractors Insurance
While this list covers some of the basic insurance policies a contractor should have as part of their construction contractors insurance coverage, the specific needs of every business will differ.
Why Does a Construction Contractor Need To Think About Things Like Cyber Insurance?
Your work may focus on the physical world, but don’t underestimate how important the virtual world is to your business as well.
Your network holds sensitive financial information, passwords, customer data, scheduling information, and more.
If your network is held hostage, there goes your ability to schedule your workers, communicate with customers, and collect payment. Cybersecurity insurance protects you in the event of a data breach and helps you get back to work. Lessons can be learned from the Equifax cyber breach, which cost the company $439 million ($125 million of it to be covered by insurance).
How Much Does Construction Contractors Insurance Cost?
Construction contractors insurance costs about $500 per year for a $1 million policy for most companies. This number does go up for companies in hazardous areas like hot tar roofing and demolition.
What Are Different Segments That Construction Contractors Insurance Covers?
Construction contractors insurance is useful for a number of different skilled workers and businesses including:
- Alterations, renovations or repairs
- Appliance repair
- Antenna and satellite installation
- Appliance repair
- Cable installers
- Ceiling installations/renovations
- Chimney cleaning
- Decks and fencing
- Doors, windows, siding, awnings
- Drywalling, plastering and lathing
- Eavestroughs and downspouts
- Floor covering installations/renovations
- Glass (Glazier) Installation
- Heating equipment and combined air conditioning (HVAC)
- Interior decorator
- Lawn Sprinkler
- Industrial machinery
- Masonry (e.g. bricks, stone, marble)
- Road construction
- Sheet metal
- Sign installation
- Swimming pool
- Solar energy contractors
- Tile work
- Tree removal, trimming and pruning
- Window cleaning
What Sorts of Incidents Do Construction Contractors Insurance Protect a Business From?
You’d be surprised at how useful construction contractors insurance can be.
Take the following example from ENCON Group of a company with pollution liability insurance.
The insured installed a new tank and furnace at a residence. After the project was done, the homeowners reported a strong smell of fuel.
It turned out there was a leak caused by a cracked fitting. The homeowner’s property insurance covered the clean-up, but then came after the business owners whose insurers worked out a settlement and paid $4,500 in defence costs for them.
Consider another example from ENRON. A cottager fell about fifteen feet from their deck and became a paraplegic due to their injuries. Sounds like a blameless accident, right?
Turns out the railing on the deck wasn’t up to code, causing the cottage to fall through. The contractor had to pay a settlement of $1.5 million.
In both of these scenarios, construction contractors insurance prevented claims from seriously jeopardizing or bankrupting the contractor’s business.
Construction Contractors Insurance Is a Sign of a Reliable Contractor
It’s common sense for a contractor to have construction contractors insurance from a risk management perspective, but it’s also good business sense. If your business wants to land large commercial contracts, you’ll need suitable insurance to even be considered.
Even if your construction business is largely focused on home renovations, you’ll find your uninsured company eliminated by wary homeowners. Thanks in part to media coverage, homeowners are getting smarter about what their personal insurance covers during a renovation.
This means that more and more homeowners will require a contractor to be licensed and have the appropriate insurance to protect their interests.
If you want your construction contracting company to not only survive potential claims but thrive as well, purchasing a construction contractors insurance policy is a must.
List of Resources:
- Occupational Health and Safety Act, R.S.O. 1990, c. O.1
- WSIB Ontario
- Workplace Safety Canada
- Canadian Centre for Occupational Health & Safety
- Labour Program – Government of Canada
- Ontario Health & Safety Canada Magazine