Insurance Covers for The Construction Industry
Before undertaking a construction project, you need to be aware that the law requires that you obtain construction insurance for the construction project. In fact, in some cases you’re required to take a specific kind of construction insurance before you get started on the construction work.
Construction insurance policies provide cover for natural disasters, material, employees, risks as well as your own business. The insurance industry in construction with the construction industry try and update insurance policies on offer in order to provide coverage for a variety of unique situations.
Below is a list of some of the most commonly used construction insurance covers available for the construction industry.
Contractor Liability Insurance
This type of insurance cover is designed to provide protection against property damage that happens on the job as well as accidents and a whole list of injuries. It is not uncommon to have construction workers inadvertently damage property by mishandling tools and materials.
Builder’s Risk Insurance
This type of insurance policy will only pay for the damages and won’t exceed the coverage limit. So how much does it cost? The limit should be an accurate representation of the value of the completed structure, that is, all labor costs and materials but does not include the land value.
In certain situations, extensions of coverage might be provided. There are also exclusions that are included in the builder’s risk insurance. One such exclusion that shouldn’t be ignored, excludes protection from damage that results in a faulty design, workmanship, planning, and materials.
This type of insurance cover protects the owner against possible losses that are occasioned by the contractor failing to deliver the project based on the established agreement. There are times when a contractor declares himself bankrupt or defaults. In that scenario, the insurance kicks in and is responsible for compensating the owner for any losses incurred.
Hold Harmless Agreement
This type of insurance cover varies depending on the jurisdiction where it’s being executed. The hold harmless insurance cover may be used by contractors to protect themselves by claims filed by companies or corporations that are not party to the agreement. There are three types of hold harmless agreement types:
- Broad Form Hold Harmless Agreement
- Intermediate Form Type
- Hold Harmless Agreement Limited Form
A bid bond refers to a guarantee that the contractor provides the project owner with stipulating that the contractor is able to take on the project and implement it once chosen during the bidding process. If the contractor fails to honor the bid the project owner is guaranteed to receive compensation.
Professional Liability Insurance
A professional liability insurance is used to cover any errors that might happen due to the contractor’s negligence while going about their work according to the terms of the specified agreement. This insurance cover offers protection against litigation costs that might be incurred due to omissions and errors that might lead to the loss of a client’s investment.