July 7, 2022 Last updated July 7th, 2022 678 Reads share

5 Things to Know About Construction Insurance

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Because of the risks involved in construction activities, most, if not all countries, require construction companies to have insurance. This form of protection enables organizations to pay for injured or killed workers and protect the business from all types of liabilities.   

There are different types of coverage and policies offered by insurance companies. Depending on the project’s nature, location, and scope, some insurance coverage might make better sense than others.   

This blog discusses the basics of construction insurance, the different types, and in which situations and settings they work best. Read on for this insight. 


1. What Is COI in Construction? 

A certificate of insurance or COI is a document from an insurance company that validates a company’s coverage. The paper also contains the critical conditions of the policy, including the policy holder’s name, effectivity dates, coverage type, issuing company, policy limitations, and liabilities.           

COI in construction projects is required from all companies engaged in building structures regardless of the size. Its absence would mean that the client and workers, instead of the company, will assume the liabilities and costs of damages, injuries, and repairs incurred during the project.  

2. What Does Construction Insurance Mean? 

Insurance coverage in construction projects, often shortened to construction insurance, is not an actual insurance type. It’s an umbrella term referring to policies that protect stakeholders and other resources needed in construction projects. These include the workers, the company, contractors, and property owners.  

3. What Are The Most Common Types Of Insurance In The Construction Industry?  

Several factors impact the type of construction insurance a project requires. However, most territories in the United States demand businesses to purchase workers’ compensation insurance, which we will discuss further in the succeeding sections.    

Below are the most common insurance types companies must purchase if they want their construction business to expand:  

  • General Liability Insurance 

This policy covers physical injury and property damage incurred during a construction project. Most insurance companies protect current and finished projects, otherwise known as completed operations liability.   

Most companies, including general contractors, remodelers, and developers, avail themselves of this policy because of its broad coverage. These include craftmanship issues, job-related injuries, and advertising injuries.    

  • Builder’s Risk Insurance  

This coverage is known by various names, including course of construction (COC) or construction all-risk insurance. This safeguards buildings and structures being built, including materials and temporary structures. Residential and commercial properties are also covered from damages caused by fire, vandalism, and harsh weather. However, there are limits to what service providers offer. That’s why it’s crucial to read the terms before signing up.   

  • Professional Liability Insurance  

This coverage is also called errors & omissions insurance. It aims to protect professionals such as architects and engineers from lawsuits due to miscalculations, design issues, defective materials, or other mistakes impacting the structural integrity of the building.   

  • Commercial Auto Insurance 

Construction projects also use transportation to carry and transfer bulky materials. Suppose a contractor is found liable for injuries and damages caused by any of these vehicles. In that case, this policy may be able to cover a portion of the losses, depending on the circumstances.  

Note that this type of insurance isn’t exclusive to construction companies, as logistics companies and other organizations that run a vehicle fleet can also avail of this coverage. This insurance type often includes vehicle repair costs, medical bills, and lawsuit settlements. More importantly, it can cover expenses caused by injuries and damages caused by uninsured motorists.  

  • Workers Compensation Insurance  

Most states require companies, even those not involved in construction works, to purchase this type of coverage for their employees. The workers’ compensation insurance may cover hospitalization and rehabilitation costs, missed wages, legal fees, and funeral and death benefits of work-related injuries and illnesses.      

  • Excess Liability  

If your company wants to increase the cost of its general liability limits, excess liability coverage can be handy. It also covers other policies, including commercial auto, workers’ compensation, and general liability protection.    

  • Contractors’ Equipment Policies  

As most construction companies struggle with theft and equipment damage, some organizations prefer to have this coverage. Most policies not only cover the pieces of equipment you currently use but also include those that have yet to be utilized. It may involve fire safety equipment and other costly construction tools.     

  • Inland Marine Insurance  

Inland marine insurance safeguards materials, equipment, and products shipped or transported on the ground and in the sea. While not exclusive to construction, organizations that avail of this protection will have their high-value resources covered during transit. Companies can purchase this as an add-on or independent of other types of business insurance coverage.      

  • Other Insurance Coverage    

More extensive operations may require special insurance coverage for incidents such as contractors’ pollution liability. In some instances, construction companies may tap insurance providers to help them with surety bonds for ensuring project completion or contractor license bonds to guarantee compliance with their license’s rules.    

4. How Is Construction Insurance Calculated?  

While insurance providers offer policies that carry different terms and conditions, the factors influencing a company’s premium payment and coverage are often based on elements like the insured’s credit record, the contractor’s history, the scope and location of the business, and the deductibles. The level of risks involved and their likelihood will also be considered.  

5. Why Does Construction Insurance Matter?   

Contractors who don’t carry a certificate of insurance won’t be able to earn a client’s trust and are therefore at risk of losing their business. Apart from being unable to attract clients, these organizations may be forced to shut down if something goes wrong.  

Here are the most compelling reasons construction businesses must purchase insurance coverage: 

  • To maintain reputation:

    The construction sector is full of uncertainties and is one of the most dangerous industries worldwide. A minor accident can bring down a company even if it’s shown exemplary performance for years. Insurance coverage protects the business from this unfortunate situation.      

  • To prevent closure:

    Lawsuits and out-of-court settlement costs can be extremely high in cases of construction-related accidents and damages. Having this type of protection helps businesses tide through these challenging times.    

  • To remain compliant:

    Government and industry standards mandate businesses to obtain specific coverage under the law. Failing to observe these requirements may cause your company to be sued for particular violations.     



Contractors and other companies in the construction sector must carry insurance coverage for risks such as injuries, property loss, or damages that may occur during and even after projects.   

Whether you’re a contractor or a client, it’s crucial to do your homework and identify the state and federal requirements applicable to a construction project before ensuring compliance with these rules.

Gabriel Simmons

Gabriel Simmons

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