Construction business owners face many challenges in running their companies safely, effectively and profitably. Scrambling to cover the cost of employee injuries, liability lawsuits, stolen tools and other business risks shouldn’t be one of them.

Fortunately, there is business insurance that can cover these types of incidents and others, providing financial protection so owners and employees can focus on projects.

Separate Policies for Customized Coverage

Because every construction company is unique in its structure, the way it operates, and the hazards in its industry and area, there are separate policies that can be purchased for different “exposures” to ensure that the business has all—but only—the coverage it needs.

There are five policies that are crucial for most construction companies:

1. Workers’ compensation insurance. Sometimes called workers’ comp or workman’s comp, this type of coverage is typically mandatory for businesses that have employees and may be required by a general contractor or landlord for a sole proprietor to start work. It helps protect a business if an employee is injured, contracts an illness or dies as a result of an on-the-job incident. It can cover medical costs, legal fees and lost wages related to the incident.
2. General liability insurance. Also referred to as commercial liability insurance, a general liability policy can cover damages and legal costs associated with injury claims by non-employees, damage to other people's property that was caused by the business, and medical costs associated with these incidents. Insurance typically won’t pay to repair faulty work, but can cover the resulting damage.
3. Business Owners Policy. Also called property and liability insurance, a business owners policy combines general liability insurance with coverage for company property. If a construction company owns or leases a building where they store tools or supplies, this type of policy can include add-on coverage for those items.
4. Commercial Auto Insurance. If a business owns or leases vehicles, this policy can provide coverage for legal fees and the medical costs of others if an employee is at fault in an accident. It can cover the cost of damages even if the vehicle is used for personal activities outside of its primary business use.
5. Umbrella Insurance. Every liability insurance policy has a maximum value that it will cover in the event of an incident. Umbrella insurance can cover costs that exceed the limit of another policy, subject to its own limit. Without it, the policyholder may be responsible for anything over the policy limit. Adding umbrella insurance may cost less than increasing the limit of a liability policy.

Understanding Policy Endorsements

To provide further flexibility in how a construction business is insured, some policies can be modified with what are called endorsements. Also referred to as riders or add-ons, these amendments modify the coverage provided by the policy.

With a general liability policy, for example, there are endorsements such as:

• Contractors Installation, Tools and Equipment. This add-on can cover things like company property, tools and equipment while at a job site, in transit, temporarily in storage or during installation.
• Hired and Non-Owned Auto Liability. This endorsement can provide protection when a business owner or employee drives a rented, leased, hired or borrowed vehicle for business purposes. It also provides protection when employees use their own vehicles to complete work tasks.
• Cyber Liability. This add-on can protect a business in the event of theft of sensitive employee data or client information, such as a stolen credit card number that results in fraud or might reasonably be expected to result in fraud.
• Employment-Related Practices Liability. With this add-on, there can be coverage if an employee files a claim or lawsuit related to inappropriate workplace behavior—things like wrongful termination, harassment or discrimination.
• Employee Benefits Liability. This endorsement can protect a business if errors or omissions are made in how an employee benefits program is administered, such as if the company fails to add an employee to its medical insurance and they are later denied coverage for a claim.

Proper Protection for Financial Security

Business insurance is easy to obtain and typically very affordable. Most companies will provide a free quote online or over the phone, and the necessary policies can be purchased the same way with immediate coverage.

Once the right coverage is in place, business owners and employees can come to work each day knowing that they’re protected should the unexpected occur.