The Basic Principles of Construction InsuranceAssociation of Construction and Development
December 10, 2012 — 1,824 views
The Basic Principles of Construction Insurance
Construction jobs typically come with a high amount of risk for contractors. They invest a lot of money and time into materials, labor, equipment and various other things. To protect this investment from potential damage and disasters, smart contracting companies choose to cover their jobs with construction insurance. Below you will learn what construction insurance is, and what it typically protects contractors from.
One of the most common things that construction insurance covers is the possibility of the complete destruction of the project being worked on. This will cover natural disasters such as storms and the flooding and wind damage they may cause, as well as fire damage that could occur. Just as fully constructed homes and buildings are constantly at risk from these elements, so are ones that are in the process of being built.
Construction insurance will also oftentimes cover the legal fees and loan payments that can continue even after a construction site is destroyed. Just because something damages a work site does not mean that the company working on it does not need to still pay for their materials, bills and legal fees in the meantime. Some types of construction insurance policies will cover these expenses. This is a very smart feature to have in a policy, as a failed project will not influence the contractor's ability to continue working on other projects. This could be delayed significantly if they are not covered in this way and they have to spend time trying to get their finances in order.
Errors in either existing equipment on the job site that is left by others or the equipment that the contractor uses themselves may also be covered in a policy. Machines and any systems involving water or electricity are prone to failure. If this should happen and damage to the property being worked on is caused, contractors can be held liable. This is why having insurance to cover such issues is vital.
It is also important to note that construction insurance policies will likely vary greatly between providers. Each plan will have very specific guidelines and terms. It is encouraged for a contractor to evaluate all of their options and get a policy that is fine tuned to what things they need covered on their job sites.
These are just a few of the main things that construction insurance can cover for contractors as they work on projects. Having this type of insurance is absolutely necessary for any contracting company that wants to ensure they are protected in the event of emergencies or damage.