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Commercial insurance isn’t just essential for construction businesses, it is often required — either by the state or client — for contractors and developers.
Whether you’re a plumber, electrician, carpenter or general contractor, these five steps will help you figure out what type of small-business insurance you need, and give you the tools to compare your options.
1. Understand your risks
Business insurance all comes down to risk. Risk of injury. Risk of damage. Risk of lawsuits.
Evaluate the hazards your business faces to better understand your coverage needs. That includes common risks, like injury or loss of income, as well as those specific to the construction industry, such as:
Damage to a building under construction due to theft or vandalism.
Project delays or overruns that result in a lawsuit.
Accidents or mistakes that result in damage to a customer’s property.
Stolen or damaged tools and equipment.
Consider how accidents, lawsuits and natural disasters could impact your business. The nature of your work, the size of your business, the city or state you work in and whether you have employees also play into an insurer's risk assessment.
2. Determine your policy, coverage needs
The following types of coverage are common for construction businesses. Your exact coverage needs will vary depending on your trade and business size, among other factors.
Type of insurance
What it covers
Third-party claims against your business for bodily injury, property damage, personal injury (libel or slander) and advertising injury (copyright infringement).
Legal fees and damages for lawsuits stemming from negligence, mistakes, inaccuracies or delays. This coverage is also referred to as errors and omissions insurance.
Vehicles used for work purposes. Coverage may encompass liability, physical damage, medical payments and uninsured motorists, but can be tailored to your needs.
Business property, like tools and equipment, that are stored off-site or transported from one location to another.
Medical and rehabilitation costs for employees who are injured or become ill on the job. Most states require this coverage if you have employees.
Buildings under construction that suffer property damage due to theft, vandalism, explosions or natural disasters. This coverage is also referred to as course of construction insurance.
Lost income, as well as payroll, loan payments and other expenses should your business be unable to operate due to a major disaster.
Damage to your business property, such as an office or warehouse space, due to fire, vandalism and other events. Typically covers the property itself, as well as any equipment or assets.
Some contracts may also require you to buy a surety bond, which acts as a guarantee that you will finish the project you've been hired for. If you don't, the insurance company who provided the bond will be financially responsible.
3. Shop for coverage
There are three main ways to shop for business insurance: contact providers directly, use an insurance broker or try an online marketplace. Each has its pros and cons.
Contact individual providers
You can buy a construction business insurance policy or contractor insurance policy directly from an insurance provider, either online or over the phone.
Some providers, like Progressive and Geico, use a third-party insurer for certain types of coverage. So while you may be able to purchase your policies from a single provider (and get a discount for bundling coverage), you may deal with two separate insurers for claims.
You decide which providers to reach out to for quotes.
You can get a quote and purchase a policy rather quickly.
Getting multiple quotes will be time-consuming.
You don’t get the support of a broker or agent to help determine coverage needs and limits.
Use an insurance broker
Brokers act as middlemen, doing the legwork for you by gathering quotes from multiple insurance agencies. They work to understand your business needs and can offer guidance on the types of coverage you need, which is especially helpful for new business owners.
A broker can help you figure out your coverage needs.
You deal with one person, rather than calling around to multiple insurance companies.
They often work on commission and may try to upsell you.
Brokers are under no obligation to find you the lowest rates.
Some brokers charge fees.
Try an online marketplace
Websites like CoverWallet and Simply Business are the online version of your traditional insurance broker. You answer questions about your business — like industry, trade, revenue and number of employees — and receive multiple quotes and coverage recommendations in a matter of minutes. The main difference: You don’t need to talk to an agent, though you can call to speak with one if you have questions.
Self-guided insurance shopping that yields quotes from multiple companies.
Option to talk to an insurance expert if you need assistance.
You get quotes only from insurance providers within the marketplace network.
Everything after the quote, including claims and customer service, is handled by the insurer, not the marketplace.
4. Compare providers
Prices can vary widely from one insurer to the next, even for the same coverage. Get multiple quotes from a variety of business insurance providers to ensure you get the best value.
Consider the following factors when comparing policies:
Policy coverage: What is and isn't covered by the policy? Note any differences between providers and policies to better compare them.
Limits of liability: What is the maximum dollar amount the policy will pay out? Some policies have two limits: per occurrence and aggregate over the life of the policy.
Price: What is your annual premium? Can you pay it monthly? And what is your deductible if you need to make a claim? Coverage limits and deductibles affect the price of the policy, so try your best to compare apples to apples.
Reviews: Read customer and independent reviews. Investigate how many complaints have been filed against each company and the nature of those complaints using sites like the Better Business Bureau and the National Association of Insurance Commissioners.
5. Purchase coverage, revisit regularly
When you purchase coverage, decide whether to pay your annual premium in a lump sum or in monthly installments. (You might get a discount for paying it all upfront.) Familiarize yourself with the claims process ahead of time, so you know what to expect should the need arise.
Most policies renew annually. When it comes time for renewal, make a point to review your coverage and get fresh quotes. As your business evolves, your insurance needs will, too.