A Guide to Understanding Insurance for Construction Projects
- Matthew Evinger
- Jun 8, 2023
- 4 min read

Construction projects involve many risks, such as accidents, property damage, lawsuits, theft and weather events. That’s why it’s important to have adequate insurance coverage to protect your business and your clients from potential losses. In this blog post, we will explain some of the common types of insurance for construction projects and why you need them.
General Liability Insurance
General liability insurance is one of the most essential types of insurance for construction projects. It covers bodily injury and property damage that you or your employees cause to third parties while performing your work. For example, if you accidentally break a window or injure a passerby while working on a project, general liability insurance can pay for the repairs or medical expenses.
General liability insurance can also cover legal costs if you are sued for negligence or faulty workmanship. For example, if your client claims that you did not complete the project according to the contract or that your work caused structural problems, general liability insurance can help you defend yourself in court.
The cost of general liability insurance depends on several factors, such as the type and size of your business, the scope and duration of your projects, your prior claims history and the amount of coverage you choose. According to Forbes**1**, the median cost of general liability insurance for contractors is $1,090 per year.
Builders Risk Insurance
Builders risk insurance, also known as course of construction insurance, is a specialized type of property insurance that covers buildings under construction. It protects the project owner and the contractor from losses due to fire, vandalism, theft, wind, hail and other perils that may damage the building or its materials during the construction process.
Builders risk insurance typically covers the following:
The building itself
Materials and supplies on site or in transit
Equipment and tools used for the project
Temporary structures such as scaffolding and fences
Soft costs such as permits, fees and taxes
Builders risk insurance does not cover:
Liability claims
Injuries to workers
Damage due to faulty design or workmanship
Damage due to earthquakes or floods (unless specifically added)
Normal wear and tear
The cost of builders risk insurance depends on several factors, such as the value and location of the project, the type and duration of construction, the level of security and safety measures and the amount of coverage you choose. According to The Hartford**2**, builders risk insurance typically costs 1% to 4% of the total construction budget.
Workers Compensation Insurance
Workers compensation insurance is a mandatory type of insurance for most employers in the United States. It covers medical expenses and lost wages for employees who are injured or become ill due to their work. It also provides death benefits for the dependents of workers who die from work-related causes.
Workers compensation insurance protects both employers and employees from the financial consequences of workplace accidents. For employers, it reduces the risk of being sued by injured workers or their families. For employees, it ensures that they receive adequate compensation and care for their injuries or illnesses.
The cost of workers compensation insurance depends on several factors, such as the number and classification of employees, the payroll size, the industry and location of your business, your prior claims history and the amount of coverage you choose. According to Forbes**1**, the median cost of workers compensation insurance for contractors is $3,175 per year.
Other Types of Insurance for Construction Projects
Depending on your specific needs and preferences, you may want to consider other types of insurance for your construction projects. Some examples are:
Commercial auto insurance: This covers vehicles used for your business, such as trucks, vans or trailers. It protects you from liability and property damage claims if you or your employees cause an accident while driving for work purposes.
Contractor’s tools and equipment insurance: This covers tools and equipment that you own or rent for your projects. It protects you from losses due to theft, vandalism, fire or other perils that may damage or destroy your tools and equipment.
Errors and omissions insurance: This covers professional liability claims arising from errors or omissions in your design or consulting services. It protects you from lawsuits if your clients allege that your advice or plans caused them financial losses or failed to meet their expectations.
Environmental insurance: This covers pollution liability claims arising from your work activities. It protects you from lawsuits if your work causes environmental damage or contamination to third parties.
Commercial excess umbrella insurance: This provides additional liability coverage
Conclusion
Insurance for construction projects is a vital part of risk management for contractors and project owners. It helps protect your business and your clients from unexpected losses and lawsuits that may arise during the construction process. By choosing the right types of insurance and coverage amounts, you can ensure that your projects are completed safely and successfully.
I hope you enjoyed reading this article and learned something new. To find out more about the best construction insurance options, contact Alex Insurance Agency 407-847-2539 or use our online Quote Now platform. We can help you compare quotes from different providers and customize a policy that suits your budget and goals. If you have any questions or comments, please feel free to leave them below. Thank you for your attention and have a great day!
: Metz, J. (2023). Contractors Insurance: Cost And Types You Need. Forbes. Retrieved from https://www.forbes.com/advisor/business-insurance/contractors-insurance/
: Construction Insurance | Zurich Insurance. (n.d.). Retrieved from https://www.zurichna.com/industries/construction
: What Is Builder’s Risk Insurance? | The Hartford. (2021). Retrieved from https://www.thehartford.com/insights/construction/builders-risk-insurance
: 9 Reasons Why Construction Projects Should Be Insured. (n.d.). Retrieved from https://www.builderspace.com/9-reasons-why-construction-projects-should-be-insured
: Why Insuring Your Construction Projects Is A Must. (n.d.). Retrieved from https://theconstructor.org/others/why-insuring-your-construction-projects-is-a-must/570358/
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