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Construction & Contracting Business Risk: An Overview for Agents

Construction Is Among the Riskiest Industries

of all worker fatalities were in construction
of fatal injuries involved contractors

Construction sites are dangerous places. OSHA reports that of the 3,929 worker fatalities in the private sector in 2013, 796 were in construction, which accounts for about 20 percent of all work-related deaths. The industry also saw a significant rise in nonfatal injuries, increasing from 12.6 to 16.1 per 10,000 workers, according to the Bureau of Labor Statistics. These numbers make it clear that your construction clients need Workers' Compensation Insurance, but don't forget that accidents happen to innocent bystanders, too. When a business partner or customer gets hurt, small-business owners need General Liability to cover medical bills and legal fees.

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Important Insurance Policies for Construction & Contracting Clients

All small businesses have insurance coverage needs unique to their industries. The risks your construction and contracting clients face dictate the appropriate policies for them. Knowing your client's specific needs can help you find coverage quickly, making you a trusted ally as they develop a risk management plan.

The policies below are key coverages your construction and contractor clients should consider. Each protects your client's business in a different way:

General Liability Insurance

This policy steps in when a third party (i.e., a non-employee) sues your client over bodily injuries sustained on their commercial premises or property damage your client allegedly caused. It can reimburse your client for legal expenses, including judgments or settlements. For example, if your client breaks a window while working on a customer's roof, General Liability Insurance may provide compensation for the claim.

Property Insurance

Construction workers and contractors might have office space, workshops, tools, materials, and expensive equipment that all need protection. Property Insurance compensates your client when these business assets are lost or damaged because of fire, theft, or windstorms.

Workers' Compensation Insurance

The physical labor and potential exposure to hazardous materials in construction means your client and their employees run the risk of occupational illnesses and injuries. Workers' Compensation covers your client's employees' medical costs and lost wages when work injuries take their toll. Workers' Comp policies are often state mandated, but even if they aren't, many of your client's contracts will require this coverage.

Commercial Auto Insurance

Many contractors transport tools, equipment, and people to worksites. If your client does, they should consider purchasing a Commercial Auto policy. This is true even if your client uses their personal vehicle for work purposes. If your client is in an accident while driving their business vehicle, Commercial Auto may pay for the damages to their car and the damages their vehicle caused.

Umbrella / Excess Liability Coverage

Contractors are sometimes surprised by the amount of General Liability a client or general contractor requires them to carry. Excess Liability can help your clients meet these requirements by allowing them to draw on extra coverage when their GL limits are surpassed. Umbrella Insurance is a type of excess liability that extends the limits of multiple liability policies at once.

Some contractors may work out of their homes. It's important they know that a Homeowner's Insurance policy does not adequately protect their home-based business. Because construction and contracting risks have some unique characteristics, two common small business insurance policies are not a good fit for these businesses. The first is Errors and Omissions (E&O) Insurance , which covers the insured when a third party claims they were harmed by the insured's negligence. Your construction and contracting clients usually have this coverage through their General Liability Insurance. The second is a Business Owner's Policy (BOP). A BOP bundles GL and Property Insurance in an effort to keep rates low. The construction industry is too high risk to qualify for a BOP.

Tips for Insuring Construction & Contracting Clients

Roofers, contractors, and the like work in a labor-intensive industry and face lots of on-the-job risks. If you have clients in construction, you'll want to highlight the importance of:

Insuring equipment

Your client may not have an office space, but if they have tools that are essential to their work, they need to include those on their Property Insurance.

Insuring employees

You'll want to know if your client hires W2 or 1099 workers and, if so, help them determine whether they've classified those workers properly. Federal fines for misclassification can be very expensive.

Giving your clients a heads up on these exposures will save them money in the long run.

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