Course Of Construction Insurance Is Better Than General Liability

Is Course Of Construction Insurance Better Than General Liability? A 2022 guide

Choosing the best insurance coverage to carry between insurance policies has always been debated. This review should help you clarify some of them and understand why the policies discussed here are both usually needed for a contractor’s project. 

As a general contractor in the construction industry, you need the best insurance policies as coverage when handling construction projects. They prevent possible financial losses and other associated risks when accidents happen at the construction site. 

General liability and Course of Construction are vital insurance policies that general contractors must carry. Both policies provide different coverage during a construction project. The first one covers claims for damages from a client or third party, while the other protects your building and equipment during construction. None of these are better than the other; they are helpful for different things.

Let me tell you more:

What is the Course of Construction Insurance?

Builder’s risk insurance (also known as course of construction) is a vital property insurance policy that protects an organization’s insurable interest, materials, equipment, etc., from damage and theft. Builders’ risk policies become essential when items sustain physical loss or damage from a covered peril, excluding employee theft.

Builders risk insurance provides proper coverage and protects every participant (general contractors and independent contractors) on the job site, from the project’s inception until it’s completed or handed over to property owners.
Builder’s risk insurance covers financial implications from fire damage, theft, adverse weather conditions, damage to contractor’s tools, etc.  

It also protects temporary structures like scaffolding and fences and mitigates the loss of profit caused by any of these situations. Builder’s risk coverage applies to all construction projects: a new construction project, major renovations, refurbishment, restructuring, etc. There are different risks associated with constructing and building projects. Carrying the right coverage like the builder’s risk policy can cut costs and prevent major financial loss from these risks.

What is General Liability Insurance?

Most states legally require this insurance alongside workers’ compensation insurance. The policy provisions cover any accident on the job site resulting in third-party bodily injuries and property damage. It only covers the policyholder and not everyone involved in the project. Although an independent contractor can be an additional insured in a general contractor’s business owner’s policy, most insurance experts say most builders should carry their own policy. 

Business owners with this policy enjoy coverage from damages including third-party bodily injury, property damage, advertising injury, etc., excluding external events. It covers the medical payments and legal fees for lawsuits resulting from bodily or property damage you caused while on the job site. 

However, the policy includes some coverage exclusions like medical costs or lost wages for an injured employee, intentional damage, illegal activities, errors, omissions, etc. Workers’ compensation insurance policy covers the financial implications of injured employees, and most states require that business owners carry the policy alongside the general liability policy.

Do You Need Both?

Contractors must carry both insurance policies as the Builder’s risk insurance protects the building and equipment, while the general liability policy protects the contractor and his business. The general liability policy and other additional insurance should provide needed coverage against possible risks for independent contractors not in charge of the construction project.

Builders Risk Vs. General Liability Insurance Policy

Apart from the significant difference in coverage for both policies, the builder’s risk insurance differs from the general liability policy in validity duration. Builders’ risk property coverage only covers buildings under construction. It doesn’t extend to completed buildings. Thus, the general contractor may not be protected from damages after project completion. 
The general liability policy provides coverage for contractors as long as they continue to operate their business. It doesn’t have validity duration as long as the contractor renews the coverage with his insurance company and keeps to term. While both insurance policies protect businesses from different risks, they also have cons. We look into this below:

Pros of Builder’s Risk Insurance

Like every other property insurance, this policy protects the financial assets of a business during projects. It reduces loss incurred from a covered peril and pays for equipment replacement costs, repair costs, debris removal fees, cleanup costs, etc. It is also not compulsory for everyone involved in the project to carry out this policy. As the general contractor’s policy covers everyone, thereby saving costs.

Cons of Builder’s Risk Insurance

While the policy covers most natural disasters and damage to equipment and property, it doesn’t cover employee theft or bodily damage. It only protects the job site and equipment, not the contractor and other workers involved in the project. Employee injury, third-party injury, or property destruction can also leave huge financial debt on the business. Legal defense and judgment fees, employee medical treatment costs, etc., are some of the risk exposures the business could still face. This makes carrying additional insurance like workers’ compensation policy essential. Also, the coverage has a validity period and stops immediately after the project is completed and handed over to the owners.

Pros of General Liability Policy

The general liability policy is a vital business insurance every contractor must carry, so most states demand it. The policy covers third-party medical expenses due to bodily injury caused while handling a specific job or legal fees incurred from a lawsuit due to property damage. Unlike the builder’s risk insurance, this policy isn’t a specialized type, and it remains valid throughout a contractor’s career.

Cons of General Liability Policy

The policy has a lot of limitations. It neither protects the job site and equipment nor the contractors involved in the project. The policy is mainly concerned with the third party. Also, a single policy doesn’t cover everyone involved in the project. Every independent contractor must have this policy coverage protection against possible liability.

Advantages of Working With an Independent Insurance Agent

Insurance products can be seamless and cost-effective if you follow the right channel. Leveraging an independent insurance agency is one of the effective ways of getting the best deals when purchasing policies. It comes with the added benefit of swiftness, as you can get free quotes on insurance products from multiple insurance companies and compare rates in just a few minutes. Builders risk is one of the most reputable agencies you can trust for satisfactory services.

What are soft costs in builders’ risk insurance?

These costs are not directly related to construction costs (labor, building materials) and are attributed to a covered loss. They include advertising and promotional expenses and interest on construction loans.

Do I need homeowners insurance during construction?

Homeowners insurance is for completed buildings. It doesn’t protect buildings under construction. Thus, contractors in charge of a project don’t need to bother about this policy. 

Conclusion

Having the right insurance can protect you from any job-site risk. Theft, damage, natural disaster, etc., and it won’t cost you much with the right provider. Third-party claims from property damage and injury are also covered with a basic general liability insurance. Carrying additional policies can also save you from claims due to negligence, omissions, or errors like faulty design, auto crashes, etc.