What is the Cost of Construction Insurance?
Running a construction business often comes with a number of complexities that those not involved with the business may not be familiar with.
Among those complexities is the ability to manage and handle soft costs associated with construction jobs. Soft costs refer to those outside the spectrum of labor and materials. Among the most important soft costs to consider is that of construction insurance.
Without a doubt, there are quite a few hazards and general liability concerns associated with working on a construction site. Indeed, general contractors do have to protect themselves from losses resulting from any potential liabilities. Construction liability insurance may be able to offer the blanker protection to safeguard against these liabilities.
Construction Insurance Policies
In general, the low end of construction insurance policy costs will be about 4% of the overall value of the contract signed. It is not without question that the cost can rise up to about 8% of the contract value. So, with a $150,000 contract, insurance costs may range from $6,000 to $12,000.
These costs are related to general construction liability coverage. There can be other insurance requirements necessary for certain jobs but not for others. For example, certain vehicle liability insurance policies may be required. In other scenarios, workman’s compensation insurance may have to be factored in as well.
Again, for general construction general liability coverage, a cost of 4% to 8% is what most in the construction business are going to have to pay; at least this is the case for now.
There are major concerns the cost of construction insurance may (and likely will) increase in the near future, and there are a few factors capable of contributing to this increase. Regulatory changes expanding the minimum amount of professional liability coverage in a policy are expected to be the biggest culprit of any future increase. Changes in state laws regarding construction site management can also yield a ripple effect that might increase costs.
The more minimum requirements in insurances for contractors, the more comprehensive it becomes. A comprehensive contractor insurance policy is going to have higher premium costs. After all, the insurance company is put in a position where the potential to have to pay out more increases due to increased general liability.
Construction, Insurance & Requirements
To become a licensed contractor, there may be a minimum requirement of coverage necessary to be approved or renewed for said license. How much construction insurance you will need and, hence, how much the insurance will cost, ends up being based on quite a few factors. The exact type of contracting work and the category of construction jobs you are performing is going to factor into the type of insurance you must procure. The number of employees you might have working for you (who will require workers compensation coverage) and the size and scope of the construction projects you are involved in further play a role in how much the cost of insurance for construction is going to be.
Rough estimations can help construction professionals and general contractors gain some insight into how much construction insurance or contractor insurance can be expected to cost their business. Of course, rough estimates only have so much value. At some point, there does need to be a specific figure quoted to the construction business so the owners can budget for the related expenses and premiums.
The way to determine more specific costs is to request a quote from a reputable provider of insurance for construction. A quote is an estimate of what the insurance premiums can be expected to be along with what the insurance coverage is going to include.
Reviewing any construction insurance estimate thoroughly is a must. No one should make any decisions on whether to accept or reject a policy based on only a cursory understanding of what it offers. Getting the right construction insurance is too important to a business to treat the matter errantly.