Finding the right construction bonds can be tricky if you’re new to the business, but there are really only a few types to worry about for most jobs. Much of the diversity in the market comes from bond providers catering to niche needs larger developers might have on big projects. Getting started is as easy as understanding a small group of four or five bond options.
License and Performance Bonds
The two most basic types of construction bonds are license bonds and performance bonds. License bonds protect the project owner in the event your license is lapsed or there are similar credentialing issues with any subcontractors you hire. Performance bonds protect the customer if your performance causes them to miss milestones or otherwise incur damages due to setbacks that your business is liable for. Within the realm of performance bonds, there are also individual payment and supply bond options designed to protect the customer and your business in the event of disruptions to the raw material supply line or to your ability to pay subcontractors.
Maintenance bonds are also quite common, and they cover the ongoing maintenance of properties after construction is completed, providing for expenses related to design defects or other issues that cause maintenance costs to exceed the projections in the approved design for the project. This protects you and the client in the event of defects to the design or construction that aren’t immediately apparent at the conclusion of the project.
If you own a construction company, you need adequate insurance to protect your investment. You may not realize it, but there are two types of necessary coverage, and they aren’t interchangeable. Let’s take a quick look at each.
Builders Risk Insurance
A builder’s risk policy covers the contractor’s property, materials, and equipment where the construction is taking place. This policy protects the project until it is finished and the owner approves of the work. The policy also covers unexpected perils, such as weather events, vandalism, and theft. Examples of damage include:
- Lightning strikes and hail
- Explosions and fires
- Theft and vandalism from external sources
- Vehicles that crash into the building
If the damage was caused by flooding, it won’t be covered. In addition, coverage is excluded for any weather-related damage that resulted from property left unprotected. Most builder’s risk policies only cover the damage to property or materials of the insured contractor.
Contractors’ General Liability Insurance
This general liability insurance covers bodily injuries, accidents, and damage at the construction property. In addition, if you or your workers are accused of causing injuries or property damage at the site, general liability insurance will protect your business. It will also cover litigation from claims of libel, slander, or false advertising.
Both policies are critical to protecting your construction company.
Are you looking for construction insurance in Wayne, NJ?
If you’ve found it challenging to determine the coverages you need, here are four of the key insurance options that you should be sure to include in your policy.
General liability insurance is broad coverage in case a third party suffers bodily injury or property damage because of your business. If a lawsuit is filed against you, your policy will cover the legal fees and any other expenses for which you’re liable.
Professional liability is for construction companies who are also designers. If your client files a lawsuit claiming that your design didn’t meet their expectations or includes errors, your policy will cover the cost of any legal fees associated with the case.
Pollution liability insurance covers you in case a lawsuit is filed against you because your construction activities lead to pollution that caused harm to a third party or their property. Your policy can also be used to purchase items to help mitigate pollution.
Unlike many other industries, workers’ compensation is a requirement for construction companies. Your policy should cover your employees and any subcontractors you may work with as well.
Plenty of other insurance options exist to keep you covered against the many risks that are inherent to the construction industry. Work with an agent who’s experienced in construction insurance in Wayne, NJ to create the policy that’s perfect for you.