New Housing Contractors

The Best Insurance Options for New Housing Contractors

Ann Herro | July 31, 2018
New home construction site with contractor in foreground

New housing contractors play a very special role in the lives of many people. You take great care to create beautiful, functional living spaces for families to enjoy for years. Whether you build single custom homes or whole neighborhoods, you can truly make dreams come true for your customers. 

But those dreams can be dashed when something goes wrong. 

  • What if a fire or storm destroys an unfinished house? 
  • What if someone gets injured on the job site? 
  • What if your tools or building materials are stolen from the worksite or destroyed in a severe storm? 

Unfortunately these are common occurrences; problems like these happen on construction sites every day. The best thing you can do to protect your business and your customers is to have the right insurance in place to make sure you can recover your losses, regroup, and complete the project even after a disaster.

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Why Do I Need New Housing Contractors Insurance? 

New housing contractors come in all shapes and sizes. Some build single-family or multi-family homes on land that is owned by the customers (or future owners of the completed homes). Others, called “for-sale” builders, build new homes on land that they own, with the completed home and land to be sold upon completion. 

Today, many new housing contractors do all three types of projects. While the specifics of the insurance coverage they need varies depending on the type of projects they undertake and their size and scope, in general, most new housing contractors need similar types of insurance. 

What changes is the number of structures that are covered; the number of subcontractors on the job at any one time; the amount of tools, equipment, and materials owned by the contractor and dispersed at job sites; the number of employees; and the number of contracts that must be satisfied in order for a project to be completed. 

Regardless of the type of home being built, new housing contractors take on huge risks at job sites, working with other contractors and subcontractors, and using and storing valuable tools, equipment, and building materials on-site and moving them from place to place. 

On any given day, a new housing contractor might experience: 

  • Property theft, vandalism, loss, or damage—at your home office or on a job site
  • Lost income due to work stoppages after a fire, storm, or power outage
  • Employee illness, injury, or death 
  • Liability claims if you cause bodily injury or property damage to others at your home office, showroom, or on a job site

Aside from these immediate risks, new housing contractors can be held legally responsible for problems that happen long after a house is complete. Leaky plumbing, mold problems, structural defects, and faulty drywall or stucco are all common problems that may only become apparent months or even years after a house is completed. 

What’s worse, if one house has a problem, it’s likely that others built with the same materials or by the same contractors have the same problem. Your new housing contractors insurance gives you a place to turn when repairs have to be made, and in the worst case, when lawsuits are filed. 

And keep in mind that in order to obtain a contractors license and even begin work as a builder, you will be required to prove that you have appropriate and adequate insurance coverage. So while insurance is necessary to protect your livelihood, it is also simply a requirement of doing business. 

Liability Insurance for New Housing Contractors

Liability insurance is your first line of defense for lawsuits and claims that you have caused property damage or bodily injury.

Contractors general liability insurance protects you if your business is responsible for bodily injury or property damage to others. Be mindful that most construction firms need general liability insurance in order to obtain a contractor's license.

General liability insurance provides coverage for a variety of liability claims, such as: 

  • Bodily injury
  • Property damage
  • Completed products
  • Faulty workmanship
  • Personal injury and advertising injury

If you own trucks or other vehicles, commercial auto insurance covers your vehicles and drivers in the event of an accident or other vehicle damage. Commercial auto insurance provides coverage for property damage and bodily injury liability claims, vehicle damage, and medical bills, as well as any costs related to lawsuits due to auto accidents involving your vehicles. 

Professional liability insurance (or contractors errors and omissions insurance) covers you if a client experiences a loss based upon any professional services you have provided, such as design work or advice. 

You may want to talk to your independent insurance agent about your need for excess liability, or commercial umbrella insurance. 

Commercial umbrella insurance provides an extra layer of liability protection to any of several other liability policies you might have. Commercial umbrella insurance kicks in when the limits of your other applicable insurance policies have been exhausted, protecting you in the event that a claim exceeds the amount of coverage available from any other applicable policy.

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Property Insurance for New Housing Contractors

Property insurance helps protect you against losses to your physical assets, such as tools, equipment, construction materials, office space and furnishings, computers, whether they are in an office, a warehouse, a showroom, on a job site, or in transit from one place to another. 

With a variety of policies and endorsements, you can cover your “stuff” no matter where it is. 

  • Commercial property insurance covers your office space, warehouse, or other buildings and their contents for losses due to fire, theft, vandalism, weather events, and more. 
  • Property insurance also typically includes loss of income coverage, or business interruption insurance. It reimburses you for lost income and helps pay for certain ongoing expenses if you are temporarily unable to operate due to a covered loss (fire, storm, etc.). 

Your commercial property policy only covers your tools, equipment, and supplies while they are on your premises (your office, a warehouse, a showroom, or another covered location). You need additional coverage to protect all of your property while it is in transit and while it is at a job site. 

  • Inland marine insurance is another form of property insurance that protects your equipment, tools, portable computer equipment, building supplies, and any other tools or equipment from theft, loss, or damage while they are in transit to and from worksites. 

The Importance of Builders Risk Insurance for New Housing Contractors

As a new housing contractor, you face unique risks. You might have numerous houses under construction at one time, in varying states of completion. Some may be only a foundation or a frame, while others may be ready for the final interior finishing touches.

At each job site you have tools, equipment, building materials, and the structure itself to worry about. What happens if there’s a fire or storm that destroys the structure? What if thieves break into your construction trailer and steal valuable tools, equipment, or materials? How would you pay for the losses and complete the house? 

Builders risk insurance is the answer. Here are the basics:

  • A type of property insurance that helps construction professionals protect their investment and their bottom line.
  • Protects buildings that are under construction, as well as materials and equipment at the job site.
  • Usually covers the total completed value of the structure, including materials and labor, but not the value of the land.
  • Typically covers damage due to fire, wind, theft, lighting, hail, explosion, vandalism, and certain other perils.
  • Does not cover worker accidents and injuries or liability risks (these are covered by your other policies).

You can structure your policy to cover your unique project and the related exposures. It is important to note that your builders risk insurance policy will not cover property on the job site that belongs to others, and subcontractors are usually required to have their own insurance.

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A Note About Workers’ Compensation Insurance 

Any kind of construction environment can be dangerous for employees. No matter how many safety protocols you have in place, accidents happen. 

Construction workers may use heat and welding tools, saws, hammers, heavy machinery, and sharp instruments. Their fingers, toes, eyes, and limbs can be damaged, cut, or crushed. Workers can fall from unfinished second stories, off of roofs, or while framing a house. 

Even employees who work with simple hand tools can be vulnerable to repetitive motion injuries and other problems. What’s more, insulation, lacquers, paints, and other chemicals can cause eye and lung irritation, or worse. 

Keeping your employees safe from work-related injuries is important for their health and satisfaction, as well as your long-term financial survival. Workers’ compensation insurance provides insurance coverage for employees when accidents happen in the workplace, regardless of who is at fault. The injured worker receives medical care and income protection after a work-related injury.

Each state has different workers’ compensation laws. Your independent insurance agent can help you navigate the rules for your state, and can help you find appropriate workers’ compensation insurance. 

How Much Does New Housing Contractors Insurance Cost? 

Insurance costs for new housing contractors will vary significantly form builder to builder. Your costs may increase and decrease over time as the number of houses under construction fluctuates.

Insurance company underwriters will consider things like the location and types of houses you are building, the number of houses under construction, and all of the different optional coverage types and policies that you might need. Your costs are based on these and a variety of other factors unique to your business. 

Your best bet is to work with an agent who specializes in new housing contractors insurance. An experienced independent agent will have access to insurance companies that have developed policies specifically for your type of business and the risks you face. And an experienced agent will be able to anticipate your exposures and find the right insurance products to protect your livelihood for the long term. 

Find and Compare Quotes

An independent agent can work with you one-on-one to determine the types and amounts of coverage you need. Your agent can get quotes from multiple insurance companies so you can evaluate the cost and coverage options and make the best choice. 

Benefits of an Independent Agent

Our agents simplify the search process for finding the right new housing contractors insurance. They’ll walk you through some handpicked policy options and explain the details.

Most importantly, they’ll be there for you when claim time comes. They know the ins and outs of the process and will make sure your claim is handled appropriately. 

The Lowdown on Online Quotes

Online quotes can be tempting. They are fast and easy to get—but are they accurate? And are you getting quotes for the right coverage? For business owners, choosing speed over accuracy can cost you. 

Online quotes can’t and don’t see the whole picture. They can leave out important coverage that will leave you devastated if something unexpected happens. And they can leave out cost-saving opportunities that an agent can help you take advantage of. 

Instead of getting an online quote, find an independent agent now, and get one-on-one consultation and affordable options for the best coverage for your unique needs. 

TrustedChoice.com Article | Reviewed by Paul Martin

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