Commercial construction projects come with a variety of risks — from property damage to worker injuries and project delays. Having the right insurance coverage is essential, but many businesses unknowingly make mistakes that leave them vulnerable. Here are some of the most common pitfalls to avoid when it comes to commercial construction insurance:
1. Underinsuring the Project
One of the most frequent errors is not purchasing enough coverage. Construction projects often exceed initial budgets, and if your policy doesn’t account for cost overruns, you may be left covering the gap out-of-pocket.
Tip: Work with an experienced broker to estimate the total project value accurately, including materials, labor, and equipment.
2. Overlooking Subcontractor Coverage
Many contractors assume their subcontractors carry adequate insurance, but that’s not always the case. If a subcontractor causes damage or injury and isn’t properly insured, your company could be held liable.
Tip: Always verify that all subcontractors have up-to-date liability and workers’ compensation coverage before work begins.
3. Not Understanding Policy Exclusions
Every insurance policy has exclusions—specific situations or types of damage it does not cover. Failing to read or understand these exclusions can result in nasty surprises when filing a claim.
Tip: Ask your insurance provider to clearly explain any exclusions and consider supplemental policies if necessary.
4. Letting Coverage Lapse
Due to long timelines or project delays, some businesses let their insurance expire before the project is complete. This creates serious risks and could even void contractual obligations.
Tip: Set reminders for policy renewal dates and ensure coverage extends for the full duration of the project, including post-completion risks.
5. Ignoring Workers’ Compensation Requirements
Even if you hire independent contractors, you may still be legally obligated to provide workers’ compensation insurance depending on local laws and project terms.
Tip: Understand the legal requirements in your jurisdiction and consult legal counsel if you’re unsure.
6. Failing to Customize Coverage
Construction insurance isn’t one-size-fits-all. Buying a generic policy without considering the unique aspects of your project could leave you exposed.
Tip: Work with an insurance expert to customize a plan that suits the size, scope, and risks of your specific construction project.
7. Inadequate Communication with Your Insurance Broker
Some businesses treat insurance as a one-time task rather than an ongoing conversation. Poor communication can lead to outdated coverage that no longer matches the evolving risks of your project.
Tip: Keep your insurance broker informed of any major changes to project scope, timelines, or partnerships.
Conclusion
Avoiding these common mistakes in commercial construction insurance can save your business significant time, money, and legal trouble. The key is proactive planning, due diligence, and expert guidance.
