Construction Insurance – Importance and Coverage
Insurance is that thing that you do not need now but may need in the future. The uncertainty of the unknown is the fuel on which insurance companies run, convincing you to accumulate insurance after insurance on your life, health, and property. One of the most common insurance is the construction insurance. Unfortunately, insurance companies bombard potential clients with information to sell the policy rather than inform them of its importance and describe what it covers. Consequently, clients end up buying an insurance policy that they can hardly interpret because it is confusing. Nevertheless, an insurance policy is a critical part of any major construction project as it helps in managing risk for all parties involved in the construction project.
Definition of Construction Insurance
Construction insurance is a form of contract involving the insurer and the owner of the construction project. The agreement here is that the company will make regular payments, say annually, of a certain amount so that the insurer will take the responsibility of recovering any loss of property following an accident or unforeseen tragedy. In some cases, the insurance may also cover the health and life of individuals involved in the project, ensuring they are compensated in the rare event that they get hurt or die. Therefore, the essence of the insurance policy is to act as a risk management strategy.
Insurance policies differ in the aspects of the construction project they cover. For instance, the liability and property insurance policies form a significant risk management strategy. Here, the property insurance covers such aspects as physical equipment and tangible property through such unexpected events as explosions. On the other hand, the liability insurance covers the insured against any hazards that he causes. In this regard, the coverage is further broken down to commercial general (CGL), professional, workers’ compensation, and automobile liability insurance.
The liability insurance is highly varied and it is important for the insured to understand what each of the insurance policy covers. For instance, CGL insurance involves the promise to compensate any harm or injury that occurs within the contractors’ operations. This often involves monetary compensation by the contractor. All types of accidents are covered within this category. On the other hand, the professional liability insurance covers the need to protect and offer safety to all the professionals involved in the construction project as specified in the claims made in the policy terms. Another interesting coverage is the workers’ compensation one. This covers the interest of the workers against any liability experienced while working on the project. This involves all injuries and harm that occurs within the project where workers are affected. However, the employer has the responsibility of ensuring his employees, and the contractor must ensure that the injury is not the responsibility of the employers. This can be determined through legal means whereby the contractor must protect his interests. Automobile insurance also forms a part of the liability insurance coverage. Here, the insurance of automobiles may not be a personal choice. All contractors must have the automobiles used in the project covered in case of accidents and occurrences. The insurer compensates any harm caused to the contractors and his employees, recovers property lost within limits agreed upon for each individual in terms of the contract. This cover lasts for the duration of the project.
Importance of Construction Insurance
Construction projects are cumbersome due to the bulky of activity involved as well as the length of time it takes to complete the task. Based on thee bredth of the project, most construction involve the use of several human and physical resources to achieve the desired effect. Moreover, the project involves a legal contract between the contractor and the owner of the project. Here, each individual must work towards enhancing the health and life of the workers, as well as protect the property used for the construction as much as possible. Unfortunately, accidents are never a part of the plan, but sometimes they come unannounced. Such occurrences may involve fires and explosions or natural hazards that threaten the lives of the people involved and lead to the loss of the property used. This may be a major setback for both the contractor and the owner, and it may even lead to the destruction of the construction project if there is no risk management plan.
Therefore, construction insurance is a risk management plan that all contractors and owners engage in as a way of cushioning their interests against unforeseen harm. This prevents the legal frustrations involved when claims for compensation arise since it is outlined in the contract. Besides, the insurance offers financial support by compensating the injured and recovering damaged properties as per the terms of the policy. This implies that the business will be safe regardless of the uncertainties of the future.
The amount of security that an insurance cover brings about outweighs the cost of buying a policy. Although no events may occur that require compensation, having insurance creates an amazing working environment where the contractors, employers, and workers will not have to worry about what will happen in case of accidents and other occurrences. It also creates a strong legal base for lawsuits involving compensation for damage and injuries.
In brief, the construction insurance is a significant part of any construction project. A cost benefits analysis reveals that the benefits of buying a policy far outweigh the risk of losing the money due to lack of any accidents or occurrences. Different insurance policies cover various aspects, all geared towards enhancing surety during the duration of the construction project. The major aspects covered in the policies include liabilities that may occur when people are injured, lose their lives, or lose their properties. The covers form a binding legal framework to solve issues involved when claims arise regarding the need for compensation. Therefore, construction insurance policies will go a long way in making the construction process secure and smooth for all the parties involved in the project.