All You Need to Know About Construction Insurance
Construction sites have a lot of potential dangers involved in them, from machinery malfunctions to natural disasters. To protect against these types of risks, builders need to take out specialised insurance for this industry. The main difference between the three is that an accident covered by casualty insurance is a type of event that happens to a building, hence the name. A liability situation in which you are legally liable for someone else’s criminal or civil actions is a type of event that happens to a person, hence the name.
An injury-related problem in which you have an employee working on your property and get sued by him because he was injured at work (and you’re supposed to protect employees from such things) is a type of event that happens to an employee, hence the name.
If you would like to read more information or learn more about the pricing of business insurance, you can do so here.
Builders insurance helps a construction business mitigate a variety of risks associated with the building industry. Some of the most common issues that builders insurance helps protect against include:
Property damage: Builders insurance covers the cost of repairs and replacement due to accidental damage, such as fire, water leakage and vandalism. It can also extend to natural disasters such as floods and cyclones.
Equipment damage: Property equipment such as power tools and generators can be damaged or stolen. Builders insurance protects against losses caused by breakdowns and theft.
Accident claims: Accidents on the site must be reported immediately for compensation for injuries sustained by contractors and subcontractors and to protect against lawsuits from any homeowners whose property is damaged. This type of insurance will pay for hospital expenses and any medical treatment needed following an accident on site.
Builders insurance can be broken down into three main categories: casualty, liability and workers compensation. Casualty insurance is for when you are building or renovating your property, liability insurance is for when you are legally liable for someone else’s accident, and workers compensation insurance is the same thing but for people who work on your property. The main difference between the three is that an accident covered by casualty insurance is a type of event that happens to a building, hence the name.
A liability situation in which you are legally liable for someone else’s criminal or civil actions is a type of event that happens to a person, hence the name. An injury-related problem in which you have an employee working on your property and get sued by him because he was injured at work (and you’re supposed to protect employees from such things) is a type of event that happens to an employee, hence the name.
Casualty insurance can include the replacement cost of buildings & structures damaged by fire, windstorm or another natural disaster. It Can also include reimbursement to repair or replace lost or damaged equipment; and general liability that covers accidents during construction, including accidental injuries to people near the site of the construction activities due to unsafe conditions.
Liability insurance protects the building owner’s property against claims of injury or damage caused by people working on or around the property. Liability can cover accidents with vehicles, machinery and other equipment on-site; and claims of pain and suffering if someone is hurt during the construction process.
Workers compensation is used to protect employees who are injured on or around a job site. It is not meant to compensate for injuries due to unsafe conditions but for incidents where work-related accidents usually occur at a job site (for example, how it is supposed to be done).
Workers Compensation Loss Ratio
A “Workers Compensation Loss Ratio” (WC/Loss Ratio) is a ratio that measures how much of the payroll is covered by workers’ compensation insurance and how much the employer pays out in claims. This ratio is used to determine if workers’ compensation premiums are reasonable and compare the cost for various companies. This ratio is used to set rates and is a significant factor in setting the jurisdictions minimum weekly salary for workers’ compensation benefits.
Typically, the ratio is set to 50% of payroll; however, this ratio can vary depending on the jurisdiction. A high WC/Loss Ratio means that premiums are too high. Likewise, a low WC/Loss Ratio indicates that premiums are too low. Workers’ compensation insurance is generally regulated at the government level and reflects what benefits are available for compensation.
Some jurisdictions will allow employers to purchase liability and workers compensation insurance through a centralised insurance department. In general, employers have been reluctant to purchase additional insurance beyond their standard liability policies because it comes at a high cost. However, there has been an industry-wide trend towards self-insuring business risks, partly due to increasing worker’s compensation claims and other operational risks related to employment.
Companies that buy additional insurance may be doing so because:
- Their current criteria for allowing coverage of individual risks are too strict. They do not want to risk losing the employee and having to pay for unemployment benefits, etc. This is a significant issue, as workers’ compensation insurance carriers claim over 20% of all claims come from employees who leave their jobs and go back to work for another employer. Some jurisdictions have enacted “Voidable Employment” laws that would prevent an employer from taking such action.
- They are concerned about the personal injury of their employees who are working on the property. Casualty insurance is also referred to as “commercial property insurance”.
- They are concerned about the environmental damage that an employee incurs on their business property.
- Workers’ compensation claims may be significantly reduced if the company buys additional workers’ compensation insurance beyond the state minimum requirements.
- Hiring contractors who do not have sufficient worker’s compensation coverage can place an employer at significant legal risk, especially if they fail to properly control the work environment and provide safety training for all workers on the job site, etc.
- An employer may save money by purchasing additional business liability insurance for their general liability risks.
- When taking a longer predictable period to settle a claim, additional workers’ compensation coverage may help an employer reduce the overall cost of their overall insurance package for a given risk.
Find out more about construction insurance here.
Other useful links about business insurance:
Business Contents Insurance
Business Building Insurance
Employers’ Liability Insurance
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