The Complete Guide to Construction Insurance

Understanding Construction Insurance

There are many different types of insurance designed to protect property owners, developers, and contractors through the various phases of a construction project. In fact, certain types of construction insurance policies are required for many projects. In the sections below, we’ll review the basics of construction insurance, the most common types of policies available, and when those policies would apply. If you are already well-versed on the topic or just want to find a reputable company, be sure to check out our recommended construction insurance companies below the guide.

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What is Construction Insurance?

Construction insurance is a broad categorization of insurance policies that provide protection for risks associated with construction projects. In reality, the term “construction insurance” refers generally to insurance that relates to the entire lifecycle of a build—including both the construction phase and the period following completion when liabilities can still arise—and it is not itself an actual form of insurance.

Many factors dictate the type of construction insurance coverage one would need for a given project or business. These factors include, the person’s relationship to the project (contractor, property owner, subcontractor, etc.), the type of entity buying the insurance (business or individual), and the type of property to be covered. It’s also important to note that insurance companies often bundle multiple policies together into packages for specific trades, such as insurance for electricians, insurance for plumbers, etc. In the sections below, we outline the most common insurance policies used in the construction industry.

Types of Construction Insurance

A property owner undertaking a construction project could seek to insure a number of things related to the project—for example, the building, materials in transit, etc. Depending on the nature of the contract, a contractor for that same project might require different types of coverage, such as general liability and commercial auto insurance. Below is more information about the various types of coverage available.

1. Builders Risk (Course of Construction) Insurance

Builders risk insurance, also known as course of construction (COC) insurance, or sometimes construction all risk insurance, is insurance coverage for buildings and other structures while they are under construction. Other policies like homeowners insurance or commercial property insurance will typically not cover structures during construction. Builders risk policies will usually have options to cover the following types of property:

• Buildings and structures
• Foundations
• Permanently installed machinery (e.g., HVAC systems)
• Temporary structures such as scaffolding
• Paving, fencing, outdoor fixtures
• Limited coverage for lawns, trees and plants installed by the builder

Insurance providers generally cover the most common types of construction projects, including:

• Residential new construction
• Residential remodeling or smaller projects
• Model homes and model home contents
• Commercial property construction

However, if your construction project or type of structure is unique, there may still be specialty providers that can offer insurance policies for your unique project.

Builders risk policies only protect against certain types of damages. Generally, the most basic builders risk insurance policies will cover damages caused by fire, weather, vandalism, or theft. That said, many insurers offer “premium coverage” options, which cost more, but can extend the coverage limits, insurable events, and/or insurable property for the policy. Damages from earthquakes or flooding will generally not be covered, unless coverage for those types of events is added to the policy. Insurance providers may also specify some exclusions in the policy that protect them from covering damages that occur under specific conditions or from policyholder negligence.

Read our course of construction insurance guide to learn more.

Because builders risk premiums and coverage limits are based on the total completed value of the project, accuracy during the bidding phase is critical. Contractors who utilize dedicated construction takeoff software and construction estimating software are far less likely to underinsure a project. Accurate software estimates ensure that if a catastrophic loss occurs, your policy will actually cover the true cost to rebuild.

2. General Liability Insurance

General liability insurance, sometimes called commercial general liability (CGL) insurance or contractor general liability insurance, is a class of insurance that provides liability protection to businesses in the case of bodily harm or property damage during the course of business. Many states require general liabilty coverage for contractors to obtain a valid license.

Insurance providers create various versions of these policies available to professionals in construction and for construction projects. Whether you are the property owner, contractor, or other type of construction firm, liability insurance policies are available to protect policyholders from unnecessary risk. So often, these plans will be advertised as “contractor general liability insurance” or “general liability insurance for contractors.”

General liability insurance policies will usually cover a broad range of damages, including:

• Resulting damage from faulty workmanship
• Third-party bodily injury
• Advertising injury and defamation

Contractors or developers may actually be required to have a minimum level of liability insurance either by law in some states or to win certain contracts that require it. Companies who complete many design-build projects will definitely want to have professional liability insurance in case they are sued for design or engineering mistakes. Also, subcontractors are frequently required to carry liability insurance in order to work for certain general contractors. Because general contractors can be held liable for an uninsured sub’s mistakes, many rely on construction project management software to track and verify active Certificates of Insurance (COIs) before a subcontractor is ever allowed on the jobsite.

General liability insurance policies are available through various providers for the following types of construction businesses:

• Developers
• General contractors
• Architecture and engineering firms
• Specialty contractors
• Handyman businesses

Like builders risk and other types of insurance coverage, certain exclusions are likely to be defined in the policy, protecting the insurance company from having to cover certain types of damages or incidents.

Read our complete contractor general liability insurance coverage guide to learn more, or if you’re ready for a policy, see our comparison of the top general liability carriers for contractors to get a quote.

3. Errors & Omissions Insurance / Professional Liability Insurance

Errors and omissions insurance, also known as professional liability insurance, is a type of insurance offering that provides coverage for businesses against claims arising from errors or mistakes in their work. For example, if an engineer makes an error when calculating the structural requirements for a building, which later causes the owner to have to make costly repairs down the line, the owner might sue the engineer to recover the costs. In that case, the engineer’s E&O policy might cover the claim.

There are also specialized contractor E&O policies that are similar to contractor general liability insurance in that they cover claims arising from work performed, but these contractor E&O policies usually cover a more limited set of claims. Generally, a contractor errors and omissions policy will cover financial losses but not property damage or bodily injury claims.

Read our errors and omissions insurance guide to learn more. To better understand the difference between this and general liability, see: general liability vs. professional liability insurance.

4. Commercial Auto/Truck Insurance

Commercial auto insurance, also called commercial vehicle insurance, isn’t exclusively available for construction projects. It is insurance intended to provide auto insurance to vehicles used by businesses. The coverage provided by commercial auto insurance is intended to help policyholders avoid high vehicle repair costs, medical expenses, or lawsuits resulting from auto accidents.

There are several coverage options for commercial auto insurance policies that mirror the coverage options of standard auto insurance policies. The standard coverage options include:

• Liability Coverage – This protects the company and employees from expenses associated with accidents caused by employees.
• Physical Damage Coverage – This covers damages to company vehicles after a covered collision. This could also include comprehensive coverage, which protects against stolen vehicles, damaged from vandalism, or destruction from natural disasters.
• Medical Payments Coverage – This coverage helps to pay for injury-related expenses resulting from a covered incident, including medical bills, hospital fees, ambulance costs, and funeral expenses.
• Uninsured Motorist Coverage – This type of coverage covers damages and injuries caused by uninsured drivers. This is necessary because standard liability insurance only covers damages and injuries that you cause to others. If you are involved in an accident with someone who does not hold coverage, you still want to be protected from high medical or repair costs for your own team and vehicles.

Insurance providers like Progressive offer coverage for many types of commercial vehicles, including vehicles that are commonly used during construction projects. The following vehicle and trailer types are usually covered by insurers who offer commercial auto insurance:

Something to note is that a more specific policy type—commercial truck insurance—falls under the umbrella of commercial auto. While commercial auto insurance is a broad term that covers a wide range of vehicles used for business purposes, commercial truck insurance specifically applies to large vehicles (such as dump trucks, semi-trucks, cement mixers, etc.) and the businesses that use them. In addition to all of the coverage options provided by a standard commercial auto policy, commercial truck insurance also offers cargo coverage, general liability coverage, and downtime coverage, among other options.

Regardless of the type of vehicle you drive, it’s important to have some form of commercial auto policy when driving a vehicle for business. Keep in mind that most personal auto insurance policies will exclude accidents while using your vehicle for business purposes from coverage.

If you’d like to learn more about commercial auto insurance policies for construction, visit our detailed commercial auto insurance guide or our guide to commercial trucking insurance.

5. Inland Marine Insurance

Inland marine insurance is another broad class of insurance that spans well beyond the construction industry. While the name comes from an era when this class of insurance covered primarily ocean-bound materials and vessels, that is no longer the case. Inland marine insurance coverage has evolved to cover many types of property, including property in transit, mobile equipment, property in the custody of a repairman or storage facility, property commonly used in different locations, and even computer equipment and digital information.

For the construction industry, inland marine insurance applies primarily to the tools and equipment used by contractors and developers. For this reason, it’s commonly referred to as “tool and equipment insurance” or “contractor equipment insurance.”

These insurance policies cover many types of property used by construction professionals, contractors, and developers, including:

• Contractor’s tools, equipment, clothing, and supplies (hammers, drills, generators, electric saws, wood, drywall, etc.)
• Mobile equipment (excavators, forklifts, loaders, cranes, etc.)
• Leased or borrowed equipment (leased tools or mobile equipment like electric generators and forklifts)
• Computer equipment and data (laptops, tablets, private project data)

Policies will cover items either at replacement cost or at the fair market value of the damaged or stolen items, and covered incidents for this type of insurance would include:

• Equipment stolen from a jobsite
• Tools or equipment damaged in transport to a jobsite
• Equipment damaged in a fire or natural disaster at a jobsite

This class of insurance can also cover other costs that might be associated with the loss or damage of contractor tools and equipment, including:

• Debris removal and pollution cleanup following a covered incident
• Costs caused by delays resulting from a covered incident

6. Contractor License Bonds

Contractor license bonds are agreements, similar to insurance policies, which guarantee that a contractor will comply with the regulations that apply to their particular contractor license. The main difference between this and an insurance policy is that while the contractor is the one who purchases the bond, the bond is designed to protect the general public and anyone that the contractor does business with. Typically, insurance companies offer bonds, even though they are not quite the same as insurance policies.

The cost of the bond to the contractor usually depends on the contractors historical track-record of income and their credit score. And the better track record a construction specialist has, the less expensive the bond will be for them.

Certain states, industries, and types of construction contracts will require contractors to carry a contractor license bond, and in some cases additional bonds will be required.

To find more information about license bonds for the construction industry, refer to this thorough guide on contractor license bonds and how they work.

7. Construction Bonds

Construction bonds, also known as contract bonds, exist to “guarantee” certain aspects of a contract or construction project, and ultimately that the project contract is guaranteed to be completed if accepted. There are several types of contract bonds, which are:

• Bid bonds – to guarantee that bid proposals on projects are serious and that contractors can financially support the project if their bid is chosen.
• Performance bonds – to ensure that the contractors adhere to the standards and finish the project laid out in the project contract.
• Payment bonds – to guarantee that the contractor can provide payment to subcontractors, laborers, and suppliers.
• Maintenance bonds – to protect the project owner from defective workmanship or fault materials for a length of time after the contractor’s work is completed; also known as warranty bonds.
• Subdivision bonds – to guarantee to a city, county, or other local municipality that the bond-holder will develop the property in accordance with local guidelines and requirements.
• Site improvement bonds – to provide the same guarantees as a subdivision bond, but specifically for improvements to public property (like sidewalks or sewers) required for the development of a specific site.
• Supply bonds – to provide assurance that suppliers will deliver materials, supplies, etc, as contractually specified.

8. Workers’ Compensation Insurance

Workers’ compensation insurance, also known as workers’ comp or workman’s compensation, is insurance coverage designed to protect businesses and contractors when their employees are injured while on the job. It does this by covering the following costs after a covered incident:

• Medical expenses
• Missed wages
• Ongoing recovery costs related to an injury
• Legal fees when an injured person sues the policyholder
• Funeral costs and death benefits

Workers’ compensation insurance, like others on this list, spans beyond just the construction industry, but it is an important piece of coverage for construction businesses that plan to employ others. In fact, workers’ compensation insurance is required by law in nearly all states.

Insurance companies like Progressive, Nationwide, and The Hartford offer workers’ comp coverage for many types of businesses, including general contractors, plumbers, HVAC technicians, electricians, and others.

Construction Insurance Requirements

Some might be asking, “is construction insurance necessary?” Actually, in many cases, it’s not only necessary, but required.

Commercial auto insurance is required by law in nearly every state, with New Hampshire being a notable exception where drivers may instead demonstrate financial responsibility. Federal laws also mandate specific liability minimums for vehicles involved in interstate commerce or those transporting hazardous materials. Workers’ compensation is also required by law in almost every state except for Texas, where it remains optional for most private employers; however, the specific requirements in mandatory states will vary by industry and the number of employees in the business.

While some policies are primarily contractual, other types—most notably general liability—are frequently required by state law as a condition of contractor licensing or registration. Even smaller contractors working directly with homeowners are often legally required by state or local boards to carry insurance to maintain their professional license or to secure the necessary building permits for their projects. In California, for example, all licensed contractors must carry workers’ compensation insurance even if they have no employees. When large organizations, like local governments and big companies, contract out major projects, they almost always require contractors to carry insurance coverage that protects the various insurable aspects of the work. These costs are often passed on to the project sponsor, but the contractor remains responsible for securing the policy.

Typically, these project contracts will require the contractors to carry general liability, workers’ compensation, and builders risk insurance. For public works projects involving local or federal government entities, surety bonds are also legally required by the Miller Act to guarantee project completion and payment to subcontractors.

The increased limits and protection provided by an excess liability / umbrella policy or professional liability coverage are often required for large-scale commercial developments, government projects, or design-build contracts where the contractor provides professional design services. However, for standard residential or small commercial work, this coverage remains a recommended but optional layer of protection that can go a long way for businesses caught in legal battles after covered incidents.

Construction Insurance Costs

The question of cost doesn’t have a very straightforward answer because construction insurance refers to various policies currently influenced by a ‘two-speed’ market, where property-related rates are softening while liability premiums continue to rise. In addition, while contractors, developers, and property owners can choose between different providers, their coverage levels are often not just a matter of preference. In 2026, many insurance limits are strictly mandated by construction contracts or lenders, and workers’ compensation coverage levels are governed by state law.

Factors that Affect the Cost of Construction Insurance

Several factors will affect the cost of construction insurance policies. While many policies are available independently, they are often bundled into packages to streamline coverage and reduce costs. Regardless of how they are purchased, most policies are influenced by a consistent set of factors, including:

• Claims history and loss runs
• Type of work, hazard classification, and years in operation
• Size of the project or business (revenue and payroll)
• Location of the project or business
• Credit history of the business or primary owners
• Coverage limits and deductibles

Other factors may affect the cost of the construction insurance policies that are necessary for your construction project. In general, these factors are used by the underwriter to estimate the likelihood of a covered loss, or the risk associated with insuring the project, contractor, or business.

Average Cost of Construction Insurance

Despite the variance in exact costs, it is possible to get an approximate estimate of what the total insurance coverage for various projects will cost. The following table shows approximate annual premiums for various construction insurance policy types:

The costs shown in this table are only a summary of the nationwide average costs for these insurance policies. Notice how broadly these estimates range. Any contractor, development firm, or homeowner may pay different amounts based on the details of their projects and their own background of safety and experience. Generally speaking, contractors who face more risk are subject to higher insurance costs.

For example the cost of general liability insurance for construction contractors and development firms varies by the type of projects they take on and their track record of claims. In fact, because of the risk involved with construction projects, construction contractors pay some of the highest rates for general liability of any profession. The same can also be said of professional and excess liability policies. While policies can vary widely in cost, lower risk contractors cost less to insure.

Finding the Best Construction Insurance Companies

There are many insurance companies that offer specialized policies for the construction industry. In an ideal world, businesses and contractors can buy their primary insurance policies from one provider to save time and money. However, in monopolistic states like Ohio and Washington, workers’ compensation must be purchased through a state fund. Homeowners should also note that major construction often requires a specialty builder’s risk policy that may not be available through their standard home insurer. Buyers should also consider several factors when choosing an insurer:

• Financial strength – Contractors and commercial developers should verify an insurer’s financial strength ratings from agencies like AM Best. Most project owners and general contractors require carriers to maintain a rating of at least A- (Excellent) to satisfy contractual and bid requirements. Choosing a company with a ‘Superior’ or ‘Excellent’ rating ensures the insurer can meet long-term claims obligations and that your certificates of insurance will be accepted on most job sites.
• Customer service and reputation – policyholders will frequently need to interact with their insurance provider, including when a claim is filed, a policy is updated, or a question about the policy needs to be answered.
• Coverage – It is also important to make sure that the coverage offered by the policy is complete. Protection provided by the policy should at least meet the minimum state and contractual requirements. Buyers must remain vigilant regarding recent regulatory shifts; for instance, as of January 1, 2026, California requires all licensed contractors to maintain workers’ compensation coverage regardless of whether they have employees.
• Cost – While traditional underwriting still exists for complex projects, many modern insurers now provide instant quotes for standard construction risks by utilizing automated data lookups. Regardless of the speed of the quote, it is still worth comparing multiple providers and asking about premium credits for safety certifications, which can significantly lower your final cost.

The companies listed below meet those criteria and are good options for those looking to meet their construction insurance needs through a single provider.

The Best Construction Insurance Companies for Contractors and Commercial Developers

Contractors, especially those who bid on large construction projects, are often obligated to purchase a large amount of insurance coverage. Frequently, the costs of these policies are passed on to the commercial developer or project sponsor; however, cost should still be an important consideration for contractors, because savings can be passed on to the sponsor to make their bids more attractive.

And more than homeowners, contractors may want to consider the construction expertise of their potential insurance providers. The more experienced an insurer is with construction projects, the easier claim filing and designing the policy will be for the buyer.

The table below shows several of the top construction insurance providers who meet the criteria we’ve laid out above. Each of these companies offers a broad range of construction insurance products that should meet the needs of most contractors and commercial developers.

Company	Best For	AM Best Rating	Get Quote
Progressive	Commercial auto coverage and easily bundled general liability for specialty trades.	A+ (Superior)	Get Quote Show NumberCall for Quote
Liberty Mutual	Large-scale developers, heavy construction, and complex projects requiring deep risk management.	A (Excellent)	Get Quote Show NumberCall for Quote
The Hartford	Workers' compensation and tailored policy packages for small to mid-sized contractors.	A+ (Superior)	Get Quote Show NumberCall for Quote

Best Construction Insurance Companies for Homeowners

The policies that work best for commercial developers and construction contractors are not usually going to be the best fit for homeowners and owner-builders. In general, these owners, who will also be the project sponsors, can require their contractors to purchase insurance. But they can also benefit from purchasing coverage for the project themselves. Since the project sponsor will ultimately pay for coverage anyways, they may find it beneficial to research options and secure the best rates and coverage available.

Homeowners should look for insurers with specialized construction expertise and strong customer service. It is also ideal when the insurer provides flexible coverage options tailored to the project’s specific value and complexity. The insurers listed below are leading providers of construction and builders risk insurance for homeowners and owner-builders.

1. US Assure (backed by Zurich)
2. State Farm
3. AIG

References

1. AM Best. Guide to Best’s Financial Strength Ratings – (FSR). https://www.ambest.com/ratings/guide.pdf.
2. NAIC. https://content.naic.org/.
3. Insurance Information Institute. https://www.iii.org/.
4. US Assure. https://usassure.com/.
5. State Farm. Business Insurance for Contractors. https://www.statefarm.com/insurance/small-business/contractors-insurance.
6. Progressive. Contractors Insurance. https://www.progressivecommercial.com/business-insurance/contractors-insurance/.
7. Liberty Mutual. Construction. https://business.libertymutual.com/industries/construction/.
8. The Hartford. Construction Insurance. https://www.thehartford.com/business-insurance/construction.
9. Travelers. Insurance for Construction Companies. https://www.travelers.com/business-insurance/construction.