Contractors and construction companies in Tennessee come in all shapes and sizes, and the risks that these businesses face are equally diverse. Accidents and property damage in the course of doing business can happen at any time, and construction insurance is one way to protect against the devastating costs and disruption these incidents can cause. 

What Is Construction Insurance?

Construction insurance is actually a wide range of insurance products that contractors and construction companies need in order to minimize the risk from employee injuries, equipment and materials damage, car or truck accidents, and all the myriad activities taking place on any construction site day in and day out. 

Construction insurance is a catch-all phrase referring to a wide range of insurance products designed for general contractors, homebuilders, remodelers, masons, carpenters, framers, plumbers, electricians, and other types of construction businesses.

How Can I Insure My Construction Business in Tennessee?

Every construction company in Tennessee needs to carry some type of construction insurance, either to comply with certain legal requirements, or because they are required to by their customers, or to submit bids for work. 

Contractors in Tennessee must be able to show proof of general liability insurance and workers’ compensation insurance in order to obtain a license with the Tennessee Board for Licensing Contractors. The amount of liability coverage required depends on the type of work that you do and the value of the projects that you undertake. 

Not every type of construction company has the same insurance needs. Your construction insurance portfolio should be based on the size of your company, the size and scope of the projects you take on, the number of people you employ, and the type of work you perform. 

What Does Construction Insurance Cover in Tennessee?

Construction companies in Tennessee need a variety of insurance policies, from general liability insurance to contractors bonds and more. Insurance needs vary depending on the type of business and the risks involved, but it is essential that your Tennessee construction insurance protects your business and your livelihood from property losses, lawsuits, and so much more. 

Keep in mind that certain types of insurance (like workers’ compensation insurance) are required by law. Others might be required by customers, lenders, or municipalities in order to submit bids or comply with construction contracts. 

Construction companies in Tennessee should consider the following policies and coverage a starting point:

Commercial General Liability (CGL) Insurance

• This is often referred to as contractors general liability insurance.
• It protects your business against property damage liability, bodily injury liability, personal injury, and advertising liability claims. 
• You’ll likely need this policy in order to secure a Tennessee contractor’s license. 
• It pays for property damage expenses or medical bills for the injured party, as well as your legal defense and financial settlements or judgments if you are sued. 

Commercial Property Insurance

• This protects you when your business property such as equipment, tools, materials, inventory, office furniture, and other types of tangible commercial property are damaged by someone else or by some type of unforeseen event (fire, vandalism, severe weather, etc.). 

Business Interruption (Loss of Use) Coverage

• This provides income replacement if your business is temporarily unable to operate because of a covered loss. 

Inland Marine Insurance

• This is property insurance that specifically protects your equipment, tools, portable computer equipment, and other supplies or materials from theft, loss, or damage while they are in transit to and from worksites. 

Builders Risk Insurance

• This specifically protects buildings and structures that are under construction, as well as the equipment being used on-site to complete the project. 
• It can include coverage for construction materials, heating and air conditioning equipment, labor costs and expenses, and temporary structures like fencing, scaffolding, construction signs, and more. 
• In many cases, the owner of the project provides this coverage, but in some cases where it is mutually beneficial, the contractor can provide this coverage in accordance with the construction contract.  
• You can structure your policy to cover your unique project and the related exposures. 

Commercial Auto Insurance

• This protects your company’s vehicles and drivers. It covers your business cars, SUVs, vans, and trucks in the event that they are damaged in a collision or some other event. 
• It also provides invaluable auto liability coverage, which pays for damages to other vehicles and property and medical expenses for injuries caused by one of your drivers. It covers your legal defense if you are sued as well. 

Professional Liability Insurance (Errors and Omissions Insurance)

• This coverage may be necessary if your firm provides consultation or design services. 
• It provides protection from lawsuits if a client suffers a financial loss that is related to professional advice or service that your construction company provided. It is becoming increasingly common for project owners to require contractors to carry professional liability insurance or risk losing the job. 

Workers’ Compensation Insurance

• This provides coverage when accidents happen at the workplace. 
• It ensures that the injured worker gets medical care and income protection while unable to work. And it will provide death benefits for a worker’s dependents if there is a fatality.
• All Tennessee employers in the construction business or trades who have one or more employees must have workers’ compensation insurance unless they are specifically exempted. 

Construction bonds, or surety bonds, are also essential protections for construction companies and those with whom they do business. Bonds are essential to finding, securing, and performing work on all kinds of construction projects, and are often required by the project owner in order for your bid to be accepted. They serve as a guarantee for various aspects of the bidding process and construction contract. 

There are several different types of construction bonds or contractor bonds, and each guarantees a different aspect of the bidding process and the contract. 

• Bid bonds assure the project owner that the contractor can obtain a performance bond should the bid be accepted. 
• Performance bonds, or completion bonds, promise that the contractor will perform the job as agreed upon in accordance with the terms and conditions of the contract. 
• Payment bonds promise that the job will be completed free of all liens (all subcontractors will be paid in accordance with the contract). Payment bonds can be obtained individually or together with a performance bond. 
• License and permit bonds are often required by state, municipal, or federal ordinance as a condition for engaging in a particular business or exercising a particular privilege. Examples include performance bonds, payment bonds, customs bonds, tax bonds, and warehouse bonds. 
• Maintenance bonds are usually obtained for larger projects. They promise that the job will be completed free of defects for a specified period of time. 

What Does Construction Insurance Not Cover in Tennessee?

It’s just as important to understand what is NOT covered by your Tennessee construction insurance as what is. Your basic commercial property and liability policies spell out a variety of specific coverage exclusions, and it’s important for you to be mindful of all of them. 

In many cases, the excluded property or situation can be covered with another policy or special endorsement (many of which are described above). If, for example, your general liability policy excludes coverage for pollution liability, but you have a serious pollution exposure, you can purchase a pollution liability insurance policy in addition to your other construction insurance policies. 

Here are some typical construction insurance exclusions: 

• Pollution liability
• Claims resulting from damage to the property of others that is in the care, custody, and control of the business 
• Product recall liability 
• Any legal actions that do not involve a claim for bodily injury, property damage, personal injury or advertising injury 
• Most contract disputes
• Actions by a governmental agency related to failing to follow regulations
• Claims for back taxes 
• Failure to provide a safe workplace/employee injuries
• Professional negligence or errors and omissions
• Employer’s liability claims
• Flood or earthquake damage
• Damage to certain property, including money, security, accounts, and bills; vehicles, aircraft, and watercraft; walkways, roads, and other paved surfaces; electronic data; cost of restoring information on valuable records

Most of these exclusions can be covered with some other type of policy or endorsement. But remember, no policy will ever cover you for intentional wrongdoing or criminal acts. 

How Much Does It Cost to Insure My Construction Business in Tennessee?

If you own a construction business in Tennessee, you’ll want to know how much it will cost ot protect your business. 

Construction insurance premiums will vary widely from company to company, and a lot depends on the policies and insurance companies that you choose. 

There are several factors that influence your Tennessee construction insurance costs. The unique characteristics of your business and your individual risk factors truly drive your construction insurance premiums. 

Some of the most important risk factors that come into play are:

• Your gross sales and payroll
• Your number of employees
• The size and physical location of your business
• Your subcontractor exposure
• Your SIC code or business classification
• The nature of your business (what do you do?)
• Your prior claims history

Even things like the crime and weather risks in your city will play a role. It’s important to work with an independent insurance agent who can get construction insurance quotes from multiple insurance companies in Tennessee. Independent agents aren’t tied down to a single carrier so they can help you find the best coverage for your unique needs and budget. 

How Can an Agent Help Me Insure My Construction Business in Tennessee?

While it’s possible to purchase construction insurance directly from an insurance company, you might not get the tailored policies and personal service and advice that best serves your business needs. 

Construction companies in Tennessee should work with an independent insurance agent with knowledge, experience, and confidence to help them develop a comprehensive construction insurance program. A local independent agent can help you find the best policies to suit your unique needs and budget requirements, not a one-size-fits-all approach that could fail to protect you when you need it most. 

Find an independent insurance agent who is an expert in working with contractors and finding the best insurance solutions, bonds, and risk management strategies that help limit your exposures and protect your business.