Essential Business Insurance for Construction Companies with NAICS Code 23

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A guide to common types of business insurance that construction firms with NAICS Code 23 should consider to protect their business such as general liability, workers' comp, commercial auto and more.

Key Takeaways

  • General liability insurance protects against expensive injury and property damage claims
  • Workers’ compensation coverage handles medical costs and lost wages from on-the-job injuries
  • Commercial auto policies insure vehicles used in the business
  • Commercial property insurance rebuilds or replaces damaged assets
  • Umbrella insurance provides additional liability coverage above primary limits
  • A business owners policy bundles multiple coverages to save on premiums

Introduction

Construction businesses face unique risks that require specialized insurance protection. As a contractor operating within NAICS Code 23, there are several essential policies to consider in order to safeguard your company’s financial health and mitigate liability.

General Liability Insurance

General liability insurance provides critical protection for construction businesses against expensive lawsuits related to injuries, property damage, and other liability issues that could threaten the long-term viability of the business. It covers legal costs and claims from accidents that occur through daily operations. Having this coverage also demonstrates your commitment to risk management and makes your business more appealing to customers and clients. The top benefits of this insurance for construction businesses are that it covers bodily injuries, property damage claims, defense costs, medical expenses, third party injuries, and more, helping to protect the business from unexpected costs. Common use cases where this insurance applies include accidents on job sites, subcontractor work damaging client property, defending against groundless claims, employee injuries, and third party injuries from falling debris. Pricing is estimated between $2,000-$5,000 annually on average but can vary significantly based on business size, work type, safety record, and other factors.

Category List
Benefits
  • Covers legal expenses if a subcontractor, employee, or third party is injured on your worksite
  • Protects your business assets if you’re sued for property damage on or off your worksite
  • Covers the cost of repairs or replacement if faulty work damages a customer’s property
  • Covers medical expenses if an injury occurs because of faulty work or product failure
  • Provides peace of mind knowing you have coverage for unforeseen accidents and claims
  • Shows customers and clients that your business is responsible and cares about risk management
  • Required for many construction contracts and bids to show you have adequate liability protection
  • Covers pollution liability from accidents involving hazardous materials on job sites
  • Compliance with contracts and legal standards requiring subs to carry adequate liability coverage
Use Cases
  • Covers bodily injury or property damage claims from accidents on job sites
  • Protects from lawsuits if a subcontractor’s work damages a client’s property
  • Covers costs of defending against claims even if the claim is groundless
  • Covers medical expenses if an employee is injured on the job
  • Covers third party claims if a passerby is injured by falling debris from a construction site

Based on industry research, the average annual pricing for general liability insurance for businesses in the construction industry with NAICS code 23 is around $2,000 – $5,000 per year, with the pricing being dependent on factors such as the type and size of the business, annual revenue, number of employees, project value, liability limits, loss history, and safety record. The pricing provided is an estimated average and individual quotes may vary.

Estimated Pricing: $2,000 – $5,000

Workers’ Compensation Insurance

“Workers’ compensation insurance provides important financial protection for construction businesses and their employees. It covers medical expenses and lost wages for employees injured on the job, saving the business from costly lawsuits and helping attract and retain quality talent. Construction jobs often involve hazardous conditions, so workers’ comp coverage helps mitigate risks of accidents and ensures injured employees still receive benefits during recovery.”

Category List
Benefits
  • Covers medical expenses if an employee gets injured on the job
  • Covers part of an employee’s lost wages while they’re unable to work due to a job-related injury or illness
  • Protects your business from lawsuits if an employee is injured or becomes ill due to their job
  • Provides return-to-work programs and vocational assistance to help injured employees get back to work
  • Saves money by eliminating the costs of employee injuries and illnesses that would otherwise cut into company profits
  • Helps attract and retain quality employees by demonstrating a commitment to their health, safety and financial security
Use Cases
  • Cover medical expenses and lost wages for injuries sustained on the job
  • Protect the business from financial loss due to employee injury claims
  • Satisfy state workers’ compensation laws requiring coverage
  • Provide peace of mind when hiring new employees, knowing injuries will be covered

Based on research, the average estimated pricing for workers’ compensation insurance for construction businesses with NAICS Code 23 is around $2 per $100 of payroll. This pricing is derived based on industry averages and factors such as type of construction, payroll amounts, risk level of the work, safety record, and location. Construction generally has higher risks of injuries compared to other industries due to the nature of the work.

Estimated Pricing: $2 per $100 of payroll

Commercial Auto Insurance

Commercial auto insurance is an essential coverage for construction businesses to protect their vehicles and drivers from financial risks. It provides liability protection and covers repairs if vehicles are damaged on the job. This type of insurance also insures company drivers and protects the business if an accident occurs while an employee is using a vehicle for work. It is estimated to cost on average $1,500 annually per vehicle for construction companies.

Category List
Benefits
  • Covers medical payments for injuries sustained by third parties in an accident involving your vehicle
  • Pays for repairs or replacement of your vehicle if it’s damaged in an accident
  • Covers damages and legal costs if your vehicle causes property damage or bodily injury to others
  • Provides coverage if an employee is involved in an accident while using a company vehicle
  • Covers liability from accidents caused by non-owned vehicles driven by employees on company business
  • Insures newly acquired vehicles that are added to your fleet
  • Provides coverage for materials and supplies being transported in vehicles
Use Cases
  • Covering company vehicles like trucks and vans used to transport tools, materials and employees
  • Protecting from liability if an employee gets into an accident during work hours or duties
  • Insuring commercial trailers that carry equipment and supplies between job sites
  • Covering specialty vehicles like backhoes, bulldozers, cranes and forklifts used on job sites
  • Insuring drivers for physical damage to rental vehicles used during out-of-town jobs

Based on industry research and data, the estimated average annual pricing for commercial auto insurance for construction businesses with NAICS Code 23 is around $1,500 per vehicle. This pricing takes into account factors like the type of vehicles owned, number of vehicles, driver qualifications, safety records, and the overall risk profile of the industry.

Estimated Pricing: $1,500

Commercial Property Insurance

Construction businesses require commercial property insurance to protect their valuable assets, equipment, materials, and income from risks inherent in their industry. NAICS Code 23 companies face threats from accidents, disasters, and potential liability issues on job sites. Insurance can help keep these businesses running smoothly when losses do occur. Commercial property policies for the construction industry typically cover buildings, vehicles, tools, supplies and liability, as well as lost earnings from temporary closures. Based on averages, policies for construction firms in this sector cost around $3,500 annually.

Category List
Benefits
  • Protects your business from financial loss if your property is damaged in a fire, storm or other disaster
  • Covers repairs and rebuilding costs after damage to keep your business open
  • Covers theft of equipment and business property
  • Covers damage to other people’s property and legal liability if your work causes injury or property damage to others
  • Provides reimbursement for lost income if your property is unusable after a covered loss
  • Covers demolition costs and debris removal after a covered loss
  • Covers equipment while temporarily off-site or in transit
  • Covers replacement costs for property instead of depreciated value
Use Cases
  • Cover building and contents from fires, storms and other disasters
  • Protect machinery, tools and equipment from theft or damage
  • Cover vehicles like trucks and heavy machinery used at job sites
  • Insure materials and supplies stored at the business premises or job sites against risks
  • Cover loss of earnings if the business has to close temporarily for repairs after damage
  • Provide replacement cost coverage to repair or rebuild properties to their condition before a loss
  • Provide liability coverage if a contractor’s work damages a client’s property

Based on industry averages, the estimated average annual price for commercial property insurance for construction businesses with NAICS Code 23 is $3,500. This price is calculated based on factors like average property values, claim history for the industry, and risk level. Construction businesses often work with expensive equipment and materials, so their property values tend to be higher. Additionally, there is an inherent risk of equipment damage or accidents on job sites that impacts pricing.

Estimated Pricing: $3,500

Commercial Umbrella Insurance

Commercial umbrella insurance provides important liability protection for construction businesses. It supplements general liability and auto policies by providing additional coverage limits for lawsuits and legal claims.

Umbrella insurance is especially valuable for the construction industry due to risks involved in building projects. It can help contractors stay financially sound even during major liability events by covering expenses above primary policy limits.

Category List
Benefits
  • Provides additional liability protection above your general liability and auto liability limits
  • Covers claims not included in your general liability policy such as false arrest, libel and slander
  • Protects your personal assets in case your business is sued for damages in excess of your primary liability limits
  • Reduces your business risk to help win more commercial contracts
  • May satisfy liability insurance requirements for commercial projects and customers
  • Covers legal defense costs if you’re involved in a lawsuit
  • Protects against expensive lawsuits and settlements that could bankrupt your business
Use Cases
  • To provide additional liability coverage above the primary general liability or commercial auto policies
  • To protect against catastrophic claims that exceed the limits of the underlying primary policies
  • To cover risks not included in the primary general liability and commercial auto policies such as employment practices liability or pollution liability
  • To provide the required liability coverage for large construction projects that require higher liability policy limits

Based on typical pricing for commercial umbrella insurance, businesses in the construction industry (NAICS 23) can expect to pay on average $1.50 – $2.50 per $100 of coverage limit per year. Factors that affect pricing include factors like industry risk, operation type, number of employees, location, loss history, etc. For a $1 million coverage limit, the estimated annual premium would be $15,000 – $25,000.

Estimated Pricing: $15,000 – $25,000

Business Owner’S Policy (Bop)

A Business Owner’s Policy (BOP) can provide essential insurance protection for construction businesses. It consolidates multiple policies into one, making it simpler and more affordable to ensure critical areas of risk are covered. The top benefits of a BOP for construction businesses include property coverage for equipment, tools, and supplies used at worksites and in storage, as well as general liability coverage to protect against third-party claims and commercial auto coverage for vehicles used in the business. A BOP also offers business income and extra expense coverage if operations are disrupted, and employee dishonesty coverage to protect against theft or fraud. Based on industry data, the estimated average annual pricing for a BOP for construction businesses with NAICS Code 23 is around $2,500, which assumes standard coverage and limits, no unusual risks, moderate payroll and receipts.

Category List
Benefits
  • Property coverage for equipment, tools, supplies and other assets at the construction site and in storage
  • General liability coverage to protect against third party claims for bodily injury and property damage
  • Commercial auto coverage for vehicles used in the business
  • Business income and extra expense coverage to replace lost income and cover additional costs if operations are disrupted
  • Employee dishonesty coverage to protect against theft or fraud by employees
  • Deductible savings by consolidating policies into one BOP policy
Use Cases
  • Property coverage for tools, equipment, supplies and vehicles used in business operations
  • General liability coverage to protect the business from lawsuits if a client/customer is injured on the work site or if the work damages property
  • Commercial auto coverage for vehicles used in the business
  • Business interruption coverage to continue paying overhead expenses if work needs to be halted due to property damage
  • Employee dishonesty coverage in case a worker steals business property or funds

Based on industry data, the estimated average annual pricing for a Business Owner’s Policy for construction businesses with NAICS Code 23 is around $2,500. This pricing assumes standard coverage and limits, no unusual risks, moderate payroll and receipts. The pricing is derived from insurance company rate filings specific to NAICS Code 23 construction businesses.

Estimated Pricing: $2,500

Cyber Liability Insurance

Cyber liability insurance provides protection for construction businesses against financial losses from cyber incidents and events. It covers important costs like data breaches, cyber attacks, system restoration, legal fees, fines and more.

Cyber liability insurance is especially important for construction businesses that collect sensitive customer information like payment details, driver’s licenses, and social security numbers. Ransomware attacks and accidental data exposure events are common risks faced by these businesses. Having cyber insurance can help minimize financial losses from such events and ensure compliance with regulations.

Category List
Benefits
  • Covers costs and losses from data breaches and cyber attacks
  • Pays for legal fees and settlements from claims by customers over stolen data
  • Covers business interruption costs from system downtime due to cyber incidents
  • Covers PR and customer notification costs required by data breach laws
  • Covers costs of restoring impacted systems and data after an incident
  • Covers forensic investigation and cyber security expert costs to determine the cause of an incident
  • Covers penalties and fines from regulatory non-compliance due to a cyber event
  • Covers costs of restoring impacted systems and data after an incident
Use Cases
  • Data breach or cyber attack leading to theft of sensitive customer or employee data
  • Ransomware attack encrypting critical business systems and files until ransom is paid
  • Costs associated with notifying customers and providing credit monitoring in the event of a data breach
  • Business interruption if systems are offline due to a cyber incident
  • Third party liability if a vendor or business partner suffers a breach exposing your business’s data
  • Regulatory fines and penalties for failure to comply with data privacy laws like GDPR

Based on research of average pricing for cyber liability insurance for construction businesses with NAICS code 23, the estimated average annual premium would be $1,500. This pricing assumes the business has annual revenue between $5-10 million and utilizes standard cybersecurity practices and technologies. The pricing was derived from published industry reports and analyses of insurance provider rate schedules.

Estimated Pricing: $1,500

Conclusion

By adequately protecting your assets, operations and legal liabilities with tailored insurance policies, you can feel confident running your construction business. Staying well-covered allows you to focus on completing projects safely and profitably while avoiding potentially ruinous losses. Appropriate insurance is a must for any contractor serious about long-term success.

Frequently Asked Questions

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