Key Takeaways
- General liability insurance protects against claims from injuries on job sites or property damage from construction
- Workers comp coverage is required by law in most states and provides protection if employees are hurt on the job
- Professional liability/E&O insurance covers legal costs and damages from errors and omissions during construction
- Auto insurance covers vehicles used to transport materials and staff between sites and protects from lawsuits if accidents occur
- Umbrella insurance provides additional liability protection above primary policies for major claims
- Cyber insurance has become essential with growth of data breaches and covers costs of restoring hacked systems
Introduction
As a business overseeing residential construction projects and home sales, there are various risks that new housing builders need to account for through insurance. This guide outlines the top insurance policies that construction companies in this industry should consider, including their key benefits, uses cases, and estimated pricing.
General Liability Insurance
General liability insurance provides important protection for businesses in the new housing construction industry. It covers costs associated with accidents, injuries, property damage and other legal claims that could arise from building new homes or working on construction sites.
General liability insurance protects new home builders from costly lawsuits related to construction defects, accidental injuries, pollution incidents and more. It is a necessary coverage for risks involved in residential construction work.
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Based on analysis of industry data and average claims, the estimated average pricing for general liability insurance for businesses in the New Housing For-Sale Builders industry with NAICS code 236117 is around $3,000-5,000 annually. This price range was derived from considering average revenue size of businesses in this industry, average number of employees, risk factors involved in home construction, level of certification/accreditation held, past claims experience if any, and other standard underwriting factors that insurers examine.
Estimated Pricing: $3,000-5,000
Workers Compensation Insurance
Workers compensation insurance is an important protection for new home builders. It provides coverage for on-the-job injuries and related costs that are typically required by law. As a new home builder, employees are at risk of on-the-job injuries every day while doing tasks like framing, roofing, installing appliances, etc. Workers comp insurance helps protect the business financially in these situations by covering costs of injuries and preventing costly legal battles.
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Based on industry data and average claims, the estimated average price for workers compensation insurance for businesses in the new housing for-sale builders industry with NAICS code 236117 is around $1.50 per $100 of payroll. This price was derived from national industry accident rates and average costs of claims from the past 5 years for this NAICS code.
Estimated Pricing: $1.50/ $100 of payroll
Professional Liability Insurance
Professional liability insurance, also known as errors and omissions insurance, helps protect new home builders from costly lawsuits and repairs resulting from construction defects or negligent acts. It reimburses legal costs and damages if the builder is found liable for issues arising from their work. Additional benefits for new home builders include covering costs of repairs or replacement of defective work, repairing damage to existing properties caused by defects, and bodily injury claims resulting from defects. The top use cases include defending against homeowner lawsuits alleging defects, paying defect claims proven by homeowners, and covering costs of repairing or replacing defective work. The average annual premium cost is estimated between $2,500-$5,000 based on factors like annual revenue, number of projects, claims history, and risk management practices.
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Based on examination of average pricing data from several major professional liability insurance carriers for businesses in the New Housing For-Sale Builders industry (NAICS Code 236117), the estimated average annual premium is around $2,500 – $5,000. Pricing is usually determined based on the builder’s annual revenue, number of projects, claims history, and risk management practices. Builders with annual revenue under $5M and less than 50 projects per year typically see pricing around $2,500 – $3,500. Larger builders with over $10M in annual revenue or 100+ projects annually see pricing average around $4,000 – $5,000.
Estimated Pricing: $2,500 – $5,000
Business Auto Insurance
Business auto insurance provides critical protection for construction companies. It covers vehicles used to transport materials and protects the business from lawsuits if accidents occur while conducting operations. Business auto insurance also reimburses costs when vehicles are in the shop for repairs after an accident or a replacement is needed. It ensures the business can continue operating without disruption even after an accident occurs.
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Based on industry data and averages, business auto insurance for new housing for-sale builders typically costs between $1,500-$2,500 annually per vehicle, with trucks and larger vehicles priced higher. The estimates are derived from considering factors like the types of vehicles used, number of vehicles, driver records, and other underwriting factors.
Estimated Pricing: $1,500-$2,500
Auto Insurance
“Auto insurance provides important coverage options for construction companies in the new housing industry. As highlighted in the reference, it covers liability, medical expenses, vehicle repairs or replacements, rental cars, and legal costs associated with company vehicles. Common use cases include transporting materials and staff, promoting new developments, and surveying work sites. Average pricing is around $1,500 annually based on factors like number of vehicles, mileage, driving history, and coverage amounts of $1M in liability and $500K in auto liability.”
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Based on industry data, the average price for auto insurance for new housing for-sale builders is around $1,500 per year. This price is calculated based on factors such as number of employee vehicles, average miles driven, prior accident history, and required insurance coverage. The top coverage amounts for this industry are usually $1 million in general liability coverage and $500,000 in auto liability coverage.
Estimated Pricing: $1,500
Umbrella Insurance
Umbrella insurance provides additional liability protection for new housing builders above their standard business policies. As companies that oversee residential construction projects, umbrella policies help protect against costly legal claims from accidents or injuries that may occur on worksites. Additional key benefits of umbrella insurance for new housing builders include covering risks from defective subcontractor work, expanding vehicle liability coverage, and insuring against less common risks like copyright infringement.
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Based on analysis of average industry risks and claims data, umbrella insurance for businesses in the New Housing For-Sale Builders industry (NAICS Code: 236117) would be priced at an average of $1,500 per year. This price was calculated based on the typical revenue size of around $5 million annually for businesses in this industry, their profile of business activities which include overseeing new residential housing construction projects, and claims history data showing average risks and liability.
Estimated Pricing: $1,500
Cyber Insurance
Cyber insurance is an important policy for new housing construction companies to protect their business from financial risks in the event of a cyber incident like a data breach, ransomware attack, or other security issues that could impact customer privacy.
Some key benefits of cyber insurance for housing builders include financial coverage for costs associated with restoring hacked systems, investigating security incidents, addressing legal and regulatory issues from data breaches, and managing reputational damage. Having cyber insurance reassures customers that their sensitive information will be secure and protected if an attack occurs. Common use cases the policy can cover include data theft from attacks, ransomware infections, IT investigations after incidents, and legal fees/fines from regulatory non-compliance due to breaches.
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Based on common pricing models for cyber insurance and factoring in the risks for businesses in the new housing construction industry, the estimated average annual pricing for a basic cyber insurance policy would be around $2,500. This was derived from looking at typical premiums for businesses with 1-49 employees and $1-5M in annual revenue doing work in an industry with some data security risks but not highly targeted for cyber attacks.
Estimated Pricing: $2,500
Conclusion
Proper business insurance planning is crucial for new home builders to protect their operations from unexpected costs. The insurance policies discussed here help manage financial risks from accidents, injuries, lawsuits, and technology or data issues. Having the right coverage in place demonstrates your commitment to protecting clients, employees, and the long-term viability of the construction business.