Types of Construction Insurance: 2025 Guide for Contractors & Developers
Builder’s risk, general liability, workers compensation, inland-marine and contractors pollution liability are the five core types of construction insurance. Each protects a different phase of work and may be bundled to cut total cost of risk by 8-12 percent.
Key Takeaways
- Builder’s Risk covers the structure and materials until substantial completion.
- Commercial General Liability (CGL) pays third-party injury or property claims during construction.
- Workers Compensation is mandated in every state; Experience Mod drives premium.
- Inland Marine / Equipment protects tools and heavy gear in transit or on-site.
- Contractors Pollution Liability fills the environmental gap left by CGL exclusions.
Why Construction Insurance Matters in 2025
Supply-chain volatility and double-digit materials inflation have pushed average U.S. project values 14 percent higher since 2022.¹ As a result, lenders now refuse to fund draws without proof of adequate builder’s risk and liability limits. Modern policies also factor construction type—ISO Classes 1–6—when pricing fire or wind loss potential.²
Core Types of Construction Insurance
1. Builder’s Risk (Course-of-Construction)
Covers damage to the work in place, materials and temporary structures. Premiums run 0.75–1.5% of completed value; wood-frame jobs see surcharges up to 25%. See our Builder’s Risk Guide for deductible benchmarks.
2. Commercial General Liability
Protects against bodily injury and property damage to third parties. Many owners now demand $2 million per-occurrence and project-specific $5 million excess layers.
3. Workers Compensation
State-mandated. Contractors target an EMR under 1.00 to stay bid-competitive. Scaffolders and roofers carry the highest base rates.
4. Inland Marine / Equipment Floater
Covers theft, collision and overturn of tools, cranes and leased equipment. GPS-enabled anti-theft devices can earn 5% premium credits.
5. Contractors Pollution Liability (CPL)
Essential when excavating contaminated soil, spraying foam insulation or installing spray-applied fireproofing—exposures excluded by CGL. Limits start at $1 million.
Premium Impact — Construction-Type & Control Scenario
| Scenario | Builder’s Risk | CGL | Total Package* |
|---|---|---|---|
| ISO 1 (Masonry), multi-sig security cameras | +4% | +3 % | −8% credit |
| ISO 3 (Ordinary), standard controls | +8% | +6 % | −4% credit |
| ISO 5 (Frame), no water mitigation | +15% | +10 % | 0% credit |
*Bundling lines with one carrier often unlocks up to 12% in credits—learn how.
Underwriting Data Checklist — Get the Best Rates
- Signed builder’s risk application with ISO construction class and sprinkler details.
- Schedule of values broken down by trade and material escalation clauses.
- Latest OSHA 300A log & 3-year loss runs.
- Site-security plan (fencing, cameras, guard service).
- Contractor Quality Control manual for design-build projects.
How Policies Respond to Common Claims
Scenario A – Wind-Blown Scaffold Collapse
Builder’s Risk pays to replace damaged façade panels; CGL handles injuries to pedestrians; CPL triggers if paint overspray contaminates vehicles.
Scenario B – Crew Member Falls From Roof
Workers Comp covers medical and wage loss; CGL responds only if a third party is injured; builder’s risk remains silent.
Expert Tips to Cut Total Cost of Risk
- Negotiate a blanket additional-insured endorsement (CG 20 38 10-13) once—avoid project-by-project paperwork.
- Use AI-enabled cameras; many carriers offer 5–7% builder’s-risk credit.³
- Align wrap-up (“OCIP/CCIP”) audits with fiscal year to avoid payroll true-up surprises.
Case Study — $60 M Mixed-Use Project
A national GC building a six-story, ISO 3 mid-rise bundled builder’s risk, CGL, inland-marine and CPL via Hotaling’s Nationwide and AIG programs. Premium spend dropped 11%; coverage expanded to include testing and start-up plus water intrusion.
Wrap-Up vs. Stand-Alone General Liability: Which Construction Insurance Option Saves Money?
Owner-controlled (OCIP) and contractor-controlled (CCIP) “wrap-up” programs roll general liability, excess, and workers-comp into one master policy for every company on the jobsite. Carriers now offer wrap-ups on projects as small as $30 million in hard costs, making them realistic for mid-rise apartments and large warehouses.
When it’s cheaper: Trades with higher injury rates—roofing, framing, scaffolding—often lower overall bids by 8–10 percent when brought under a wrap-up. If subcontractor experience mods average 0.90 or better and the project is largely self-performed, stand-alone general liability can still win by 3–4 percent.
Avoid audit shocks: Track change-order payroll quarterly and require every subcontractor to enroll before mobilizing. The wrap administrator can suspend non-compliant crews under a “Stop-Work” clause that holds up in most states.
Subcontractor Default Insurance and Surety Bonds: Two Critical Types of Construction Insurance
Subcontractor default insurance (SDI) pays the general contractor directly when a trade partner walks off the job or goes bankrupt. Limits reach $50 million per subcontractor, and deductibles can be as low as 1 percent of contract value. For private projects over $250 million, SDI is often 20–30 percent less expensive than traditional bonds.
Bonds remain required on public work, where performance and payment guarantees are set by statute. Private owners value SDI for its quick payouts and schedule protection, but it excludes losses tied to the GC’s own design errors. Pair SDI with project-specific professional liability to close that gap.
Tip: Some SDI policies cap completed-operations coverage at five years—shorter than many state bond requirements. Check the warranty periods on mechanical, electrical, and plumbing trades before you bind coverage.
Cyber Insurance for Construction Projects: Protecting Digital Tools and Job-Site Data
BIM models, drone surveys, and cloud scheduling tools are now part of everyday site management—and hackers know it. Ransomware attacks on design-build firms jumped 240 percent last year, according to AXA XL.
- Cyber-crime insurance covers ransomware payments, wire-transfer fraud, and data restoration. Add a “BIM file recreation” rider for corrupted digital plans.
- Media liability handles copyright claims tied to drone footage and jobsite photos.
- Business interruption extensions pay for project delays when your scheduling software is taken offline.
Installing multi-factor authentication on cloud tools and water-leak IoT sensors on site can cut cyber and builder’s-risk premiums by 3–7 percent. Ask carriers for their technology-credit checklists before renewal.
FAQs
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What are the four basic construction types?
- ISO classes 1–4: Frame, Joisted-Masonry, Ordinary, Non-Combustible. Classes 5–6 add Modified and Fire-Resistive.
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Which insurance lines are legally required?
- Workers compensation is mandatory nationwide; many states or lenders also require builder’s risk and CGL before issuing permits.
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Does builder’s risk cover theft?
- Yes—if materials are on-site and theft is not excluded; off-site theft falls under inland-marine.
Why Trust Hotaling?
- 25 years delivering P&C solutions for ENR Top-400 contractors nationwide.
- In-house risk engineers, claim advocates and surety bond specialists across NYC, Houston, Miami and Melville offices.
- Recognized as a 2025 Chubb Cornerstone Agency—earned by only 3 % of U.S. brokerages.
Next Steps
Choosing the right mix of construction-insurance lines protects profit margins and keeps projects on schedule. A Hotaling advisor can benchmark rates, model wrap-ups, and align coverage with ISO class, trade mix, and lender demands.
What makes Hotaling different
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Nationwide, independent, family-owned brokerage with 20 + years of construction-risk expertise. Hotaling Insurance Services
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24-hour in-house claims and certificate team—no carrier phone trees—so jobsite documents land when night pours start. Hotaling Insurance Services
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Custom cost-model tools that compare wrap-up vs. stand-alone pricing before you bind.
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Dedicated construction practice across NYC, Houston, and Miami offices for region-specific code insight and carrier leverage.
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Client-first service culture—tailored solutions, open communication, fast turnaround—recognized on our home page.
Ready to see line-item savings? Schedule a coverage review with our certified specialist by filling out the form below!
¹ Source: U.S. Census Construction Price Index; ² IRMI ISO Construction Categories; ³ NAIC 2024 Cyber Loss Study. This article provides general guidance only—consult a licensed Hotaling professional.