What insurance do I need for my construction business?

The most important thing for a new construction business owner to know about insurance is what the types of insurance are and how they work together to protect the business. New construction business owners need liability protection, workers' compensation coverage and, in most cases, a plan for bonding before bidding on jobs. General liability insurance protects against third-party claims for bodily injury or property damage, while workers' compensation covers employee injuries and is required in nearly every province and territory once a business has employees. 

Coverage decisions often need to happen before a business can legally take on work: 

• Many provincial and territorial licensing boards require proof of insurance before issuing or renewing a contractor's licence. 
• General contractors and project owners commonly request certificates of insurance before awarding a contract. 
• Some contracts require additional insured status on the contractor's policy. 
• Project owners and general contractors often require surety bonds alongside coverage to guarantee project completion and payment to subcontractors and suppliers. 

General contractor insurance combines several types of coverage that address different points of risk across a job site, from injury claims to property damage to project delays. A general contractor typically carries several core policies as the foundation of a coverage program: 

• Commercial general liability insurance 
• Workers' compensation for employees 
• Commercial auto insurance for vehicles used on the job 
• Builder's risk insurance to cover a structure under construction 

Because general contractors are responsible for co-ordinating subcontractors, they also manage risk transfer. This typically involves requiring subcontractors to carry their own insurance, provide certificates of insurance and name the general contractor as an additional insured, which helps limit the general contractor's exposure if a subcontractor causes damage or injury. 

Larger commercial projects may also call for: 

• Subcontractor default insurance, which protects the general contractor if a subcontractor fails to complete its work 
• Umbrella or excess liability insurance for claims that exceed underlying policy limits 

Construction businesses take on physical, financial and legal risk tied to job site safety, project timelines and contract obligations. These risks touch nearly every stage of a project, from the moment ground is broken to final walkthrough, which is why risk management is built into how the industry operates rather than treated as a separate function. 

Physical risk centres on job site safety and includes: 

• Falls 
• Being struck by equipment or materials 
• Electrocution 
• Getting caught in or between machinery 

These exposures are heightened by the number of moving parts on an active site: multiple crews working simultaneously, heavy machinery in close proximity to workers and materials staged in high-traffic areas. 

Financial risk includes: 

• Equipment damage 
• Theft of tools and materials 
• Weather delays that push back project timelines and increase costs 
• Labour and material cost increases that outpace original project budgets 

Legal risk includes: 

• Contract disputes 
• Claims of faulty workmanship 
• Third-party injury or property damage claims 
• Disputes over project scope or change orders 

Construction businesses that carry subcontractors also take on risk related to those subcontractors' performance and insurance status. A subcontractor's safety practices, financial stability and coverage gaps can all become the general contractor's problem if something goes wrong, which is why additional insured requirements and certificates of insurance play a central role in how the industry manages risk across a project. Many contractors also verify subcontractor licensing and bonding before work begins, adding another layer of protection against downstream liability. 

Construction businesses commonly carry several types of coverage, each addressing a distinct exposure rather than overlapping coverage: 

• General liability insurance. Covers third-party bodily injury and property damage claims, including incidents involving visitors, clients or passersby at a job site. 
• Workers' compensation insurance. Covers employee injuries and is mandated in most provinces once a business has employees, paying for medical care and lost wages tied to workplace incidents. 
• Commercial auto insurance. Covers vehicles owned or used by the business, including trucks, trailers and equipment transport vehicles involved in accidents or causing damage. 
• Builder's risk insurance. Covers a structure and materials during construction, typically until the project is complete, protecting against losses from fire, theft, vandalism and certain weather events. 
• Inland marine insurance. Covers tools and equipment that move between job sites, filling a gap that standard property policies often don't address since the covered items aren't tied to a fixed location. 
• Professional liability insurance, also known as errors and omissions (E&O) insurance. Covers claims tied to plans, specifications or professional advice that lead to financial loss for design-build firms and contractors offering design services. 
• Umbrella and excess liability insurance. Extends coverage limits above underlying policies for large claims, providing an added layer of protection when a single incident results in damages that exceed a primary policy's limits. 
• Employment practices liability insurance (EPLI). Covers claims related to hiring, termination, discrimination or other workplace disputes, an increasingly relevant coverage as a business's workforce grows.