Strong GC experience is a huge value-add to their involvement. Some qualities that are a little less acknowledged are the licenses, bonds, and insurance coverage that GCs carry. It’s often overlooked, but these components of a contractor’s “tool belt” are often as important as the hands-on tools. In reality, this is the main reason a building owner/company can’t just buy a CM software and manage a construction project independently. Bonds and insurance are two very different, yet equally important, forms of protection.
What’s the significance?
Whether a construction project is large or small, there is unavoidable risk of accidents and complication.
There are two types of insurance that are relevant to protect a general contractor while on the job: general liability insurance and workers’ compensation insurance. General liability covers any property damage or bodily injury covered by the policy. Workers’ compensation encompasses often unavoidable accidents that are prone to occur in physical labor. The difference lies in the recipient of the protection. General liability protects the contractor; however, workers’ compensation protects the employees affected themselves.
Bonds work a bit differently. The surety bonds that are involved in construction projects consist of an agreement in which three parties come together: the contractor, the client, and the firm that is writing the bond (the surety). The surety firm is backing the financial end if the GC cannot meet the agreed upon terms. This bond offers financial coverage that is specific toward the job scope and valuation. This is often a prerequisite to be in place prior to receiving licenses to begin construction. There are other bonds for different types of construction engagements but this is typically the most common form.
Why is this important to know?
Plain and simple – to have confidence in your policy, you have to understand it. With the protection that bonds and insurance provide to all parties in a project, it’s worth confirming your covered for all potential accidents/injuries.