As an excavation contractor, you’re the professional all of the other contractors rely on to prepare land for a construction project. It’s dangerous work that’s not without risks to you, your company, your crew, and third parties that may be in the vicinity of the job.
Preparing the foundation and building trenches to lay utility lines involves digging with heavy machinery. You may also be grading the land, clearing it, and hauling away debris and earth matter. The level of risk is high, so it’s vital that you have the appropriate excavation contractor insurance coverage for your business.
Excavation insurance will protect your business from claims and lawsuits and take care of your workers if they’re hurt or become sick on the job. Hopefully our guide will help you to understand more about how this type of insurance can help protect your business.
What Types of Businesses Need Excavation Business Insurance?
There are many moving parts to an excavation business. There are often multiple contractors involved on the excavation project, seeing it to a successful completion.
If any of the following describe your business, you should look into excavation contractor insurance:
- Excavation contractor
- Demolition business
- Blasting contractor
- Land grading
- Concrete supply and equipment services
- Foundation drilling and digging
- Other types of contractors involved in a construction project
There are perhaps other businesses closely related to the excavation business and might fall under the scope of this type of insurance. A specialized, knowledgeable business insurer can help to determine if excavation contractor insurance is appropriate for your business.
Do I really need excavation contractor insurance?
Many excavation contractors are so focused on running their business that they tend to put off getting insurance for their business. For many, it’s a horrible mistake because inevitably, something happens that threatens their financial ability to operate their business.
Ask yourself these questions:
- If one of your worker’s arms became caught in excavation machinery, could you afford to pay for their medical treatment out of your own pocket?
- What if they lose the arm to the accident, resulting in tens or even hundreds of thousands in medical expenses over time? What if they couldn’t ever work again? Would you be able to take care of them if you didn’t have worker’s comp?
- What if a severe thunderstorm caused a driver to plow into one of your workers as they’re hauling excavation machinery to a job site? Did you know that personal auto insurance won’t cover your work vehicles? Even if your personal auto insurance offers some coverage for business purposes, it likely isn’t enough to protect your business.
- What if your demolition company has a couple of things that don’t go as intended and a nearby structure is damaged in the process, as well as a third party person who is injured? Do you have tens or hundreds of thousands of dollars put away in your savings account to pay for these things out of pocket?
It makes sense that you’d want to prioritize business insurance for your excavation contracting services and consider it another important and necessary expense as part of doing business.
If something goes wrong, you don’t want to lose your business over going bankrupt from an unexpected, expensive claim against your company. You don’t ever want to be left thinking, “If only I had the proper coverage to pay for these things.”
Risk management a vital part of your business operations. It offers you the peace of mind you need to go about your business, knowing that you’re covered if the worst happens. And when it comes right down to it, it’s reasonably affordable when you consider what it provides.
What are other potential risks of the excavation business?
You’re likely all too aware of the possible risks to you, your employees, your business, and third parties when digging up the ground and preparing a construction site. But, here are a few examples:
- Excavation equipment and workers can potentially fall into the area your excavation company is working.
- Equipment and dirt that has already been excavated can fall and crush someone working below in a trenched area.
- Trenches can collapse and injure or kill workers down below. In fact, trench collapses are responsible for killing two workers each month in the excavation business. That’s not counting the number of workers who are injured on the job each month who ultimately lean on worker’s comp insurance to pay their medical bills and wages while out of work.
- Workers in deeper trenches sometimes are deprived of adequate oxygen or exposed to toxic chemicals and gases.
- Dump truck and loader accidents are common on trenching sites due to obstructions.
- Flying debris is another common peril in the excavation business.
- Damage to the infrastructure and utility lines is a typical occurrence when digging the ground and excavating the land. Natural gas leaks and electrocution are very real threats, resulting in work-related fatalities to excavation workers.
- Equipment that is left on job sites runs the risk of being stolen or vandalized.
- The oversized machinery and equipment used in the excavation business and excavated dirt being carried away from the worksite increase the risk of a vehicle accident.
- Work-related injuries and environmental exposures are high in the excavation business due to the nature of the work.
- There are many more potential scenarios involving the risk of damage to structures and equipment or injuries or death to workers and third parties. To prevent many of these hazards, OSHA has specific safety recommendations to minimize these risks.
What Types of Insurance Should my Excavation Business Have?
As an excavation contractor, you’ll likely need different types of coverage to protect your business. You’ll most definitely need the basic types of commercial policies, like general liability insurance, workman’s comp, commercial property coverage, and commercial vehicle insurance. But there could be others depending on the scope of your business.
Let’s take a look at what might make sense for your excavation business.
General Liability Insurance
General liability coverage is considered the mother of all business insurance policies. Consider the fact that there are any number of unexpected situations that excavation contractors encounter.
You’re breaking ground on a site that has unknown risks. Third-party injuries and property damage is more common than you might think when you’re digging up the earth. General liability insurance helps to pay for those types of things.
In your case, you’d want general liability insurance that’s geared for a heavy equipment operator.
As you probably already know, you’re likely to be hired by a general contractor, and most of these professionals will only hire excavation contractors who are fully insured. That’s because they’re trying to protect their business as well.
Should you hire subcontractors, that’s a bit of wisdom you’ll likely want to adopt for your own business, not only to protect your business but to keep your premiums as low as possible. If your insurer finds out you use uninsured subcontractors, your premiums are likely to be higher.
Most states require business owners to carry worker’s comp coverage on all workers on the payroll. If you don’t, you could be penalized for not doing so.
Even if your state doesn’t require it, chances are the general contractor who hires you for the job will. Worker’s comp is another layer of not only protecting your business but protecting your employees if they’re hurt or fall sick because of something involved with doing their work, such as a chemical exposure.
Worker’s compensation will help pay medical bills for work-related injuries and sicknesses. It also helps to pay for some of the lost wages your employees lose when they’re out of work because of a qualifying event.
Should your employee also decide to take legal matters against your company, worker’s comp may help pay your legal fees and any expenses related to a lawsuit.
Because excavation work is a high-risk job, most excavation contractors make it a priority to carry this coverage on their workers. The cost of worker’s comp premiums will depend on how many employees you have working for you.
Heavy Equipment Insurance
Excavation contractors typically have heavy equipment that is unique to their business. Excavation equipment is expensive, not only to purchase, but to repair and replace if the equipment is damaged on a construction job or breaks down. The equipment you and your workers use is prone to:
- Engine failure or failure to operate
- Fire damage
- Damage from the elements such as rain, hail, or lightning
- Theft or loss
- Equipment damage from a vehicle crash (some commercial vehicle insurances may limit coverage to the vehicle itself and not cover the equipment you’re carrying to a job site)
- Malfunction of equipment
Note that there may be other causes of damage to your equipment not listed above. You’ve invested quite a bit of money in your excavation equipment and could experience a substantial financial loss if something happens to it.
Some types of individual excavation insurance may cover your equipment under very narrow circumstances. But, you want to have comprehensive coverage of your equipment under just about any circumstance.
Ask your insurer if separate heavy equipment insurance is a good idea when considering the other coverage you have for your business. Heavy equipment insurance will help pay to repair or replace damaged or stolen equipment like excavators, forklifts, cranes, bulldozers, loaders, and other heavy machinery.
Commercial Property Insurance
Most excavation businesses have a commercial property to store their machinery and tools and use as a central place for their business operations. Any business that has a physical location should have commercial property insurance.
Business property owners every day suffer massive financial losses due to fire, theft, or weather-related events. Commercial property insurance will help reimburse you for repairing or replacing covered losses of building structures and any assets such as equipment, tools, and machinery that are stored at your business premises.
When you consider the hundreds of thousands of dollars you likely invested initially in the physical moving parts of your business, there’s no doubt you want to have the right insurance coverage in place in case of significant losses to your business.
Without comprehensive coverage, if the worst should happen, you would have to start over from the beginning, or your business could go under quickly.
Commercial Vehicle Insurance
There are millions of motor vehicle accidents each year in the U.S. Nearly half of those result in injuries. Furthermore, the National Highway Traffic Safety Administration (NHTSA) says that almost 37,000 people died from vehicle accidents in 2019.
A commercial vehicle is described as any vehicle that is used in business. Even if you or one of your workers are just carrying a smaller tool to bring to a job site, the vehicle would be considered a commercial vehicle.
Many business owners are under the mistaken impression that personal insurance coverage offers full protection for their business when they use the vehicle for something related to the business, however minor.
But, if it can be proven that the vehicle was used in any way for your company, your business is at stake.
Commercial vehicle insurance will cover any rigs and vehicles used to carry equipment or transport your workers to an excavation job. This may include your business vehicles as well as any personal vehicles used for business purposes.
Commercial vehicle insurance will help pay for covered events like damage to third-party vehicles or property, medical bills resulting from the accident, and claims or lawsuits resulting in a settlement against your business. It will also pay for if your work vehicles are vandalized, stolen, or damaged due to a covered weather event.
Imagine that one of your workers is responsible for a major vehicle accident involving two other vehicles. There’s a good chance the occupants of the other vehicles will initiate a claim against your business.
Without adequate commercial vehicle insurance, you risk losing your business. But, insurance to cover this event helps make things a whole lot easier while protecting your business.
Inland Marine Insurance
The phrase “inland marine” is a misleading one in this context. This type of insurance doesn’t cover your business while on the water. It covers the equipment, tools, and machinery used in your business while in transit, at the job site, or when away from your primary commercial building site.
Your business moves equipment and machinery from your primary commercial property to job sites and places in between. Commercial vehicle coverage rarely covers these types of commercial items, making it necessary to protect your interests another way when moving your equipment or when it’s stored off-premises.
That’s where inland marine insurance comes in.
This type of coverage will help pay for the equipment and machinery that’s vital to your business when it’s stolen, damaged, or destroyed when in transit or parked at a job site or other place, such as your home or a store.
Other Types of Insurance Excavators May Benefit From
Depending on your business’s risks, an insurance company might recommend additional types of coverage to offer you comprehensive protection, including:
- Commercial Umbrella Insurance
- Errors & Omissions Coverage
- Business Interruption Insurance
- Environmental and Pollution Liability Coverage
- Product Liability Insurance
- Commercial Flood Insurance
- Cyber Liability Coverage
- Employment Practices Liability Coverage
- Sexual Misconduct Coverage
An assessment of your excavation business can help determine whether you need any of these additional policies for your business.
How much do insurance premiums cost for excavation contractors?
There are several variables in terms of how much your premium might cost you. Excavation businesses each have their own suite of services that are different from a similar company.
These differences could mean that one business pays more for their premium while another pays less. The more risks involved in each business, the higher the premiums are likely to be. There are also other factors at play, such as:
- How many employees your business has
- Where your business is located
- The amount of revenue your business earns
- The value of your business’s equipment, machinery, property, and other assets
- The policy limits and deductibles you choose for your policies (lower deductibles and higher limits cost more than higher deductibles and lower limits)
- History of prior claims
Talk to a specialized excavation insurer to find out which insurance policies will best protect your business. Most insurers can bundle policies for the best rate. Combining policies will usually give you a discount and lower your premiums.
What type of policy limit should I choose for my insurance?
Ultimately, it would be best if you chose as high a policy limit as you can comfortably afford. Newer businesses tend to choose lower limits and increase to higher limits as their business grows.
The majority of contractors opt for general liability coverage with a per-occurrence limit of $1 million and an aggregate limit of $2 million.
Also, bear in mind that personal injury settlements can be costly, so you’ll want to have higher policy limits for your commercial auto insurance. Most contractors choose vehicle insurance with a $1 million limit.
As far as insurance to cover your business’s assets, you’ll want to make sure that you have enough coverage to replace all of your business’s machinery, equipment, vehicles, buildings, etc., in case of a total loss.
Excavation work has far more risks than the average business. As an excavation contractor and business owner, you want to do everything you can to minimize these risks while hoping for the best and preparing for the worst. This includes having adequate and appropriate insurance coverage in place to cover all potential risks.
Protecting your business is vital to ensure its success over the long term. This means making sure you’re covered, that your business can continue operating when it meets with challenges, and protecting your workers. Excavation contractor insurance is the key to providing total and complete protection for your business.
Adopting high safety standards to prevent hazards, good maintenance on your equipment and machinery, and vigilant monitoring of all operational procedures can help reduce the risks to your business and its employees. It can also minimize insurance claims, leading to lower insurance premiums in the future.
A premier specialty insurer like NIP Group works with industry professionals and contractors to ensure the most comprehensive, targeted coverage for your business’s needs. Consider talking with them to evaluate your excavation business to determine the best coverage for you.