Builder's risk insurance and workers' compensation coverage are essential during a construction project. Before your church or ministry starts a building project, you need to understand and manage the additional risks and responsibilities created by this work. Your ministry should obtain special insurance to cover the construction project, plus make sure your contractors have insurance of their own. Brotherhood Mutual's underwriting team recommends that you investigate four key areas:
- Obtain Builder's Risk Insurance. Standard church insurance policies don't cover new construction. Before a project begins, either you or the contractor must purchase builder's risk coverage to insure the new building or addition during the construction phase. Clarify in writing who's responsible for insuring the building while it's being constructed. After the project is completed or occupancy begins, you'll want to cancel the builder's risk coverage and endorse the building onto your policy.
- Require a Certificate of Insurance. Before your contractor begins work, ask his company to provide you with a certificate of insurance. This document verifies that an organization has appropriate coverage. The certificate should indicate that the contractor has workers' compensation, general liability and automobile insurance in force. The contractor should carry liability limits of at least $1 million. Ask the contractor to name your organization as an additional insured on the liability certificate of insurance. If the contractor is providing builder's risk coverage, ask him to indicate it on the property certificate of insurance. Obtain your builder's risk policy for your records.
- Look for Indemnification Clause. Check the construction contract for references to indemnification—making compensation for injury, loss or damage covered by insurance. Make sure the contractor will indemnify, defend and hold you harmless. If there is no such reference in the contract, ask to have it included.
- Carry Workers' Compensation Insurance. Either you or the contractor must provide workers' compensation coverage to protect the paid laborers performing construction work. If you hire a subcontractor who doesn't carry workers' compensation insurance, your state's laws may hold you responsible for work-related injuries to the contractor's employees. Never use uninsured subcontractors. If you do, you could be billed a substantial amount of additional premium for the workers' compensation exposure. When using volunteer or donated labor, determine whether your insurance program provides workers' compensation insurance. Many plans do not. Some provide only limited medical benefits for volunteers providing donated labor. Volunteers need to know that after primary medical coverage is exhausted, they will be responsible for their own medical expenses if they're injured.
Explore this expense of providing workers' compensation insurance before deciding to undertake the work yourself. Often, after this premium is factored in, a church finds it is not cost-effective to complete the construction itself. —Used by permission
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