FundRobot » Bond Funds » Guidance for new construction business?

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Old   #1 (permalink)
 
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Default guidance for new construction business

It looks like I'll be forming a mostly-residential construction business soon. Foundations to roofs and all in between.

I don't have the first idea about business insurance.



From what I read, as a minimum I need General Liability and an Auto policy. Is this correct?

Do insurance companies issue bid bonds, surety bonds, etc. or is that a completely different animal?

How does an insurance company figure premiums and such for a new business?

I haven't found any state requirements for coverage (West Virginia), is there a resource you pros know about? I want insurance regardless, but I would hate to get fined for not having enough. I couldn't find anything on state commissioner's website.

If business is a go, I will file as an LLC. No employees yet. Home office, no extra property. Just insurance in case somebody gets sue-happy, or I break my back and can't finish a job.
Casey Y, thanks for the response!

Per state regs I will be exempt from Worker's Comp requirements as long as I have no employees.

I'll look into subbing. I plan on starting small anyway, but don't want to limit myself if I don't have to. There seems enough business here for general build/repair/remodel stuff, but I don't think enough volume to specialize as "the drywall guy" or whatever. More market research will give a better idea. Many big-dog companies around here do road/bridge work. There's not too much residential stuff. Maybe there's too small a market, or maybe nobody will step up to the plate. Still researching.

I've scheduled appointments with some local agents, but wanted to learn more ahead of time, if possible. I'll scratch allstate and state farm off the list.

Again, thanks.
GoldAddicted is offline   Reply With Quote
Old   #2 (permalink)
 
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Default guidance for new construction business

Well first, if you break your back and cannot finish a job, that isn't going to be covered by insurance, that would be a breach of contract for which you are guilty. You really wont care, because you have a broken back, but just saying.

In addition to General Liability and Auto Liability, you'll also need Workers Compensation.

If you are going projects big enough to requests bid bonds, then you'll also need an umbrella policy most likely. It might be your insurance company that does it and it might be a different company; any local independent agency should be able to help you. State Farm and Allstate will not work for you (maybe auto for now).

I would start smaller if I were you. The insurance for a new home builder is very expensive, think $25K per year for the GL alone. Start out as a subcontractor doing specific tasks (framing, general carpentry, drywall, etc) rather than trying to jump in as the builder. I would avoid roofing for the time being, those are some of the most expensive workers comp rates there are.
PrettyHot88 is offline   Reply With Quote
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Old   #3 (permalink)
 
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Default guidance for new construction business

Yikes. You're going into the side of the business with the highest insurance costs.

To pull permits, you need general liability insurance. You also need to buy workers compensation to cover both your employees, and your uninsured subcontractors. You're likely to need a builder's risk policy, equipment floater, commercial auto, and umbrella policy.

The same agent that handles the rest of your insurance, should be able to handle your bonds, however, residential construction - houses for individuals - rarely requires bid/payment/performance bonds.

You need a local, independent agent, with experience in construction.

No "standard" insurance company (the allstate, state farm, farmers) is going to write a startup construction company - you'll be looking at the surplus market. There will be "minimum premiums" which are fully earned for a startup, and workers comp and liability are auditable - that means, after the fact, they look at what your ACTUAL sales and payrolls were, and retroactively charge you, accordingly. That makes it VERY important for you to compare not just premiums, but the actual RATES, when you're shopping for the insurance. Not that there will be many options - the workers comp will almost certainly end up in your state assigned risk pool or state fund.

Once you start an LLC, YOU become an employee of the company, and WV does require workers comp. Again, you cannot pull permits, without general liability, but it's not required by law.

Hiring subcontractors, where YOU direct the work, and they cannot send another guy in to do the work for them, well, that's really an employee, where you're trying to avoid taxes and workers comp. Lots of contractors try hiring employees and calling them "subcontractors", but if you don't have a contract between the two of you, if you don't pay " by the job", and the sub can send anyone to do it; If you don't get a certificate of insurance from the sub showing HE has his own GL and WC coverage, well, the government is probably going to eventually come back on you for back taxes.
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