Insurance requirements are a critical but often overlooked aspect of construction bidding. Every project has specific coverage requirements, and failing to meet them can disqualify your bid or create costly problems during contract execution. This guide explains common insurance requirements and how to address them in your bids.
Why Insurance Matters in Bidding
Contract Compliance
Most construction contracts require:
- Specific coverage types
- Minimum coverage limits
- Named insured/additional insured status
- Certificates of insurance
Risk Transfer
Owners use insurance requirements to:
- Protect against contractor-caused losses
- Ensure financial responsibility
- Transfer risk appropriately
- Meet their own insurance requirements
Bid Responsiveness
Your bid may be rejected if:
- You can't meet insurance requirements
- Coverage is inadequate
- Required forms aren't provided
- Limits are insufficient
Core Coverage Types
Commercial General Liability (CGL)
What it covers:
- Third-party bodily injury
- Third-party property damage
- Personal and advertising injury
- Products and completed operations
Typical requirements:
- $1,000,000 per occurrence
- $2,000,000 general aggregate
- $2,000,000 products/completed operations
- Higher for larger/riskier projects
Key provisions:
- Additional insured status for owner
- Primary and non-contributory
- Waiver of subrogation
Workers' Compensation
What it covers:
- Employee work-related injuries
- Medical expenses
- Lost wages
- Death benefits
Requirements:
- Statutory limits (state requirements)
- Employers liability:
- $1,000,000 per accident
- $1,000,000 disease per employee
- $1,000,000 disease policy limit
Key considerations:
- Must cover all employees
- Compliance with state laws
- Monopolistic state requirements
Commercial Auto Liability
What it covers:
- Bodily injury from auto accidents
- Property damage from auto accidents
- Owned, hired, and non-owned vehicles
Typical requirements:
- $1,000,000 combined single limit
- Cover all vehicle categories
- May require MCS-90 endorsement
Coverage categories:
- Owned autos
- Hired autos
- Non-owned autos
Umbrella/Excess Liability
What it covers:
- Amounts above underlying policies
- Extends CGL, auto, and employers liability
- Catastrophic loss protection
Typical requirements:
- $5,000,000 to $25,000,000+ depending on project
- Follow-form to underlying policies
- May need to schedule underlying coverages
When required:
- Large projects
- High-risk work
- Public projects
- Owner policy requirements
Specialty Coverage
Professional Liability (E&O)
What it covers:
- Design errors and omissions
- Professional negligence
- Design-build projects
When required:
- Design-build contracts
- Engineering services included
- Professional recommendations made
Typical limits:
- $1,000,000 to $5,000,000
- Per claim and aggregate
Pollution Liability
What it covers:
- Environmental contamination
- Cleanup costs
- Third-party claims
When required:
- Environmental work
- Sites with contamination risk
- Underground work
- Work near sensitive areas
Types:
- Contractor's pollution liability (CPL)
- Site-specific pollution
- Transportation pollution
Builder's Risk
What it covers:
- Property damage during construction
- Materials and equipment
- Soft costs (extended overhead)
Who provides:
- Sometimes owner provides
- Sometimes contractor required
- Check contract carefully
Key terms:
- Coverage amount (contract value)
- Named insureds
- Perils covered
- Deductibles
Installation Floater
What it covers:
- Materials in transit
- Materials at job site
- Installed work before completion
When needed:
- If not covered by builder's risk
- For equipment installation
- Material-heavy projects
Contractor's Equipment
What it covers:
- Owned equipment
- Rented/leased equipment
- Tools and machinery
Considerations:
- Verify coverage amounts
- Understand deductibles
- Check rental equipment requirements
Understanding Policy Terms
Additional Insured Status
What it means:
- Owner added to your policy
- Covered for your operations
- Your policy responds first
Standard requirements:
- CG 20 10 or equivalent
- CG 20 37 for completed operations
- Blanket additional insured endorsement
Primary and Non-Contributory
What it means:
- Your policy pays first
- Owner's policy doesn't contribute
- Eliminates coverage disputes
Why required:
- Protects owner's policy
- Clear responsibility
- Standard requirement
Waiver of Subrogation
What it means:
- Insurer waives right to sue owner
- Even if owner partially at fault
- Must be endorsed to policy
Cost impact:
- May increase premium slightly
- Standard on construction policies
- Usually included automatically
Notice Requirements
Common requirements:
- Notice of cancellation to owner
- Typically 30 days advance notice
- 10 days for non-payment
Your responsibility:
- Ensure endorsements are in place
- Provide accurate certificates
- Notify of policy changes
Insurance Certificates
What They Are
Certificates of Insurance (COIs) document:
- Coverage types
- Policy numbers
- Coverage limits
- Named insureds
- Additional insureds
- Policy periods
Standard Form
ACORD forms:
- ACORD 25 (certificate of liability)
- ACORD 28 (property evidence)
- Industry standard
- Recognized by all parties
What to Include
Certificate should show:
- All required coverage types
- Limits meeting requirements
- Additional insured status
- Endorsements as required
- Current policy period
Common Certificate Issues
Problems to avoid:
- Expired certificates
- Limits below requirements
- Missing coverage types
- Incorrect additional insureds
- No endorsements noted
Meeting Requirements
Review Before Bidding
Check requirements early:
- Read insurance specifications
- Note specific limits
- Identify unusual requirements
- Verify you can comply
Work with Your Broker
Before bidding:
- Review project requirements
- Confirm coverage availability
- Understand cost impact
- Address any gaps
Request:
- Updated certificates
- Required endorsements
- Premium quotes if needed
- Compliance confirmation
Cost Considerations
Budget for:
- Premium allocation to project
- Endorsement costs
- Higher limits premium
- Specialty coverage
Common Requirement Issues
Limits Too High
If required limits exceed your policy:
- Request umbrella quote
- Project-specific coverage
- Negotiate with owner
- Consider passing on bid
Unavailable Coverage
If coverage isn't available:
- Discuss alternatives with owner
- Propose equivalent protection
- Consider joint ventures
- May need to decline
Unusual Requirements
For non-standard requests:
- Clarify intent with owner
- Work with specialized broker
- Understand risk transfer goal
- Negotiate reasonable terms
Insurance in Your Bid
Pricing Insurance Costs
Include in your estimate:
- Premium allocation
- Additional endorsement costs
- Deductible exposure
- Administrative costs
Calculation approaches:
- Per $1,000 of payroll (workers' comp)
- Per $1,000 of contract value (CGL)
- Project-specific quotes
Compliance Documentation
Provide with bid:
- Current certificates if requested
- Confirmation of ability to comply
- Note any exceptions or conditions
Post-Award Requirements
Be prepared to provide:
- Updated certificates
- Policy endorsements
- Evidence of premium payment
- Ongoing compliance documentation
Subcontractor Insurance
Flow-Down Requirements
As GC, require subs to:
- Meet project insurance requirements
- Name you as additional insured
- Provide certificates before work
- Maintain coverage throughout
Verification Process
Track:
- Sub certificates received
- Coverage verification
- Expiration dates
- Compliance documentation
Risk Management
Protect yourself by:
- Not allowing uninsured subs
- Verifying coverage is adequate
- Maintaining records
- Including in subcontract
Conclusion
Insurance requirements are non-negotiable elements of construction bidding. Understanding and meeting these requirements is essential for:
- Submitting compliant bids
- Executing contracts
- Managing risk
- Protecting your business
Work closely with your insurance broker to understand your coverage, meet project requirements, and price insurance costs appropriately. Review requirements early in the bid process and address any gaps before submission.
Remember: insurance is a business expense that protects both you and project owners. Price it into your bids, maintain proper coverage, and provide documentation promptly. It's a fundamental part of professional construction contracting.
ConstructionBids.ai displays insurance requirements in project details, helping you quickly identify any special coverage needs before investing time in bidding.
