2025 Construction Insurance Mid-Year Update

Alert

The construction industry as a whole has continued to evolve as we reach the halfway point of 2025 due in part to governmental restrictions, supply chain issues and tariff impacts. Not surprisingly, the construction insurance market has also been impacted. In addition to cost increases, the insurance market throughout 2025 has seen changes to evolving risk management strategies, impacts due to extreme weather conditions and technological changes. This article will briefly discuss the construction insurance industry landscape as a whole and best practices for new projects going forward.

As material costs have steadily rose over the years and environmental risks such as fires, earthquakes and flood events have become more prevalent, insurance premiums have similarly trended upwards. Labor shortages have had a trickle-down effect on insurance premiums as well, due in part to rising labor costs to attract skilled labor impacting overall construction costs, and safety concerns tied to the lack of sufficient skilled labor potentially opening the door to more significant claims. As a result, insurance companies have been forced to either increase rates, withdraw from high-risk areas altogether, or adjust their policy language to include additional exclusions. 

No matter what type of project you are constructing, understanding what policies and limits you need is crucial for keeping construction and insurance costs in check. Although there are many different policies that should be considered given the specifics of your project, below is a brief discussion of more common construction related insurance policies and how each has been impacted throughout 2025 so far.

Commercial General Liability – Applies to bodily injury, property damage and advertising/personal injury

  • Rates have continued to increase as a result of inflation, potential for claims, outsized jury verdicts and insurers focus risk management. Although risk profiles and past loss history will likely play a key role, CBIZ has predicted a 1% to 9% increase in CGL premiums throughout 2025. As a result, parties may consider SIRs or higher deductibles.

OCIPS/CCIPS – Single plan providing broad coverage for multiple involved parties

  • Once used for larger scale projects, CIPS are becoming increasingly prevalent on smaller scale projects due, in part, to the inability to procure the necessary policies and limits in certain geographic regions, control over the risk management of the CIP, cost efficiencies and coordination of benefits for the entire project team.

Professional Liability – Responds to claims of professional errors or omissions

  • The E&O market has seen increases in capacity and competitive pricing leading to the overall viewpoint that the professional liability market, at least for 2025, will remain somewhat soft. However, coverages and impacts on premiums continue to remain very industry specific based on potential claim trends and risk profiles.

Builder’s Risk – Applies to losses/damage during construction or renovation

  • Generally speaking, the market has seen signs of stabilization with rate increases anywhere between 0-5%. However, severe weather events and other high-risk areas have seen increased scrutiny along with higher rates and deductibles.

Subcontractor Default – Protects against costs and delays from subcontractor failure

  • Several insurers offer products, resulting in more capacity, but underwriters are increasingly vigilant in light of inflation, weather and supply chain-related risks.

Pollution Liability – Designed to cover unexpected pollution risks

  • Market pricing for this coverage, sometimes referred to as environmental liability insurance, is reportedly stable, with new carriers still entering the market. Higher deductibles are common, especially for companies with aging infrastructure.

Conclusion

As with any project, thoroughly reviewing the necessary construction insurance policies (and exclusions) given your specific circumstances is essential for mitigating risk. With project costs rising, there are many ways to potentially limit increases with insurance costs as well.  Some areas to consider are: (i) introducing training and safety programs to educate labor to reduce accidents on site leading to lower insurance costs over time; (ii) focus on retaining skilled labor to reduce potential claims related to unskilled workers; (iii) incorporate advancements in technology to help actively tracking project completion and trades, potentially reducing claims or delays with responding to claims when they occur; (iv) discuss drawings and specifications in detail early on with insurance provider to incorporate any modifications into the design which could impact insurability or future insurability; and (v) thoughtful review the overall design in conjunction with potential environmental impacts to limit exposure for a total loss event. Securing and thoroughly reviewing the right construction insurance policies is essential to protecting your project from unforeseen risks and financial setbacks. By ensuring comprehensive coverage tailored to your specific needs, you not only protect your investment but also promote smoother project execution and long-term success.

For more information or to discuss any of these topics, please contact Patrick Johnson a member of Honigman’s Real Estate Services Practice Group or Noel Paul a member of Honigman’s Insurance and Litigation Practice Groups.

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