Construction business leaders know how quickly market conditions can shift. Tariffs, labor shortages, and inflationary pressures are changing the cost of doing business, while technology and legal risks evolve just as rapidly. In this environment, a “set it and forget it” approach to renewing your insurance policy can leave gaps and create costly surprises.
According to the 2025 C-Suite Stress Index by Sentry, 67% of business leaders report higher stress levels than last year, with economic uncertainty topping their list of concerns. Leaders are delaying equipment upgrades, stretching labor and scaling back investment — decisions that can cause ripple effects for worker safety, liability and insurance costs.
Instead, use your renewal window as time to reassess and make sure your insurance program reflects where you are today — and where you’re headed in 2026. Have a conversation with your insurance agent on the state of the construction industry and your business. Discussing the emerging trends and practical scenarios your business could face can help you identify the risk management programs, tailored coverages and new products that can help you build certainty in an uncertain world.
What Factors Will Shape Construction Insurance in 2026?
Several forces are likely to put pressure on contractors’ risk profiles in 2026:
- Tariffs and supply chain volatility: New trade policies can increase material and equipment costs overnight
- Persistent labor shortages: Contractors continue to rely on less experienced or contract workers, and require longer shifts, creating safety risks
- Technology integration: Drones, AI planning tools, and connected job site sensors bring efficiencies but also cyber exposures
- Litigation risk: Liability costs continue to climb due to legal system abuse and multi-million-dollar verdicts
- Geographic hazards: Extreme weather and regional regulations add complexity — and delays — to projects and insurance needs
Each of these factors can directly affect your balance sheet and your insurance program.
Rising Costs and Tariffs Can Leave Gaps
Material prices remain volatile heading into 2026. The Associated General Contractors of America reports input prices rose 2.6% year-over-year in July 2025, with some categories — such as concrete and steel — seeing double-digit increases. Tariffs and supply chain disruptions threaten to push costs even higher.
That volatility can quickly leave insurance coverage limits outdated. A contractor who set builders’ risk, construction equipment and supply values in 2024 may find those limits inadequate after a storm loss in 2026, when replacement costs have risen well beyond original estimates. The result is an unexpected shortfall the company must absorb.
To address this risk, leaders can:
- Revisit builders’ risk and contractor equipment insurance to confirm project values align with current costs
- Reassess property coverage to reflect inflation and tariff-driven spikes
- Explore escalation clauses or other coverage structures that account for multi-year price swings and inflation
Workforce and Safety Risks Are Evolving
The labor shortage shows no signs of easing. The Bureau of Labor Statistics projects overall U.S. employment to grow by just 3.1% from 2024 to 2034, but construction jobs for laborers and helpers are expected to expand much faster than average at about 7% over the decade.
Many firms are filling open positions with less experienced workers or asking existing crews to work longer shifts — and that can create safety implications.
A rushed renovation project that relies on temporary or less experienced workers can easily result in accidents and serious injuries. An unsafe workplace impacts workers, reputation, and can drive up workers’ compensation and insurance coverage costs, delay job completion, create complex morale issues and damage client relationships.
To help manage workforce and workplace safety pressures, executives can:
- Update payroll estimates to reflect actual headcount, subcontractor usage and anticipated overtime
- Take advantage of safety program credits available through many insurers
- Partner with their insurer to review site safety, and build and reinforce a culture of safety
- Reinforce that culture of safety with ongoing training, daily toolbox talks, and open communication so everyone knows their role in creating a safe workplace
Technology and Cyber Exposure Are Growing
Construction firms are embracing technology at a rapid pace. In fact, investment in construction technology has grown more than 85% since 2020. With increasing use of connected devices, cloud-based project management tools, and electronic payment systems, however, comes greater vulnerability to cyber threats.
Cybercriminals increasingly are targeting construction firms with ransomware attacks, phishing, password vulnerabilities and fraudulent payment schemes that can lead to costly data breaches.
To strengthen their protection, construction business owners can:
- Review cyber liability insurance to ensure limits reflect the potential financial and reputational impact of a breach
- Review insurance coverage to help avoid gaps related to design errors or tech-related mistakes
- Discuss with their agent whether overlaps exist between cyber and professional liability policies to avoid blind spots
Liability in a Litigious Environment
The construction industry is also facing pressures related to legal system abuse, including third-party litigation funding and ongoing increases of multi-million-dollar jury awards in excess of $10 million.
In this environment, a single subcontractor injury lawsuit or third-party claim could exceed standard general liability limits, leaving a contractor to cover the difference. With 26 percent of construction industry fatalities in 2023 due to falls, slips, and trips, it’s easy to imagine the potential for one nuclear jury award to easily outstrip policy limits and put a business at risk.
To protect against this risk, leaders should:
- Evaluate umbrella and excess liability coverage in light of today’s litigious environment
- Model worst-case scenarios to understand how catastrophic claims would affect the balance sheet
- Review contractual obligations, since many project owners now require excess coverage as a condition of bidding
- Assess and enhance safety protocols, including documentation and instilling accountability for all employees
Geographic and Climate Risks Are Intensifying
Extreme weather is hitting construction projects harder and more often. NOAA data shows that from 2020 to 2024, the U.S. experienced an average of 23 weather and climate disasters a year, each in excess of $1 billion — more than double the long-term average of roughly nine per year since 1980. Storms and other natural disasters disrupt supply chains, damage property and create regional coverage challenges.
At the same time, states are tightening building codes and insurance regulations, adding another layer of complexity for contractors operating across multiple geographies.
A project located in an area prone to severe weather events may face losses well beyond standard property policy assumptions. Even when physical damage is avoided, site shutdowns due to evacuation orders or utility failures can trigger costly business interruptions.
To prepare, executives can:
- Review property coverage with geographic exposures in mind, ensuring limits reflect local hazards and rebuilding costs
- Evaluate business interruption coverage to confirm policies account for weather-related delays or outages
- Stay current on local regulations with the help of insurers who monitor regional requirements
Insurance Products to Consider for 2026
When assessing construction insurance with your agent, prioritize policies that align with today’s realities:
- Builders risk and contractor equipment insurance: Protects contractors if their projects under construction experience fire, theft, or weather-related losses. In 2026, this coverage will be especially important as tariff-driven material price swings can make project values unpredictable. A properly structured policy can ensure replacement costs are covered — even if material costs surge mid-build.
- Property insurance: Covers owned or leased buildings, equipment and materials against physical damage. With extreme weather events becoming more common and regional regulations tightening, contractors should confirm their property policies account for geographic risks and potential business interruption.
- Workers’ compensation: Provides benefits for employee injuries and illnesses. With ongoing labor shortages and reliance on less experienced or temporary workers, claim frequency and severity may rise. Ensure coverage reflects actual payroll and safety program credits to help manage both risk and costs.
- Cyber liability insurance: Covers costs tied to data breaches, ransomware, and payment fraud. As contractors adopt more digital tools — from cloud-based project management systems to connected sensors — cyber incidents pose operational and reputational risks. Adequate coverage ensures financial protection and helps maintain client trust.
- Professional liability (Errors & Omissions or E&O): Protects against mistakes tied to design, planning, or tech-enabled work. As construction firms rely on AI tools and automated design platforms, errors can trigger expensive liability claims. This coverage helps safeguard against unintended consequences of new technologies.
- Umbrella/excess liability: Provides an additional layer of protection above general liability limits. Due to today’s nuclear verdicts and rising jury awards, umbrella coverage is more important. Contractors should evaluate whether their limits align with the legal environment.
Change Is Coming — Be Ready
The construction industry will face new challenges in 2026 — economic, operational, technological and legal. Business insurance is a strategic tool that can help protect margins and keep projects on track when the unexpected happens.
Now is the time to sit down with your insurer and review your plans, risk exposures and investment in technology. A proactive, collaborative approach ensures your coverage evolves with your business, so you’re prepared for whatever the new year brings.
