Ensuring the Best Coverage

Insurance premiums are a complicated aspect of running a construction company, often involving significant costs and risks. As a business owner, you’re likely aware that these policies renew annually, which can leave you rushing to safeguard your interests and bottom line. But there are ways to streamline this process and ensure the best coverage for your business.

Understanding the Current Insurance Market

Right now, the insurance market is in a state of fluctuation, with prices generally down but impacted by changes in contract liability coverage, exclusions for wrap-up programs, and residential work. Having a good broker and accountant is helpful, but your personal understanding of these nuances is invaluable.

When you understand the details of insurance for construction companies, you not only earn the respect of your insurance broker but also set a clear expectation for them to secure the best possible policy for your business.

Safety First: Minimizing Insurance Costs

The key to keeping your insurance costs low is to minimize claims. For businesses with large deductibles and poor loss records, claims payments can quickly accumulate. By establishing a strong safety program, training your employees in best practices, and emphasizing safety education, you can prevent many issues and claims. This approach not only reduces risk but also makes any claims you do have more manageable.

Always adopt a safety-first attitude and ensure every project your company undertakes is covered by your insurance plan. Gaps in coverage can be costly in the event of an accident.

Focus on Rates, Not Just Premiums

While it’s tempting to focus on the premium as the bottom line, other factors are equally important. An insurance premium rate is the amount paid per $1,000 of revenue or $100 of payroll. This rate, multiplied by your actual revenue or payroll, results in your company’s premium, which varies year-to-year. Comparing premium rates over time is more informative than just looking at the fluctuating premiums.

Quoting Insurance: Strategies for the Best Rates

In construction, competitive bidding is common, but insurance doesn’t operate on a patchwork system. Only one agent per insured is allowed to submit proposals. To create competition and get the best rates and policies, assign markets to each agent you work with. Share information from each option with all agents, so they know you’re informed and expecting competitive proposals.

Ensure you get all information from agents, including full quotes and declinations. Requesting copies signed by the carriers can confirm you have the complete picture.

Setting Deadlines: A Critical Step

Just like in construction, building an insurance plan requires reasonable deadlines. Start the process about a month before renewal and set proposal deadlines two weeks before renewal. This timeframe allows you and your broker to review options, negotiate prices, and confirm the best plan for your company.

FAQ: Insurance in Construction

  1. Why is insurance complex for construction companies?
    • Due to the high risks and costs involved in construction, coupled with annual policy renewals and market fluctuations, insurance can be complex for construction businesses.
  2. How can I keep my construction insurance costs low?
    • Implement a strong safety program, train employees on best practices, and ensure your projects are fully covered by your insurance plan to minimize claims and keep costs low.
  3. What should I focus on when evaluating insurance premiums?
    • Look beyond just the premium amount. Focus on the premium rates, which are based on your revenue or payroll, and compare these rates over time for a better understanding of your costs.
  4. How can I get the best insurance rates for my construction company?
    • Create competition among agents by assigning different markets to each and sharing information across agents. Also, ensure you receive all details, including full quotes and declinations, from the agents.
  5. When should I start the insurance renewal process?
    • Begin about a month before your policy’s renewal date and set deadlines for proposals two weeks before the renewal to allow ample time for review and negotiation.