The Top 5 Insurance Mistakes Contractors Make and How to Avoid Them
Running a contracting business has many challenges. One important aspect is having the right insurance coverage.
However, this is often overlooked. Many contractors make mistakes that can leave their business unnecessarily exposed to significant risks. Here’s a look at five common insurance blunders and how you can steer clear of them.
Underestimating Coverage Needs
The Mistake: Many contractors only purchase the minimum insurance required by their clients to save money. This is a mistake. It is important to have adequate insurance coverage. By skimping on insurance, contractors may be putting themselves at risk.
The insurance claim that is not covered is your most expensive. It is crucial to carefully consider the level of insurance coverage needed for protection.
Every contractor is unique to varying degrees. General Contractors, Civil Contractors and specialty sub contractors all have unique risk profiles. Different contractors, whether general, civil, or subcontractors, vary greatly based on the specific types of work they handle.
How to Fix It: Evaluate your business risks and consider hiring professionals to help you manage them effectively. Work with an insurance broker who knows contractors’ needs to get coverage that fits your situation.
This includes basic general liability and automobile, professional and cyber insurance. Additionally, there are specialized coverages like builders’ risk, wrap-up liability, and pollution liability
Neglecting Workplace Safety and Insurance board (WSIB)
The Mistake: Skipping or skimping out on WSIB insurance is a serious oversight. In Ontario, this coverage is not just a good idea—it’s required by law.
How to Fix It: Make sure you’re compliant with provincial regulations by securing the necessary workers’ compensation insurance. Keep your policy up to date and ensure it covers all employees as required by law. Talk to a professional for help with setup and yearly reports to make the process easy and cost-effective. An insurance broker who specializes in assisting contractors will have the right connections for you
Overlooking Subcontractor Insurance
The Mistake: If a subcontractor causes harm or damages property, you could be held accountable by the project owner. This is especially true if the subcontractor does not have insurance. Your insurance may or may not step in to protect you in these events.
How to Fix It: To avoid problems, make sure your subcontractors have the correct insurance before they begin working for you. This protects both them and your business. Always ask for proof of their insurance coverage and make sure they add you as an “additional insured” on their policy. It never hurts to ask your broker if the coverage they are providing meets the contract requirements and risk profile of the project.
Ignoring Policy Exclusions and Limitations
The Mistake: Insurance policies have exclusions and limitations. If you don’t know about them, they can surprise you when you try to make a claim. Always read your policy carefully.
How to Fix It: Carefully review your policy and talk to your broker about any restrictions, limits, and guarantees. See if they align with your needs and risks.
Your broker should talk to you about these things when it’s time to renew your policy. They should also make sure your insurance meets the needs of your growing business
Failing to Update Coverage
The Mistake: As your business evolves, so do your insurance needs. When you’re busy growing your business, it’s easy to forget to update your policies to match any changes in your business. However, without regular insurance and risk management “health checks”, you may be leaving your business exposed to uninsured losses.
How to Fix It: Have an annual review with your broker to ensure you have appropriate coverage. We suggest working with a trusted construction insurance brokerage and keeping in regular contact with them. They will notice any changes that affect your insurance. They will give you advice on adjusting your coverage to meet your business’s changing needs.
Conclusion
Avoiding these common insurance mistakes can save you from unexpected financial setbacks and legal headaches. To protect your business, work with an insurance brokerage that understands your needs and specializes in contractors’ coverage.
If you have any questions about your current insurance or need help finding the right policy, feel free to reach out to Peter Toole with FCA’s Construction Insurance team. He’s here to help you navigate the complexities of contractor insurance and keep your business secure.
Peter can be reached at ptoole@fcainsurance.com or by phone at 416-567-5694.