Insurers’ premiums are often the biggest business expense for contractors. So it stands to reason that contractors who are successful should try to reduce their insurance costs as much as possible. It is possible to do this in many different ways. Some methods are simple, such as price shopping to find a policy. Other techniques, like applying for credit and reviewing the modifier rates, are more complicated. In either case, construction businesses will find that the effort and reward are well worth it. Even small contractors can achieve significant reductions in premiums when they are well managed. Here are some tips from an insurance professional who specializes in writing policies for the construction industry.
First, shop around to find the lowest price and get multiple quotes from different agents. The price difference between the lowest and highest quote can be significant. This is especially true when it comes to commercial property, general liability, and commercial auto coverage. It is important to shop around and find the best agent for your needs. You should make sure that you use an agent who has extensive experience in writing construction insurance. I am a specialist in working with construction clients and I can tell that I might not the best person to consult if you need liability coverage for a doctors’ office or a policy to protect a property for a plant. Construction insurance is a highly specialized type of insurance. Insurance agents can specialize in specific areas like lawyers and doctors. Some agents don’t have the industry knowledge required to obtain the best rates for you or access to the carriers with the most favorable pricing for construction companies. You can reduce your insurance costs by following the tips I will share in the next paragraphs. Keep this in mind and don’t be afraid of asking your potential agent questions about these concepts. Ask your potential agent for advice on how to lower rates. Ask for references from construction clients they have worked with, and don’t be afraid to call those references. Your agent should also be aware that renewing the same policy each year is not enough. Although it’s often best to renew the same policy each year, this is not always the best decision. An agent can easily become complacent and stop trying hard to earn their business. Do not allow this to happen.
A key aspect of controlling insurance costs includes minimizing claims. Implementing a formal safety program is one of the best ways to achieve this. It actually has two benefits: it reduces costs and raises awareness. The second is to increase awareness about safety issues in your company. Research has shown that companies with a safety program are less likely than others to file an injury-related claim. Insurance companies use two major factors to calculate your rates: the frequency of claims and the amount of claims that you have filed. Good claims history can help you get a lower rate, but poor claims history can cause your premiums to go through the roof. This applies to all insurance lines, including auto, workers’ compensation, liability and property. Many carriers offer extra discounts to businesses for having a safety program. If you have a low or no claim, many workers’ compensation policies offer a safety dividend return. This will return a portion of your premium. This safety dividend can be very substantial. One company that I work for offers up to 30% back on your policy if there are no claims. You can get discounts on auto policies for safety measures, such as anti-lock brakes and air bags. Auto insurance discounts can be obtained for anti-theft devices, such as alarms or GPS tracking systems.
This tip focuses on workers’ compensation. Your workers’ comp. The policy is based upon a percentage of the annual gross pay. Based on the risk associated to each job code, each job classification will pay a different rate. For example, a roofer might be charged a higher rate that a plumber. The state where you do business determines the percentage of payroll that is charged for each job class. California might charge a higher rate for trim carpenters than Maryland. Maryland may also charge a different rate from Montana. Workers’ compensation coverage fees charged by insurance carriers that operate in a state are determined by the state. You can manipulate that percentage in many different ways. I have already mentioned one method, which is to keep a positive claims history. One alternative is to use contractors insurance credits that are offered by several states. Each state offers different credit amounts and not all states offer them. If you are eligible, this is one the best tools you have to reduce workers’ comp costs. Contractor credit offers a premium reimbursement for employers in the construction sector who pay their workers an annual average wage that exceeds a certain threshold amount. Florida’s minimum wage for eligibility is $10/hour. A maximum credit amount of 25% can be granted to employers in that state. Missouri’s credit begins when an employer pays an annual wage of at least $16. The maximum credit amount is 34.4% of total policy premium. Even small contractors can be charged thousands of dollars. It is simple to apply for the contractors credit. Your insurance company will provide the necessary form. The form is only one page long. If you have accurate payroll records, it is easy to fill out. For more information about your state’s contractors credit program, please consult your agent.
You may have heard of other methods to reduce your insurance premiums. One option is to increase your deductible. It is not something that I would recommend. You need to ensure you have a deductible you can afford. There are other reasons I wouldn’t recommend a higher cost-cutting tool such as a higherdeductible. But the bottom line? I don’t believe it is a good option for everyone. Self-insured is another cost-saving measure that you might have heard about. This can be a great way to lower premiums but only large employers are allowed to opt for self-insure. This does not apply to all construction businesses, so I have not covered it here.
Remember that insurance premiums are a cost of doing business. However, you can reduce their financial burden. You have many options: Find the right price, the right agent, minimize claims, promote safety, take advantage of safety dividend programs, and apply for contractors credits.
