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6 Signs It’s Time to Change Your Contractor’s Insurance

6 Signs It’s Time to Change Your Contractor’s Insurance

December 6, 2019

If you’re like most contractors or construction company owners, you probably haven’t thought about your business insurance since the day you first bought it.

We don’t blame you. After all, you have projects to manage, clients to meet, and invoices to send out.

But we’re here to let you know that if it’s been a while since you last examined your business insurance policy, it’s probably time to make a change.

Need convincing? Take a look at the six signs it’s time to change your contractor’s insurance to avoid putting your business at serious risk.

6 Signs Your Contractor’s Insurance Should Be Updated

1. You’re Ready to Start Hiring.

Whether you’re hiring your first team member or your fifteenth, adding more employees means it’s time to take another look at your insurance coverage.

Here’s why: Your policy is built based on your company’s payroll because your insurer assumes that more employees = more risks. That means adding a new employee to that payroll — whether it’s on a full-time or part-time basis — signals to your insurer that your business might be increasing its chances of encountering, say, a property damage claim or a costly employee accident.

Plus, many states require you to either have a workers’ compensation policy or update your existing WC coverage when you hire, so it’s worth going back to your insurer to check if you’re appropriately covered.

Important note: The same rule of thumb applies if you’re using more subcontractors on your worksite. While most states require subcontractors to have their own insurance coverage, you may want to double-check if your insurer requires you to cover them as well.

2. You’re Buying New Equipment or Disposing of Old Equipment.

If there’s any change to your equipment inventory at all, make sure you check out if your contractor’s insurance coverage may need to change.

For the most part, insurers offer a policy limit for tools and equipment (for example: up to $100,000 of coverage for your business’s equipment). If you acquire tools or equipment that exceeds this limit, you may need to update or change your contractor’s insurance altogether.

The same goes for if you’re disposing of older equipment or cutting down on tools altogether, as you won’t need as much coverage as you previously did. This can save you some pretty serious cash in the long run, so it’s worth double-checking to see how this may affect your current coverage.

3. You’re Offering Different Services or Specialties.

Your construction business’s specialties may have changed from when you first started out — and if that’s the case, you’ll definitely need to change your contractor’s insurance.

Here’s why: A decent chunk of your policy is determined by the specific contracting or construction services your business provides, and whether your insurer is willing to cover those services or not. In their eyes, the riskier the services you provide, the more likely it is that you’ll end up filing an expensive claim.

In fact, it’s why it can be so tough to find insurance if you provide roofing services or you work with heavy machinery. Even if a risky service makes up a sliver of your work, an insurance company may not have an appetite for that risk altogether.

If your construction business is offering a new service or you’re thinking about specializing in something different, check to see if your current policy will still cover you.

If not, it’s time to switch providers.

Construction insurance policy

4. You’ve Experienced a Change in Revenue.

Your business’s overall revenue plays a role in determining your ideal insurance coverage. Your insurer assumes that the more revenue you’re creating, the more likely it is that you’re moving more inventory, using more equipment to provide your services, or you’re working with more employees to reach a wider radius of customers.

For most contractors and construction businesses, it’s worth checking your insurance policy once you’ve crunched the numbers on how much you’ve made in the current year. It’s an easy way to build in that essential check so that your insurance stays up-to-date with your growing business.

5. It’s Not Fitting Your Business’s Budget Anymore.

Business insurance can be a costly expense, which is why some construction companies or contractors may be tempted to let their policies lapse until they’re in a better spot to afford coverage.

We get the temptation (you have to save money somewhere!) but resist the urge to go down that road. It may save you some money each month, but if something happens while you’re uninsured, you could end up paying a significant amount of money just to get out of legal hot water.

So what should you do if you’re stuck with a policy that doesn’t fit your business’s budget?

Simple: Find an insurer that can offer you more affordable coverage!

Construction and contracting carry a lot of risks (which is why insurers tend to charge higher-priced policy premiums), but there are insurers out there that specialize in providing coverage for businesses like yours.

We recommend looking for an insurer that is part of a risk retention group (RRG), meaning they’re more comfortable covering higher-risk industries at affordable prices.

6. You’re Not Happy with Your Insurer.

Let’s face it: In the construction industry, finding an insurer that will cover all of your services is challenging enough. For that reason, you may feel “stuck” with one provider simply because there aren’t enough companies out there for you to comparison shop with.

You don’t have to stick with one insurer if they’re not making you happy. Whether you’ve had a miserable claims process or your insurer keeps jacking up prices every year, you should feel empowered to find another company that will treat you like a professional.

It doesn’t take forever to see what else is out there; in fact, it can take as little as ten minutes. Find an online business insurance brokerage that lets you compare quotes from top insurance companies that specialize in covering construction and contracting risks.

Finding the right construction insurer

From there, you can see if it makes sense to switch to another provider that will truly value your business.

Ultimately, your contractor’s insurance should grow and change with your business. If you feel that your current policy is too rigid or doesn’t reflect the real risks you face on a day-to-day basis, don’t hesitate to make the switch to a new insurance provider.

About Simply Business

Simply Business is an online business insurance brokerage that lets small business owners compare and get affordable coverage from the most trusted insurers.

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