How Insurance Reduces Risk For Construction Contractors and Subcontractors

The best way for construction contractors to mitigate risk to their business is by creating risk management systems. These systems help you get paid and help you avoid getting sued. When you're focused on growing your company, there's not much time left in the day to figure out the risk management solutions that are right for you. 

A risk management team of insurance, tax, financial, and legal professionals can assess your company’s size, its projects’ scopes of work, and risk liabilities on project sites to figure out a system that makes sense for your company. More specifically, they’ll help you determine the insurance coverage that keeps your risk to a minimum. 

Insurance requirements for general contractors limit the risks they face in regard to their business, their subcontractors, and any of their employees who are in compliance with applicable laws. Of course, these requirements only work when all contractually obligated parties understand which ones apply to them. Ideally, your insurance requirements should maximize your coverage and make you accountable only for risks you can actually resolve. 

The right agent will find your business the right coverage 

Finding a reputable insurance agent that understands the risks your construction business faces is one of the best steps you can take in creating your own insurance system. Once you find an agent you'd like to work with, you should develop a relationship with them by explaining your risk management concerns. Be transparent about how you'd like to address risks with your own system of insurance. After all, these agents can only figure out an insurance system for you if they know which coverage plans make sense for your bottom line.

But, just how exactly is an agent going to figure all that out? It's actually pretty simple, and it all starts with good, old-fashioned relationship building. 

Tell your agent about the services you provide, how many heads strong your operations are, what your plans for growth look like — these are all key nuggets of information that an agent needs to identify the biggest risks to your business. Once they know these things, the best coverage plan for your business will become clear to them. 

Regular reviews keep you up-to-date on risks

So, you've gotten to know your insurance agent, you understand the coverage plans they've found for your business, and they’ve helped you identify the risks that you should care about the most. But you didn't build a relationship with them just to stop there, right? One of the biggest benefits of having an insurance agent who you trust is their regular reviews of risks and coverage plans. 

As your business grows and the services you offer expand, you'll want to have regular reviews of your own coverage, as well as the coverage your subcontractors are getting. This is one of the biggest reasons that cultivating a relationship with an insurance agent and a team of risk management experts is so important. 

Don't spend your energy on finding new coverage when you need to be focusing on your clients. Make sure to ask your agent what your review schedule should look like. This way, you'll have peace of mind that your business needs are always being put first, no matter how much they change.

You don't end up paying for excess subcontractor expenses 

The last thing you or your company needs is an insurance document that doesn't hold subcontractors liable for their own expenses. The right time to figure out insurance coverage for your subcontractors is before you start work on a project. As you might have guessed, all too often, general contractors realize they're liable for subcontractor coverage only when it's too late. 

It's also vital that your general contractor insurance requirements make it plain for the subcontractor that, just because you agree to general insurance requirements, their liability for damages they cause isn't limited under your agreement. It should always be crystal clear that you're not going to be responsible for resolving anything more than is stated in your agreement.

The easiest way to make sure your subcontractors maintain their own insurance coverage is by defining strict general contractor insurance requirements in your contracts. 

Extra policies protect your employees and equipment

You've sat down with an agent and figured out general liability requirements. You should feel confident that your business has the risk coverage it needs. Your subcontractors know what they're liable for, and they aren't going to be surprised by insurance policies you've discussed with them.

But what about insurance for the equipment you use to get projects done? And, are your employees getting the compensation coverage they deserve? Without extra policies to include in your contract, you run the risk of letting these things go uninsured. 

If you're using tools and materials to get your work done, you need to be certain that you have equipment policies insuring them. Tools get damaged, equipment sometimes gets stolen, and you may end up with faulty materials. Working with a trusted insurance and benefits expert ensures that you're reimbursed under any of these circumstances with proper added policies.  

Your employees, too, run the risk of injury on your project site. Although it's usually required at the state level to provide compensation insurance, you'll still want to speak with an insurance agent who can explain which coverage plans make the most sense for your employees. Good compensation coverage for your employees will cover their medical expenses and still fit into your risk management budget.

Don't rest on your laurels! 

Yes, it's a great feeling to have affordable, effective insurance coverage in place. But you don't want to rest on your laurels if you're planning to keep growing your construction company. 

Make sure that you regularly meet with your insurance, legal, and financial management professionals to ensure all risks to your business are accounted for. As your business grows, your coverage needs will change, and you can’t rely on just yourself to keep your insurance policies up-to-date. 

For legal assistance or recommendations for a trusted insurance agent who knows the construction industry, get in touch with Daffern Law Firm today.