Contractors Insurance Costs Lowered by Safety Procedures

Despite increasing competition from a multitude of contractors, construction can be a great business, but this industry also carries more than its fair share of risk. It is important for every contractor to carry sufficient contractors insurance to protect the company in the event of a lawsuit.

Construction insurance provides a range of protection, including coverage for legal liability that could result from poor work by subcontractors or employees. By knowing and understanding the factors that affect premiums, savvy business owners can take the necessary precautions to reduce their legal exposure and costs as well.

Identifying the risks

Keep in mind that underwriters will use both objective and subjective measurements when assessing risk. While those criteria will play a large role in the premiums for the policy, each company that writes construction insurance policies will use its own proprietary models and underwriting criteria. Knowledgeable contractors can save themselves money by knowing which factors will likely be used.

One of the factors an insurance company uses to determine risk is the type of construction. Construction deemed high risk would carry higher premiums, while contractors involved in lower-risk projects will generally enjoy lower premiums.

Putting proper safety procedures in place

A key factor in writing these types of insurance policies is the degree of safety precautions in place at the job site. Implementing strict safety rules in writing is always the smart choice, and those rules can also lower the cost of insurance. So before shopping for insurance, consider the following:

Do the workers always wear hard hats and eye protection on the job? Are visitors to the site also instructed to wear safety gear? Are hazardous areas clearly marked with signs and physical barriers? Are non-employees barred from active job sites?

If written safety procedures are not already in force, implement and enforce them at once. Safety should be a primary concern as it is the number one prevention of most accidents.

Limit hiring subcontractors when possible

Insurance companies also factor in the amount of subcontracting being done. This is an important consideration, since the contractor, and ultimately the insurance company, can be held liable for dangerous or poorly executed work performed by subcontractors. Contractors may want to consider this and limit the amount of subcontracted work.

While it may be necessary for some work, like electrical and plumbing services, to be subcontracted, limiting the amount of subcontracting (and its associated legal liability) could lower the premiums substantially.