Purchasing contractor insurance can feel like a complicated task. You may think you have many options to choose from, but you aren’t sure which quotes are quality and which aren't. You may also have trouble determining which quotes are a good deal and which to stay away from.
The good news is that it is easier than ever to find a good insurance policy for your contracting business. To get you started, we’ve collected four tips to help you select a good policy and know what to look out for in the purchasing process.
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4 Tips For Purchasing Contractor Insurance
#1. Make sure your insurance carrier can comply with common industry endorsements.
Before you take out the policy, you need to make sure it complies with most of the project requirements you will run up against in the upcoming years. For example, some insurance companies claim they are experienced in writing contractor insurance but cannot actually add a common additional insured endorsement to their policies.
If you are trying to work with a company that has strict requirements and your insurance carrier cannot add a specific endorsement to the policy, you have a problem. You’ll either have to requote everything or turn down the project; in this example, both scenarios are bad.
It is important to choose an insurance company that is compatible with your goals as a business owner. If your insurance company cannot comply with where you want to go, then you might lose out on some opportunities.
Here are some common requests you should make sure insurance company can comply with before taking an insurance policy out with them:
Additional Insured Endorsements (for both ongoing operations and completed operations)
Waiver of Subrogation Endorsement
Primary & Non-Contributory
Per-Project Aggregate Limits*
* If you are working on large projects
For more information about contractors insurance and what policies you might require, check out our article, "A Guide To Contractor Insurance."
#2. Make sure you are classified correctly on your policies.
One of the issues that can lead to premium discrepancies between quotes is the misclassification of business operations. While a misclassified quote might appear cheaper when taking out the policy, the misclassification will likely be caught after your first-year audit, and you will probably be required to pay an additional premium.
In this scenario, it is always better to know what you are going to pay instead of leaving it up to the insurance company to change the rate to whatever they want upon inspection.
In addition to cash flow issues, misclassification can also cause coverage issues if there is a misrepresentation of what operations your business performs.
#3. If something is suspiciously cheap, proceed with caution.
If you have some quotes and one is suspiciously lower than all the others, then approach it with some skepticism. I'm not saying a low rate might not happen legitimately sometimes (it does!), but there will frequently be an issue—with the coverage provided, an error on your reported payroll, or a misclassification.
Any of those errors will eventually be found out upon audit, and you might owe more than you would have if you selected the correct quote from the start.
#4. If you subcontract out more than 35% of your labor, you need a specialty insurance carrier.
If more than 35% of your labor is performed by subcontractors, you most likely need an insurance company that specializes in that particular business structure.
If you have a large number of subcontractors and you are with a carrier that doesn't like subcontractor use, it will not be a smooth process. You will have to deal with getting non-renewed, the insurance company will exclude liability for the subcontractors, or the insurance company will charge additional premium. Companies that use many subcontractors should choose insurance carriers do not mind subcontractors at all.
Best Contractor Insurance Companies
The best insurance company for contractors is the one that offers a fair price for a quality policy. Remember, the insurance company must have the size and expertise to help you comply with job requirements and pay claims when you need them to.
So, what company should you choose? There are quite a few options, but here are some of the top insurance companies for contractors that have 100 years of experience (or more).
Travelers has been around for 165 years. They’re one of the largest writers of construction insurance in the industry, and they are the number one writer of workers compensation insurance and the fifth-largest writer of commercial insurance in the United States. They are great to work with and a popular choice for contractors across the country.
CNA specializes in providing commercial insurance to large and small businesses. Whether you are an incredibly large general contractor or a small trade contractor, CNA can usually offer a quality quote on some of the best coverage forms found on the market. We love their coverages and how they handle claims.
The Hartford is a great option for all kinds of construction companies. As the second-largest writer of workers compensation and one of the top five writers of multi-peril commercial insurance policies, The Hartford has the resources and experience to help you scale your business. We have worked with The Hartford for decades and love their ability to offer higher limits than most, as well as how easy they make it to add specialty coverages when you need them.
For those higher-risk, large, or complex construction businesses,W.R. Berkley is an excellent choice. Through their subsidiary companies, they can insure main street contractors to a billion-dollar construction company. W.R. Berkley has the expertise to help you with specialized endorsements, and their various divisions are generally experts in their respective industries. The expertise and depth of knowledge at Berkley is what makes them stand out; we place insurance with them almost every day simply because they take the time to understand your business and its unique risks.
Finding the best insurance company for your contractor business can be done quickly and painlessly, but you might want to reach out to a professional to help you choose.
You can get an online quote from us that will price out nearly all the coverages you need. If you want, we can discuss which policy will be best for your goals and business aspirations.