To succeed financially as a builder you need to not only earn a fair salary and profit job after job, but you also need to avoid having money go back out the door in big chunks on completed jobs as a result of sloppy practices, errors, and accidents.
You need a comprehensive and clear construction contract. You need to incorporate excellent moisture control details in your buildings and to comply rigorously with building codes. You need a strong safety program to prevent job site injuries.
As a final measure of protection, you also need insurance. Not only does the law require certain coverages, but without insurance, you can lose life savings in a lawsuit by an injured worker or client as a result of one bad accident or mistake. Without insurance you risk devastating lives irreversibly; with it, you can repair the damage.
Who Sells What You Want
You can purchase insurance through a number of channels. It is sold by salespeople who work for large companies, by agents who represent a company, and by brokers who can sell you insurance products of many different companies. Of the three, brokers are typically the most independent and knowledgeable. Find yourself a good one. Insurance is a complicated matter, and the complications vary from state to state. You are not likely to become an expert yourself, for you will need to deal with insurance rarely, perhaps only when you pay your annual premiums and give your policy a quick riffle.
You will need an independent professional to guide you. A good broker can play that role. They can assess your needs and let you know what policies with exactly which provisions and levels of coverage you should carry. They can find you policies offered at competitive rates by strong companies and steer you away from second-rate operations. They can advise you on how to cut your insurance costs by adjusting coverage or by adding detail to your accounting records.
To locate a broker, ask other builders for recommendations, stressing that you want someone who really knows construction insurance. Talk with several brokers. Pose a few open-ended questions:
- How do I determine what policies I need?
- How much coverage do you think is prudent, and why?
- Can you recommend ways to control costs without losing quality?
- How do I select a company that is likely to be responsive if I have a major claim?
Be suspicious of a broker who breezily offers easy solutions to every question. Insurance is treacherous territory. The broker you want is the one who will tell you candidly there are difficulties and where they lie, as well as offer you solutions.
Once you have selected a broker, stick with them. A good, long-term relationship should pay dividends. An insurance-industry expert told me that he has seen small-volume builders enjoy extraordinary service from brokers simply because they were loyal and expressed appreciation for what they were given.
You will want your broker to provide you with policies that fall into two broad divisions: liability coverage, including general liability coverage and vehicle insurance, and employee coverage, including workers’ compensation insurance.
Portions of this content was sourced and/or published in:
- Barbara J. Jackson, Construction Management Jumpstart