The Elements of Building by Mark Kerson

Author:Mark Kerson [Kerson, Mark]
Language: eng
Format: epub
Published: 2015-03-21T22:00:00+00:00

126 Consumer Reports magazine and its website offer detailed information about insurance, and although the information is directed at private consumers, reading it will be informative.

Work with the most knowledgeable agent available. You need someone who can answer your questions, as well as the questions you don’t know to ask. Interview those you are considering to learn how long they have been an agent, how long they have sold commercial insurance, how much they know about the finer points of the policies, and how many construction clients of your size they currently have.

When you get your policies, meet with your agent—a few times if necessary—to go over them thoroughly until you understand every term, every clause, in each policy. This is not fun, and some agents may resent it. However, over the course of your career you will pay an enormous amount of money for insurance; therefore, expecting coaching from your agent is perfectly reasonable.

Everything used in conducting your business should be covered in your commercial insurance policy. This includes your home office, garage, vehicles, tools, trailer, sheds, employee’s vehicles that are used for work, and so on.

Consider “self-insuring” some items. To self-insure means not to buy insurance coverage for certain things, but instead, if the item it is lost, stolen, or damaged, you pay for its replacement. With tools, for example, insurance will pay the depreciated value. That is, if you paid $700 for a hammer drill two years ago and it is stolen, insurance will pay a portion (on tools, a tiny portion) of the cost to replace it. This is why for certain items it may make sense not to pay for insurance coverage.

Managing Insurance Actively manage your insurance. Raise deductibles when the business can easily pay for what is likely to be claimed or when the risk of a loss is small. Cut unneeded coverage after carefully considering the risk of not having that policy. Check the insurance companies’ “premium calculations” for errors and correct anything that is wrong. Develop a company culture that promotes safety. Periodically get competitive bids on all of your insurance needs.

Insurance does not protect against recklessness. Insurance companies will raise rates, drop coverage, or deny a claim given a reason to do so. And the industry shares information, meaning that moving to another company will become difficult or impossible for those with a bad record, and moving will not eliminate higher rates anyway because every insurance company will know about past claims. Insurance is a method of managing risk and a hedge against catastrophic loss, it is not intended to cover neglect.

Insurance will not fix your mistakes. It will not pay to fix work that was done improperly by you, your employees, or subcontractors.

Safety is the best insurance. Having an effective safety program in place helps keep the cost of insurance down. If you have an active safety program that your agent is unaware of, let him know about it.

Maintain a long-term relationship with an insurance broker or agent, if you can.

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