The best way to control insurance costs for your general contracting business is to avoid having to make claims if possible, and to control the cost of claims when they do happen.
Overall, compared to other types of contractors, general contractors have a very low insurance risk, meaning that they don’t make many claims and/or the claims are often for smaller amounts.
So, what kinds of claims do you need to watch out for?
Not all contractors do the same kind of work. The kind of work you do will determine, to a great extent, how likely you are to make a claim. Generally, working on a brand new construction or installation project is likely to lead to lower total claim costs than a project where you are renovating, repairing or retrofitting an existing structure. Also, work carried out on residential properties is more likely to result in a claim than work done on commercial or industrial structures.
Because general contractors usually oversee a project, but subcontract virtually all of the actual work, the most common type of insurance claim for a general contractor is a claim that arises from work done by subcontractors.
The following list provides a rough understanding of which trades have the most claims and/or most costly claims:
|Contractor Type||Total Claim Cost||Most common Claims|
|Landscapers/snow removal||High||Injuries to passersby. More|
|Plumbers||High||Water damage, Fire damage. More|
|Roofers||High||Fire damage, water damage. More|
|Carpenters||Medium||Fire, drill/nail into plumbing More|
|HVAC Technicians||Medium||Water damage, gas leaks More|
|Bricklayers/Masonry||Low||Façade detaches from structure|
|Electricians||Low||Fire damage. More|
|Floorers/carpenters||Low||Drill/nail into plumbing. More|
|Painters||Low||Overspray, spillage. More|
You are overseeing a major home renovation. Your plumbing subcontractor installs bathroom fixtures, which start to leak overnight while the work site is vacated. By morning, a substantial amount of water has damaged the new floors and other materials that were left at the site.
Total claim: $22,000, which is shared between your insurance company and the plumber’s.
Claims related to work done by the above trades will usually result in at least some liability for the general contractor that is overseeing the project. That said, for a general contractor, the best way to avoid claims on their insurance policy, or to minimize the cost of those claims, is to:
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