When you start a quote today, you might include a clause to inform your customers that material costs are subject to change. That is because inflation impacts every aspect of our lives, including the costs associated with lumber and other building supplies. While it might not seem that inflation could impact your other overhead costs, including contractors’ insurance, the truth is that inflation has a far-reaching impact. Let’s learn more about other ways inflation can affect your contracting business.

Inflation Increases the Costs

Your contractors’ insurance is based on how many projects you have in process and the liability coverage included. Let’s imagine that one of your employees makes a mistake. Three years ago, that mistake might have only cost a few hundred dollars to repair, which meant that your liability insurance under your contractors’ insurance would not have to be that high. However, now that same repair might cost $1,000 or more. As a result, your contractors’ insurance has to go up to cover your increased liability risk.

That means you might need more insurance coverage because the costs of your projects have increased. But insurance costs can also grow in another way: your premiums.

Rising Costs for Contractors’ Insurance

Not only can you spend more on materials for your jobs, but covering those jobs with contractors’ insurance will increase premiums. Your contractors’ insurance also faces increased costs as claims require more funds to cover them, and operating costs go up. That also means the cost of your coverage is likely to go up.

What plays a role in your premiums?

  • Your coverage needs/Types of coverage
  • Number of employees
  • Prior claims history
  • Other pricing factors

Solvency margin requirements will also be more stringent. What are these requirements? Simply put, there is a minimum excess on an insurer’s assets over its liabilities as set by regulators. For you as the policyholder, that can translate into higher premiums to renew your coverage. Inflation erodes the buying power of your money, so your premium payments might no longer buy the coverage they once did.

How to Maximize Your Coverage

During inflationary periods, it is important that you have a clear idea of what projects are in the pipeline and that you keep your scope of work up to date. Discuss how much coverage you need with your insurance provider at least once a quarter to analyze if you need to increase or decrease your coverage.

They can also help you to understand your premiums. If you want to shop rates, compare apples to apples since different companies offer various coverage options under their policies.

Finally, be realistic about your costs and find ways to reduce your overhead costs. While contractors’ insurance is essential for protecting your business, other areas can be trimmed to ensure you cover your premiums. That being said, working with your insurance provider can help you to find the right coverage and premiums for your contracting business.

Our team is ready to help you work through your current contractors’ insurance policies and determine if the coverage fits your business’s current needs and scope of work. Contact us today to learn more about your options.

Top Contractors Insurance Services is a full-service contractor insurance agency handling workers compensation, general liability, construction bonds, and auto quotes.