Risk is a big word in the construction industry – and not in a way most people might think. While the possibility of loss of equipment or supplies must be considered, the biggest risks many building contractors face are on paper and often more costly than material losses. A business that is affected by the economy, competition, and other unexpected factors can experience massive loss, so contractors must carry the best construction risk insurance or risk losing their entire business. Construction risk insurance with a reputable contractors insurance company covers both the material losses a company can experience as well as unexpected losses in what is often a complicated and unsteady industry.
Primary Building Contractors Risks
The best contractors insurance companies know just how difficult the building industry is when it comes to profitability. There are many ways contractors can lose money, business, or their entire company due to unforeseen problems and other risks that make carrying the best construction risk insurance a must.
Liability Losses – Whether the liability is from an employee injury, damages caused to equipment or property, or unpaid bills, a single insurance policy does not cover it all. The resulting gaps in coverage can become a costly expense to be paid.
Lawsuits – Whatever the cause, lawsuits in the building construction industry are costly. As a result, a company can lose a large amount of money and find it necessary to sell off expensive equipment to cover those losses – leaving the business inoperable in some cases.
Competitive Bidding – With a weaker economy and so much competition, bidding is fierce, regardless of whether it is in the public or private sector. When a company takes on too many jobs below their actual cost just to stay in business, it creates a strain on the entire company.
Changing Contract Terms – Some buyers may try to take advantage of competition in various ways, commonly by trying to convince a contractor to accept ridiculous contract agreements that offer little profit for the contractor.
Slow Pay vs. Faster Payoffs – A poor economy means customers, both residential and public, are also experiencing money issues. Customers are taking longer to pay and banks are demanding that contractors repay a loan much sooner.
Decreasing Equipment and Real Estate Values – Even when it comes to liquidating used equipment or selling the finished building product, falling values continue to cost a construction company money when they are unable to recuperate costs in their selling prices.
How Construction Risk Insurance Helps
Construction risk insurance helps when an event takes place – putting the construction company in jeopardy as a result. Insurance is not a loan; it is an insurance policy designed to offer different types of coverage for different risks and can result in helping a company stay in business. Gap insurance, more complete liability coverage, insurance against fraud, underbidding, and other business losses are types of essential coverage for every construction company. Of course, hopefully using such policies and coverage will never happen; if they do, construction risk insurance coverage it is there to help.
Building contractors who want to protect their company and stay in business must consider good construction risk insurance. Working with the best contractors insurance company can make the difference between riding out an unplanned financial hump – or losing everything from an unplanned casualty!