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By Jeremy Nisen
March 12, 2018
As the old joke goes, insurance is the one thing you pay for and hope you will never need to use. However, when you need it, it can be under trying—or even desperate—circumstances.
The stakes could be high, with not only a project on the line and the associated financial losses, but also reputational loss. Insurance is a key tool to mitigate risk, and selecting the right plan could prove pivotal. The last thing anybody wants when an accident happens is for their insurance company to deny a claim. Such a setback could potentially cause financial difficulties, or even result with duking it out in court, or, in the worst-case scenario, if you didn't select the right plan, just taking a loss.
That is why even if you don't want to use that insurance, you very much need to pick the right plan in case of the unexpected. Here are a few key steps you can use to help ensure the plan you pick —the plan you pay for—is the one that is going to be there when you need it:
1. Growth Is A Double-Edge Sword
It's outwardly beneficial that the construction industry is going gangbusters, with, for instance, 210,000 industry jobs added in 2017, and a 35 percent bump from 2016. Nevertheless, as more construction creates bigger opportunities for GCs, subcontractors, and related businesses, it brings new players to the field looking to capitalize on that growth.
Insurance firms are adding new practices specializing in construction. By and large, this should be good—more people want to cater specifically to you! Yet this creates more need than ever to perform due diligence. Is the provider dependable, with a strong financial solvency rating from A.M. Best or another ratings firm? If the firm's construction specialty practice is a relatively new one, what is the history of the practice personnel? It's not too hard to check out their bona fides, and you’ll make sure they have the background to understand the particulars and perils you'll be encountering on the jobsite.
2. New Capabilities? New Wrinkles
Technology is another factor that's mostly beneficial. The construction industry is ever evolving – yet, correspondingly, so are the risks. New technology, new techniques, and new practices undoubtedly include new complications. The more outwardly obvious are for instance drones, as they can cause physical damage or even violate others' privacy rights.
You should also consider, depending on the nature of your project, whether you're keeping sensitive information on hard drives, company emails, or even in the cloud. Theft of physical media or even hacking of electronic systems could lead to important information, whether regarding personnel, intellectual property, or other confidential items, being compromised. It's a new day, with new risks – have you considered whether your policy covers these dangers?
3. Identify Your Needs
You need to take an honest, comprehensive look at the scope of the project, including all risks your employees and/or contractors may face, and which equipment would need coverage. This will not only enable you to receive an accurate quote from an insurance provider, it will help you understand what level of insurance you'll need. It will tell you whether a comprehensive policy will prove worth the price, or whether umbrella insurance might be the best option. And be sure to "mind the gaps" – that is, pay attention to the exclusions. Every policy has exclusions, even the ones that are given names such as "full coverage" or "comprehensive." The key is identifying what they are. They can include things as relatively commonplace as earthquakes and water and weather damage, or even government action. Are these risks you need covered? Then make sure your policy doesn't exclude them or look for an additional plan to cover them.
4. Policy Particulars
Pay careful attention to the deductible. Can you swallow it if you have to pay it? Is it worth paying more on a policy for a lower one? Paying a little more upfront may help in the long-term if you need to exercise your policy.
Similarly, take an honest look at the timeline of the project. Insurance is typically purchased in terms of months (three, six, twelve). Extensions are available (sometimes only once, though) if the implementation is slower than planned. Still, having an accurate assessment on the front end can save hassle and expense down the line.
Your specialty has more likely to do with getting great, high-quality projects built on time and to specification. As you get busier with more work and as projects get more complicated, it's okay to turn to experts in the field for help. An experienced attorney, for example, will be able to give you general guidelines or review specific contracts for factors you may not have even considered. Much like thinking about the deductible, this may cost you more upfront, but can grant you a better position in case of damages.
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