Most contractors know they need insurance. The bigger question is whether they actually know what their insurance covers.
A policy can look solid on paper until an accident happens, a subcontractor lets coverage lapse, or a claim exposes an exclusion you didn’t realize was there. By that point, the cost can be far greater than the premium you were trying to save.
On a recent episode of Business Success Tips, host Paul Sanneman, founder of Contractor Staffing Source, spoke with Stacie Waller of Trucordia about some of the insurance risks contractors often overlook.
The central message from their conversation was simple: the worst time to discover a gap in your insurance coverage is after you have a claim.
Here are some of the most important lessons contractors should take away from the conversation.
1. Don’t Treat Insurance as Something You Set and Forget
One of the biggest insurance mistakes contractors make isn’t necessarily buying the wrong policy. It’s failing to pay attention to the policy they already have.
Insurance policies can contain exclusions, limitations, and conditions that may significantly affect whether a particular loss is covered.
That means contractors shouldn’t evaluate insurance based solely on the premium.
Instead, sit down with your insurance professional and ask:
- What isn’t covered?
- What exclusions should I be particularly concerned about?
- Have the risks in my business changed since we purchased this policy?
- Are additional endorsements available for exposures we currently have?
- Are there areas where I might think I’m covered but actually am not?
You don’t necessarily need to become an insurance expert. You do need an insurance professional who can translate the policy into practical business risks you understand.
2. A Subcontractor’s Insurance Problem Can Become Your Problem
Contractors rely heavily on subcontractors, which creates an additional layer of risk.
You may collect a certificate of insurance when a subcontractor begins working with you, put it in a file, and assume you’re protected.
That isn’t necessarily enough.
During the podcast, Waller described a situation involving a subcontractor whose workers’ compensation insurance had lapsed. An employee of that subcontractor was injured, and the resulting workers’ compensation claim ultimately reached approximately $750,000, according to Waller.
The general contractor was left dealing with the consequences.
The lesson is important: insurance verification shouldn’t be a one-time onboarding task.
Contractors should have a system for obtaining and reviewing updated certificates of insurance regularly, particularly when policies renew.
3. Certificates of Insurance Aren’t the Same as Contracts
Another important distinction is the difference between having proof of insurance and having the proper contractual protections in place.
A certificate of insurance can provide useful information about a subcontractor’s coverage, but as Waller emphasized, a certificate isn’t a subcontractor agreement.
Contractors should work with qualified insurance and legal professionals to establish appropriate subcontractor agreements and risk-transfer requirements for their businesses.
Think of subcontractor risk management as a process rather than a document:
Verify the coverage. Maintain the documentation. Use appropriate contracts. Recheck the coverage when it renews.
That process can be much more valuable than simply collecting a certificate and forgetting about it.
4. Understand the Major Exclusions Before You Have a Claim
Insurance policies are complicated, and few business owners are going to enthusiastically sit down and read hundreds of pages of insurance language.
But contractors should understand the exclusions that are particularly relevant to the work they perform.
Two areas Waller highlighted during the conversation were workmanship and property within the contractor’s care, custody, or control.
For contractors performing certain types of design or professional work, additional coverage such as contractors professional liability may also be worth discussing with an insurance professional.
The important point isn’t that every contractor needs every available endorsement.
It’s that contractors need to understand the difference between:
“I have insurance.”
and
“I understand which risks my insurance actually covers.”
Those are very different statements.
5. Your Insurance Agent Should Understand Construction
Contracting businesses don’t operate like every other small business.
Roofers, plumbers, electricians, HVAC companies, remodelers, landscapers, and general contractors all have risks that an insurance professional who primarily works with unrelated industries may not encounter frequently.
When evaluating an insurance agency, ask about its experience with contractors.
Questions might include:
- How many construction companies do you currently work with?
- What types of contractors do you insure?
- How long have you worked with the construction industry?
- What claims do you commonly see among businesses like mine?
- What coverage gaps do you regularly find when reviewing contractor policies?
An agent who understands construction should be able to talk about your risks in practical terms rather than simply quoting a policy.
6. The Cheapest Policy Isn’t Necessarily the Least Expensive
Contractors naturally watch expenses, and insurance premiums can be substantial.
But choosing coverage primarily because it has the lowest premium can create a false economy.
A cheaper policy doesn’t help much if a significant loss falls into an exclusion you didn’t understand.
A better comparison considers more than price. Contractors should understand coverage limits, exclusions, deductibles, endorsements, subcontractor requirements, workers’ compensation exposure, and the support they’ll receive if a claim occurs.
The goal isn’t necessarily to buy more insurance.
The goal is to understand the risks you’re taking.
7. A Denied Claim May Be Worth Another Look
One particularly interesting point from the podcast concerned denied claims.
If an adjuster says something isn’t covered, Waller recommends asking where the policy specifically says the claim is excluded.
Insurance policies are complicated documents, and disagreements over how provisions apply can occur. An experienced agent can sometimes help a contractor understand the carrier’s position and advocate for the policyholder when appropriate.
That makes the relationship with your insurance professional especially important.
You aren’t simply buying a policy. You’re choosing someone you may need in your corner when something goes wrong.
A Simple Insurance Review for Contractors
Contractors don’t have to wait for renewal season or a claim to examine their insurance program.
Schedule a review with your insurance professional and walk through a few fundamental questions:
- What are the major exclusions in my current policies?
- Are my current operations accurately reflected in my coverage?
- Do I have exposures related to workmanship or professional/design services?
- How are subcontractors handled under my policies?
- Are we collecting updated insurance documentation from subcontractors?
- Do our subcontractor agreements properly address risk transfer?
- What happens if a subcontractor’s workers’ compensation coverage lapses?
- What additional endorsements should I at least consider?
- If a major claim were denied tomorrow, what would the likely reason be?
You may discover that your coverage is already appropriate.
Or you may find a risk you didn’t know existed.
Either result is better than discovering the answer after an accident.
Know What You Don’t Know
Contractors spend enormous amounts of time managing jobs, employees, customers, schedules, cash flow, and subcontractors. Insurance often gets pushed into the background because everything seems fine until suddenly it isn’t.
That’s precisely why it deserves attention before there’s a problem.
As Paul and Stacie discuss in the full episode, the objective isn’t simply to carry insurance. It’s to understand your coverage, identify potential gaps, and work with professionals who understand the risks contractors face.
Want to hear the full conversation?
Watch Paul Sanneman’s complete interview with Stacie Waller of Trucordia on Business Success Tips for more examples and insights into contractor insurance, subcontractor risk, policy exclusions, and what contractors should be asking their insurance agents.
This article is for general informational purposes and does not constitute insurance or legal advice. Coverage varies by policy, carrier, jurisdiction, and individual circumstances. Contractors should review their specific policies and agreements with qualified insurance and legal professionals.
