A smart business owner or independent contractor is always watching his bottom line.
You may be a newly established small business, or an industry expert with many years of experience. Either way, construction insurance coverage is equally important to businesses of all sizes.
Insurance coverage lapses can happen for a lot of reasons
- Late payments
- Intentional cancellation
- To lower costs during a slow season
But before you consider letting one or more of your policies lapse, there is something you should know.
A lapse in insurance coverage can have big consequences for your business.
To put it simply, a lapse of coverage can be bad news.
Let’s look at the ways it can cost you big if you let go of one of your construction insurance policies.
Accidents Can Still Happen
Here is a common myth about your general liability coverage: “My policy will cover claims from work I’ve completed for up to 3 or 10 years.”
This is a misconception that could cost you big.
If a third-party experiences injury, or property damage, as a result of your work, your insurance will only cover it if it has occurred during the policy period. A claim may still be filed after the policy period, but if the injury or damage didn’t occur while the policy is in force, you’re stuck with the bill.
When an accident happens the day after you’ve let your coverage lapse, you will be the one paying the price.
Lapses Don’t Really Save You Money
So you let some coverage lapse during the slow season, and now business has picked up and you are ready to protect it again.
But this time, it may not be so easy.
When you show a history of lapses in coverage, it can become difficult to find someone who will write you a new policy at the same rate as before. The agents and underwriters who review your file begin to see your company as a risk.
You may find yourself with fewer options, and much higher premiums.
As a matter of fact, a lapse in your construction insurance can cost you much more in the long term. Commonly, cancelling coverage doesn’t get you a refund in your fees. Getting insured the next time could be difficult and cost you even more in premiums since you forego any continued policy discounts. You even run a risk of not being able to get coverage at all. And someone could still get injured and bring a lawsuit your way.
The best way to watch your bottom line and put more cash into your business is to lower your rates on your contractor’s insurance, not to let it lapse.
How to Combat a Lapse in Coverage
Let’s face it, things happen. Payments get missed. Renewal dates pass us by. It’s a fact of life.
But that doesn’t necessarily mean you’re left out to dry.
The best way to reduce expose is to ask for the carrier to remove the “prior work exclusion” endorsement. If you’ve done work during a period of lapse, or even if you’re switching between carriers, this is the best way to make sure that prior work is still covered.