By Kari Dybdahl
Over the past eight years, I have attended cleaning and restoration conventions with attendee size varying from 300 to 5,000. Standing in our trade show booth, having attendees visit or walk by, I have found there are two types of contractors when it comes to insurance purchasing.
The first group includes the ones that dread having to talk about insurance because it is so cumbersome and such a long, drawn-out process. I swear some contractors take one look at our banner, read the word “insurance,” and fight an overwhelming urge to run. The second group of contractors loves to talk about their insurance and how they can improve it.
I have to stay, I enjoy both types of contractors as I am passionate about what they do for a living.
Insurance purchasing can be a long and stressful process for cleaning and restoration contractors. I completely understand where they are coming from when they hear or think the word “insurance” and want to run for the hills. During the last decade, I have helped more than 1,300 firms in the industry, and I am here to share the five best tips I’ve figured out for making insurance purchasing more enjoyable for contractors just like you.
Find an experienced retail insurance agent
You thought I would start off with something else, didn’t you? So did I when I started to develop these tips until I realized how truly important this step is. Your insurance agent is a local insurance professional there to help guide you in protecting your company and your livelihood through the purchase and use of insurance. If your agent gets this wrong, your company can be in jeopardy since you are the one left holding the bill and acting as the insurance carrier should a claim go uncovered.
Let’s say you do some water extraction work on jobs that involve Category 3 water. You tell your agent this, and they get you a Commercial General Liability (GL) policy. This would be perfect… if you owned a flower shop, but as a cleaning and restoration contractor, having only a GL policy won’t cut it.
You get a call from a client who has a flood in his basement, so you send a technician to go check it out, and they bring the crew in to extract. The technician plugs in a dehumidifier and leaves for the night only to come back the next morning to a burned-down house. The homeowner sues you for burning down the house, and you file a claim on your GL policy only to find out there is a bacteria exclusion on the policy for any claims that in any way involve bacteria.
Your GL insurance company denies the claim, leaving you to indemnify the homeowner out of pocket. You didn’t buy GL insurance so you could pay and defend a claim out of pocket.
Finding and working with an experienced insurance agent would help you avoid situations like this. You will want to find an experienced insurance agent who knows how to write insurance on any type of specialty trade contractor.
A good way to weed out the experienced from the inexperienced is to ask them how many specialty trade contractors they write in their book of business. If they report working with quite a few, that is a wonderful start. Another question to ask is if they are familiar with Contractor’s Environmental Liability insurance. If they say yes, you have hit the step-one gold mine.
Look for a wholesale broker who specializes in your industry
Just as important as selecting a qualified retail insurance agent for protecting your business, is the wholesale insurance broker. Brokers are behind the scenes creating a solution for some of the most complex liabilities your company takes on. They are the knowledge behind intricate insurance policy wordings and insurance for your industry. It is not unusual for an out-the-door policy from a wholesale broker specializing in your class of business to incorporate industry-specific coverage enhancements such as integrating IICRC standards and guidelines into the coverage parts.
The value behind wholesale brokers is that they help your insurance agent present you a functional insurance option for your business. The specialty wholesale broker understands your business. They understand the changes that are happening and are dedicated to your industry and want to see you thrive. They also will go to bat for you when you have a claim and need advice or help. They will negotiate with insurance underwriters to get you the best possible cost and coverage available in the marketplace.
It can be tempting to bypass a wholesale broker; however, this person is crucial to the longevity of your business, especially after you suffer a claim. The experienced specialty ones have an exceptional amount of knowledge in offering complex insurance for your industry while still working with the insurance agent of your choice. You will want to take advantage of that.
Start the insurance purchasing process early
Whether you are a startup or have been in business for more than 40 years, it is always a great idea to start your insurance-buying process early on. Early usually means three months out from when you want to buy insurance or when your current insurance expires. At this time, you should be looking over your insurance documents and writing down any questions you may have.
This is also the time to let your insurance agent know of any changes that have been made to your equipment, vehicles, employees, services, etc. If you have made changes to your company, let your insurance agent know early on in the insurance purchasing process.
About two months out from your renewal date, your insurance agent should send a renewal application to complete for your liability insurance. The insurance application may seem redundant, but it is so important since what you write down on the application becomes part of your insurance coverage. You will want to make sure the information there is correct and current, or it could come back to bite you if you have a claim.
Let’s walk through an example. Say you plan to add trauma cleanup to your list of services to add an additional revenue stream to your company. This is a great idea, but know you also are taking on more risk, which changes your insurance needs.
Unless you or your agent notifies the insurance company that you are adding this service, they have no idea since it was not noted on the application when the coverage was first purchased. If you have a claim resulting from trauma cleanup work, the claims adjuster could deny the claim because you never reported you offered that service. To avoid denials on new services, be sure to take the time to properly and fully complete your application and notify the insurance company of any changes in your business.
When working on your renewal, aim to have renewal options in your hands from your insurance agent at least 30 days out from your renewal date. This will give you plenty of time to look it over, set up a time to meet with your agent, and not feel pressured to just buy something because you ran out of time. An informed decision is always the best decision.
Never buy your liability insurance based solely on price
I am going to throw some statistics out there on GL and Environmental Liability insurance policies sold to cleaning and restoration contractors. There are 144 (and counting) variations of a “Contractors Pollution Liability” policy.
Just because you bought a “Contractors Pollution Liability” policy, doesn’t mean it covers you for what you do for a living. Eight out of 10 cleaning and restoration contractors have fundamental flaws in coverage with their purchased policies such as Category 3 water limitations.
If you start shopping for the lowest cost option, you are most likely stripping crucial coverage away that could determine whether your doors stay open. How else could an insurance carrier underprice the market? Is saving a few hundred — or even a couple thousand dollars — worth potentially losing your company? I have seen it happen before, and I would hate to see it happen again.
If your insurance agent presents an option that shows a comparison of more than just limits and deductibles and tells you one option has broader coverage but will cost a bit more, go with the one with broader coverage. You might not like it when you write the check, but believe me, you will be thankful you did if you get a crazy homeowner suing you.
Provide contract insurance requirements before you purchase insurance
If you get into contracts with those such as general contractors, schools, cities, or commercial property owners or managers, it is very important to give a copy of those contracts to your insurance agent well before you purchase insurance or immediately when you get them in. Hidden deep in those contracts could be an insurance requirement on which your policy would need to be altered to comply.
Having to alter the policy is only concerning if the carrier will not comply. However, if you have followed the first four tips, this shouldn’t happen.
Providing the insurance requirements from those contracts early on enables your insurance team to ensure your policy is in order so you have no hiccups on the insurance end of your contract.
We have seen contractors kicked off of a job due to their insurance policies not meeting the insurance requirements of the contract. We do not want this to happen to you.
Insurance purchasing can be an enjoyable learning experience when you work with the right people. Your insurance team is paid off of commission; a great insurance team should not cost you more than an inexperienced insurance team.
The best part is you get to choose who you want to work with. Have fun with them, and if you do not enjoy working with them, find another team.
Have a suggestion on an insurance topic you want to learn more about in a future issue of Cleanfax? Leave us a comment.
Kari Dybdahl has a decade of experience in the environmental insurance industry assisting clients from carpet cleaners to municipalities. She has received multiple awards and recognition for her work placing compliant insurance for Crawford Contractor Connection members, ICRA members, and many others. Dybdahl designs custom insurance programs alongside Dave Dybdahl. Reach her team at 608-824-1192, or reach Dybdahl directly at firstname.lastname@example.org.