Increase Profits
with Risk
Management
Introduction:
What can Risk
Management do
for you?
A small business is a labor of love...and time and resources. Of
course you want to protect it from losses as best you can. The
good news is that making risk management a priority not only
keeps your business protected, it can even improve profitability
There is a lot of opportunity in the construction market today.
New residential construction spending is projected to be slightly
over 410 billion dollars in 2016, and for small businesses who
struggled through the downturn, it’s time to breath a sigh of relief
and get busy working again.
It’s not all smiles and roses though. Despite the recovering
economy and the new opportunities available to contractors, 53%
of new construction business ventures won’t make it to the five
year mark. And existing businesses aren’t immune to this threat
either. As the next generation of small business contractors and
skilled tradesmen and women see the opportunity to get in on a
piece of the pie, the pool of available profits get smaller for those
already established businesses.
What is the key factor that separates a successful, profitable
company from all the rest?
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p2
Risk management.
Reducing the likelihood your business will experience a significant
loss is critical to increasing profits. Managed risk puts cash in
your ledger, and provides financial stability. When you want credit
or financing to grow your business, you will have the financial
reports to prove your worth.
You can’t have profitability if you are not managing your
business risks.
In this guide, you’ll learn about:
• Identifying construction business risk
• Assessing safety risks in the construction industry
• Using business insurance to transfer risk
• Improving profitability with risk management
Let’s take a look at your blueprint for a profitable and successful
risk management strategy for your company.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p3
1. Understanding
a Contractor’s
Business Risks
Risk.
It’s a small word with big implications for your business. As a
small business owner, risk might be on your mind far more than
you’d like. Many contractors operate as a sole proprietorship,
which leaves personal assets vulnerable. And those who do
incorporate in some way still aren’t immune to plummeting
profits if disaster strikes, even if it doesn’t mean losing the farm.
Operating in the construction industry brings with it even more
potential for loss than other industries, and the owners who
operate a risk resistant business will be the most stable and
profitable ones.
Risk - The possibility of loss or injury. Someone or
something that creates or suggests a hazard.
—Merriam Webster Dictionary
Business risk represents the potential for loss during the course
of daily operations. In other words, a risk means the potential for
you to lose money. While you can’t completely eliminate all risks,
you can identify the ones that are controllable while taking steps
to protect your business from the ones you can’t control. This
process of identifying, assessing, and taking action to protect
yourself from risk is known as risk management.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p4
You may be surprised to realize that risk management not only
protects your business from monetary loss, but can actually lead
to financial gain and increased profits for your
construction company.
The Rewards of Risk Management
“Why is risk management important? Good risk
management will help your business continue
in operation. Mitigated risk leads to better cash
flow and greater stability. Creditors will see this
stability and good cash flow reflected in your
company’s financial reports. Greater stability
will mean your company will last into the future.
The rewards of risk management are all linked
together: good cash flow leads to stability, which
leads to good credit, which leads to longevity.”
- Small Business Administration
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p5
Identifying Small
Business Risk
Certain business risks are easier to identify and manage. These
are known as internal factors. Other risks to your business can be
harder to identify, and are often completely out of your control.
These are known as external risk factors.
Here are some examples of each.
Internal Risks
Risks that come from the normal operations within your company
are considered internal risks.
These include:
Human Risk
Human risk can include things like:
• Mistakes or intentional fraud on timecards
• Theft or vandalism of materials, tools, and equipment
• Injuries, and damage to third-parties.
Human risk can also include factors such as union strikes,
ineffective management, or problems with material suppliers and
vendors.
Technological Risk
As more and more technology finds its way into the construction
industry, risks increase. The smartphones, tablets, laptops, and
software programs that you use to conduct your business contain
a large amount of critical data and information. Electrical outages
and the potential for lost data are risks that could impact your
business.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p6
Physical Property Risk
Every time one of your autos is on the road transporting
employees or materials to a job site, it is at risk for an accident.
Any physical property you rent or own for your business is at risk
for accidents, loss, or damage.
Physical property can include:
• Office spaces
• Materials
• Supplies
• Tools
• Equipment
• Automobiles
• And even the project site itself
External Risk
Risks that cannot be controlled by your company and cannot be
reliably forecasted, or even identified, are considered external
risks. These include:
Economic Risk
Market changes that increase the cost of materials, goods, oil, and
gas are considered external economic risks to your business.
Other market changes and economic risk factors could include
a change in the real estate market due to oversaturation of new
homes on the market, rising interest rates, or decreasing home
values in a specific area.
Natural Risk
It can be almost impossible to identify or control a natural
disaster such as a fire, flood, or earthquake that could impact
your business. Even high winds that uproot and overturn trees
can lead to loss for your business.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p7
Political Risk
Laws and ordinances in your state, county, or city can change and
affect your business. Federal laws that involve employee safety,
health care, or other policies can also impact your bottom line.
You have no control over the laws and ordinances that can affect
your company, and it can be difficult to anticipate and identify all
of the ones that will.
Identifying Construction
Industry Risks
Small business contractors face even more potential for loss than
most. Fatalities in the private industry are a huge liability, and a
good portion of them come from the construction industry.
You have a very large responsibility to keep your employees, as
well as third-parties, safe on the job.
“20% of private industry fatalities happen
in construction.”
—Bureau of Labor Statistics
Unique Risks for Construction Business
• Employee safety and hazards
• Liability from construction defects
• Project changes
• Budget Overruns
• Site Conditions
• Contractual risk
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p8
Project delays, cost overruns, disputes and claims, litigation
and legal fees can destroy your profit margins, or worse. Legal
fees and judgements don’t just affect your business assets,
either. If your small business is set up as a sole proprietorship or
partnership, your personal assets could be at risk, too.
Specific Risks by Project
Phase
Bid Risk
If you are just starting out in business, you run the risk of losing
out on jobs if you have not been properly licensed, insured, and
bonded.
Contractual Risk
Construction contracts, leases, purchase orders, rental
agreements, and other contractual documents can contain
sneaky language that transfer additional risk to you as the
contractor, or fail to transfer risk away from your business.
It’s critical to understand what risk you are being asked to assume
when you sign a contract.
Site Risk
When on the project site, hazards can occur to the property
itself, the materials you need to complete the project, tools and
equipment, and the people on the project site.
Vehicle Risk
Accidents can happen on the road, and if you are transporting
employees, materials, tools, or equipment to a project site, an
accident can cost you in lost productivity time, asset damage,
and injuries.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p9
Changes and Overages Risk
Changes in the project scope and budget overages can, and often
do, occur during the course of a project. Ongoing changes can
prevent you from completing your project in the estimated time,
and budget overages can eat away at your profit margins.
Completed Project Risk
Even a project that was completed month or years ago can
continue to carry a risk for your construction business. Each
state has its own statute of limitations for the kinds of lawsuits
an injured party can bring against your business in the event of a
construction defect.
Managing Construction
Business Risk Increases
Your Profits
How can you use all of these potentials for monetary loss and flip
them into increased profits for your contractor’s business?
Through risk management.
Risk management is all about protecting your business from
losing money. But it can also do more than that…
• Imagine saving money on insurance premiums.
• Picture yourself winning more bids, with higher profit margins.
• Visualize your business credit improving, and becoming more
attractive to investors.
• Prepare yourself for the additional business you will get from
repeat clients and client recommendations.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p10
Managing construction business risk not only prevents big losses,
it paves the way for you to reach new levels of profitability.
Step #1: Identify the Risk
Uncover, recognize, and describe the risks that could lead to a
loss for your business. In construction, there are four main factors
that could cause you to lose money:
• Property
• Loss of income
• Personnel
• Third party liability
What do some of these risks look like in real life?
Imagine you are on your way to a jobsite and you are involved in
an auto accident. Your truck is carrying tools and materials that
you use on the jobsite. Maybe you are even towing a small trailer
filled with equipment. The damage to this property is going to
cost you as you face repairs and replacements.
Let’s say that the time it took to handle the repairs and
replacements from this accident sets you behind on your project.
Now you are running behind schedule, and you need to pay more
hours to your crew to get caught up and complete on time. The
overtime hours are eating into your profits.
What if you had an employee riding with you at the time of the
accident who was injured? Your best guy had an injury that
prevents him from working, and his medical bills are piling up.
Finding a skilled tradesman who can come in and replace him
quickly to finish the project will be difficult.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p11
The driver of the other car also sustained injuries, and is claiming
the accident was your fault. Now, this third-party person is trying
to get you to cover their medical bills and auto repairs.
This is just one example of how a seemingly simple event, a car
accident, can have a big impact on your business.
Step #2: Analyze and Measure the Risk
What do you stand to lose if a risk becomes reality? You can
measure a risk by determining the actual consequence of one
happening.
Let’s use our hypothetical auto accident as an example. We have
identified all of the ways that accident could bring risk to your
business, like damage to your truck and tools, injuries to other
people, and a project delays.
Measuring this risk involves considering the consequences,
financially and otherwise, of that car accident.
What would it actually cost your business if this event happened?
And what is the likelihood of this actually happening?
In this situation, every time you travel to a job site in your truck,
there is a risk that a car accident could occur. That is a high
possibility of this risk happening.
Once you have looked at the consequences and likelihood of risks
happening, you can rank them in order of importance. Putting it
all on paper can help you see which risks are a big enough threat
to deserve your attention. These risks need to be controlled.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p12
Step #3: Control the Risk
For your highest ranked risks, you’ll want to do whatever you
can to lower the likelihood they might happen, and reduce the
sting if they do. This may include minimizing risks through safety
measures and business insurance.
Large corporations often have entire departments involved with
risk control, safety training, and insurance claims. As a small
business owner, this will be one more hat you may have to wear
yourself.
Luckily, you can get help managing this risk, without employing
a full-time safety officer. Just like it takes a team of architects,
engineers, contractors, and skilled subcontractors to carefully
construct a house, good risk management also takes a team of
people with specialized knowledge and experience.
Your risk management resources should include professionals
with hands-on experience minimizing risk on a daily basis.
Your risk management resources may include:
• Certified Public Accountants
• Insurance Providers
• Attorneys
• Occupational Safety & Hazards Association (OSHA)
• The Small Business Association (SBA)
Rely on the expertise of these risk management ‘subs’ to save
you time, money, and stress. Whenever possible, work with
professionals whose specialty is in the construction industry.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p13
Step #4: Transfer the Risk
If a risk is too great for you to control, the next step is to transfer
the risk to someone else.
Insurance is the most common form of risk transfer. In exchange
for a specific premium, an insurance company agrees to assume
the potential consequences of certain risks to your business.
How do you know when a risk is worth transferring? Compare the
cost of an insurance premium to the cost of paying out of pocket
in the event that risk should happen. If a major event happened,
and you had to pay a judgement on a lawsuit; medical expenses
and recovery time for an accident; or to repair and replace
the damage on a project due to a natural disaster, could your
business afford it?
If the answer is no, then it is time to transfer that risk.
Step #5: Review and Refine the Risk
Your risk management efforts do not end after you transfer a risk
with the right insurance coverage. Risks must be continuously
reviewed, assessed, and refined. As your business changes and
grows, potential risks might also change.
Certificates of insurance must be provided and tracked, claims
must be made, and changes need to be reported. In the
construction industry, safety risks must be addressed daily.
Managing risk is an ongoing process, but your efforts can save
your company from the threat of huge losses, and put you on the
path to increased profits.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p14
2. Assessing
Construction
Safety Risks
Let’s be honest: construction is a highhazard industry.
Hazards on the jobsite can risk the health and lives of everyone
involved. Falling objects, electrical shocks, and dangerous
equipment are just some of the hazards your employees or
subcontractors may face while doing their jobs. When people
work hard for you day in and day out, it is your responsibility to
keep them safe.
Safety is the most critically important part of your business.
About Construction
Safety Risks
The risks your construction business faces fall into two categories:
the risk for physical harm to your employees (or third-party
persons), and monetary risk for your business.
Let’s take a look at both.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p15
Physical Safety Risks
Construction Site Hazards and Dangers
Twelve workers lost their life today on the job. Every year, across
all industries, more than 4,600 worker fatalities occur in the U.S.
16% of fatal work injuries involve contractors.
—Bureau of Labor Statistics
Safety hazards left unchecked in the construction industry bring
the ultimate risk: the loss of human life.
The leading causes of worker fatalities on construction sites,
known collectively as the Fatal Four, were responsible for more
than half (57.7%) of construction worker deaths. These are:
Falls
Caught in/between
Electrocutions
Struck by Object
Workplace Safety is the Law
Providing your employees with a safe workplace is not only the
best way to protect your construction business from costly losses,
it is also the law.
Even if you only have one or two employees, you are responsible
for keeping them safe on the jobsite.
The Occupational Safety & Health Administration (OSHA) is a part
of the United States Department of Labor. OSHA was created
by congress to assure safe and healthful working conditions for
working men and women by setting and enforcing standards for
workplaces safety.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p16
Bottom line: OSHA sets standards and conducts inspections to
make sure employers are providing a safe and healthful workplace
for employees.
You are required to provide jobs and a place of employment free
from recognized hazards that are causing, or are likely to cause,
death or serious physical harm.
OSHA Most Commonly Cited
Construction Standards
• Scaffolding
• Duty to have fall protection
• Respiratory protection
• Fall protection systems criteria and practices
• Aerial lifts
• Wiring methods, components and equipment for general use
• Electrical general requirements
• Ladders
• Accident prevention, inspections, training
• Scaffold training requirements
• Hazard communication
• Wiring design and protection
• Fall protection
• Eye and face protection
• General requirements
• Asbestos
• Scaffolding training requirements
• Abatement verification
• Head protection
• Liquefied petroleum gas (LP-Gas)
• Concrete and masonry
• Demolition preparatory operations
• Stairways
• Permit-required confined spaces
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p17
Monetary Safety Risks
You stand to lose a lot of money if you don’t pay attention to
and try to avoid safety risks. Accidentally, willfully, or repeatedly
violating OSHA standards for workplace safety carry the risks of
fines, or even imprisonment. Poor safety records and a history of
loss can increase insurance costs.
Other risks of monetary loss from safety risk may include:
• Costs of injury medical treatments
• Contract liabilities
• Civil exposure to injured third-parties
• Reputation harm from willful or repeat violations, or
enrollment in OSHA’s Severe Violators Enforcement
Program (SVEP)
Let’s face facts:
If your business has a reputation for ignoring safety regulations,
or a history of repeat OSHA violations, this will have a negative
impact on your business.
Other skilled tradespeople, contractors, owners, and developers
will not want to put their own business interests on the line to do
business with you if you do not take construction safety seriously.
On the other hand…
If you make reducing safety hazards a priority, it gives your
company avenues for increased profit and growth.
• Fewer safety incidents within your company can lower your
insurance premiums, freeing up more money to reinvest in
your business for more tools, new equipment, or
additional labor.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p18
• A history of safety will add to your reputation; giving you a
competitive edge for bids, and attracting the top talent when
you want to add more skilled tradespeople to your team.
• A reputation for safety makes you more appealing for
creditors and investors when you need them.
Assessing Construction Safety Risks
As a small business owner, it’s not likely you’re going to want to
hire a safety officer. That means the safety risk analysis for your
business falls on your shoulders.
Here are some questions to get you started assessing safety risk
for your small business:
• If you have any employees or subcontractors, what are their
attitudes about safety?
• How do you teach safety best practices?
• Do you have a safety program?
• Is your safety program valid and compliant with the state’s
Codes of Regulations?
• Do you conduct safety meetings, even if you only have one
employee?
• How do you enforce safety standards?
• Do you involve employees in safety analysis and inspections?
• What is your process in the event of an injury or hazardous
incident?
• Is your insurance broker involved in your risk control process?
A small employee roster doesn’t mean you can neglect safety
best practices. One or two employees, even part-time or seasonal,
still deserve a safe workplace. As the person who writes their
paychecks, you are required by law to provide it to them.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p19
Tips for Managing the Fatal
Four Construction Safety
Risks
When your employees put it all on the line for your and your
company, keeping them safe is your greatest responsibility.
Protecting the lives of your employees is the best business
decision you can make, and the right thing to do. Your safety
risk management processes should include specific measures to
reduce the risk of the four risks most likely to result in a worker
fatality.
Risk #1: Falls
Falls are responsible for 36.5% of construction industry fatalities.
Ladders, ledges, roofs, and scaffolding pose a real fall risk. Single
story residential projects can be just as risky as multi-story
commercial towers.
Nearly 1/4 of fatal falls occur from a height of less than ten feet.
Protect against falls by posting signs when appropriate, using
standard guardrails and 4-inch toeboards for all surfaces elevated
more than 48 inches above the floor, and providing a permanent
means of entry to elevated surfaces with handrails. Watch out for
materials that could lead to a fatal fall, slip, or trip.
Risk #2: Struck by Objects
Tools, equipment, and materials can pose a risk to employee
safety. Tools, materials, and even equipment can come flying,
falling, swinging, or rolling to a forcible impact with the
nearest person.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p20
Employees should be trained on the safe operation of machinery,
such as jack hammers, compressed air machines, pavement saws,
and power tools. Tools with loose, cracked, or splintered handles
should not be used. When overhead work is performed, a process
to secure all tools and materials should be in place. Materials
should be stacked and secured to prevent sliding, collapsing,
falling, and secure from wind gusts.
Risk #3: Electrocution
The construction occupations with the highest average number of
electrocution deaths per year were:
• electricians
• construction laborers
• supervisors
• and electrical power installers and repairers.
Electrocution can happen to anybody, not just electricians. A
power tool with a frayed cord could be an electrocution risk to a
finish carpenter or landscaper, too.
Electrocution risk can be reduced by ensuring overhead power
line safety, isolating electrical parts, and. supplying ground-fault
circuit interrupters (GFCI). Ensure proper grounding, and that
power tools are maintained and used in a safe condition. Provide
training, proper guarding, protective equipment, and ensure the
proper use of flexible cords.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p21
BE SAFE to recognize, avoid, and protect workers from
electrical hazards that can put employees at risk for:
B
Burns
E
Electrocution S
Shock
A
Arc Flash/Arc Blast
F
Fire
E
Explosions
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p22
Risk #4: Caught-In
Caught-in hazards are defined as: Injuries resulting from a person
being squeezed, caught, crushed, pinched, or compressed
between two or more objects, or between parts of an object.
This includes individuals who get caught or crushed in operating
equipment, between other mashing objects, between a moving
and stationary object, or between two or more moving objects.
Protect your employees from being ‘caught-in’ by providing
guards on power tools and other equipment with moving parts;
support, secure, and make this equipment safe. Take measures
to prevent workers from being crushed by heavy equipment that
could tip over, or equipment that could pin them between it and a
solid object.
Workers who do trenching and excavation work should be
provided with protection. Avoid the collapse of structure
scaffolds, and protect workers from being crushed by collapsing
structures during demolition. © 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p23
3. Transferring
Business Risk
Through Insurance
Risk management practices will go a long way towards saving
you money and increasing your profits.But some risks can’t be
controlled or managed. These risks should be transferred to
insurance coverage that will act as a protective safety net for your
business.
Some small losses you might be able to recover from, but a big
loss could bankrupt you. Luckily there’s a really easy way to
transfer that risk.
Business Insurance for Your
Construction Company
Business insurance protects you in case something goes horribly
wrong. If you don’t have the right type of contractor insurance,
one incident could cost you everything.
Let’s take a look at the business insurance coverage that can
protect you from a worse-case scenario.
General Liability Insurance
When you run a business, the one aspect you can’t anticipate or
control is other people.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p24
General liability insurance offers a broad range of protection
against the hazards that are the most difficult to prevent: thirdparty claims.
Let’s say that you are a remodeling contractor working on a
house. You’ve done everything you can to create a safe job site.
One day, the homeowner’s neighbor decides to stop by and
check out the project. He slips, falls, and is injured. A lawsuit is
brought against you, damages are awarded, and legal fees must
be paid.
Your careful attention to job site safety wasn’t enough to protect
you from this risk, and now you have a very high price to pay.
Can your business afford the high-price of a claim like this?
General liability insurance is there to protect you in case a thirdparty claim is brought against your business. Your policy will
cover attorney’s fees, settlements, judgements, and legal costs,
up to your limit, in such an unfortunate event.
General liability protects you when your business is sued over:
• Bodily injuries that happen on your premises or at your jobsite.
• Bodily injuries caused by your completed work.
• Damage to someone else’s property while carrying out your
work.
• Claims of false or misleading advertising, including libel,
slander, and copyright infringement.
Workers’ Compensation Insurance
You can manage employee safety in the workplace, but the
high hazard environment of the construction industry makes it
impossible to entirely remove it.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p25
Workers’ compensation insurance offers a protective safety net
for you and your employees. If someone does get injured on
your jobsite, your business isn’t left vulnerable. Workers’ comp
insurance also protects your profits and business assets in the
unfortunate event that an employee is injured while on the jobsite.
Let’s take a look at one of the most common injuries to occur on
a construction site: falls.
OSHA reports that falls from heights are one of the most
significant causes of injuries and costs, and has analyzed the
average cost of a fall event for two construction industry
occupations: roofers and carpenters.
Here is what they found.
The average cost of a fall for a roofer: $106,000
The average cost of a fall for a carpenter: $97,000
Can your business afford the cost of an injury like this one? What
about multiple injuries such as this?
In addition to the cost of medical expenses and lost time paid to
the employee, you also face the business costs associated with
replacing that skilled tradesperson on the worksite.
Will you have to hire, train, and get a new employee up to speed
on your project? Will your project suffer from delays or downtime
if your employee is out recovering?
Bottom line: Workers’ compensation insurance requirements
can vary state to state, and even by industry. Not surprisingly,
most states have laws concerning workers’ compensation in the
construction industry.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p26
Course of Construction Insurance
Some events are completely unforeseeable, such as natural
disasters, or an unexpected vandalism. Course of Construction
Insurance, also known as Builders Risk Insurance, protects your
assets from the events that no amount of risk management could
prepare you for.
Take California for example. In 2015, California fire officials
responded to more than 3,381 wildfires from January to June.
The devastation from a wildfire can quickly spread from isolated
forest areas to heavily populated residential areas.
Wildfires Across the Western U.S. in 2015
What would it cost you if your project was hit by the devastating
damage of a fire?
Floods, high winds, hail, lightning, and even earthquakes can
damage your project in the blink of an eye, ruining your progress
and even materials. Could you afford to repair the damage from
one of these events, and replace materials that have been lost?
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p27
In most instances, the costs of repairing damage, cleaning up
after an event, and replacing building materials would completely
remove any chance of profit on a project.
Course of construction insurance protects you from the risk of
unforeseen events such as natural disasters, and even burglary,
theft, and vandalism that occurs while you are working on your
project.
Course of construction may cover:
• Fire
• Wind
• Theft
• Lightning
• Hail
• Explosion
• Vandalism
• Flood
• Earthquake
When you started your business, you didn’t get a crystal ball or
a way to see the future. With course of construction, you won’t
have to pay for repair and replacement costs from your own
pocket. Your future is protected.
Commercial Auto Insurance
When you are an independent contractor or construction
business owner, the line between personal and business assets
can sometimes get a bit blurry. If you are using your own personal
vehicle for business purposes, you may be surprised to find that it
not covered by your personal auto insurance policy.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p28
Let’s say you or one of your employees is involved in an accident
driving your truck to a jobsite. As you stand on the side of the
road surveying the damage to the vehicles involved, you pick up
your phone to call your insurance agent.
Without a commercial auto policy, you may be about to receive
some very bad news: your personal auto insurance doesn’t
cover this.
How much will it cost your business in repairs, rentals, or even
medical expenses for injuries?
If you do have commercial auto insurance, your business won’t
pay the price for an accident on the road. Your assets, vehicles,
and people are covered.
If you answer yes to any of the following questions, you should
carry commercial auto insurance.
• Do you use your vehicle for work or own vehicles operated by
a business?
• Have you installed permanent toolboxes, ladder racks, or other
equipment to support your business?
• Do you haul a considerable weight in tools and equipment, or
tow a trailer for business purposes?
• Do your employees operate the vehicle?
• Are any of your vehicles owned, leased, registered or titled to
a business, corporation, partnership, or DBA?
In the skilled trades industry, automobiles are one more piece of
equipment you use to get your job done. Treat your autos like a
business asset, and be sure that they are completely covered with
the right commercial auto insurance.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p29
Tools & Equipment Insurance
A painter needs his ladders, rollers, and brushes. A finishing
carpenter needs his hammer, mitre saw, and level. A landscaper
needs mowers and blowers. How much could you get
accomplished on a project without the right tools and equipment
by your side?
Your tools and equipment are essential to your business. To insure
these critical items, you will want to get tools and equipment
insurance, which is also known as inland marine.
Imagine you are on your way to your jobsite, and you stop to fill
up the gas tank and grab a cup of coffee along your way. As you
get back to your truck, hot coffee in hand, you are shocked to see
your toolbox ajar and most of your tools gone.
If you have Inland Marine insurance, you are covered if your tools,
materials, and supplies are vandalized, stolen, or damaged while
being transported to and from the job site.
What’s the difference?
Course of construction insurance
Inland marine insurance will offer
will protect your tools and
you the protection you need to get
equipment while on a jobsite.
your tools to the site and back.
Did you know?
Why is tools and equipment insurance known as inland marine?
Inland marine is one of the oldest insurance products around.
At one time, most goods were moved around the world by ship.
The concept of insuring these goods as they traveled by ship was
known as “marine insurance”, and later, “ocean marine insurance.”
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p30
As the years passed, this insurance expanded to cover goods as
they were transported over inland waterways, and overland by
railways or automobiles. While the coverage for goods during
transport changed, the name has remained the same.
Today, inland marine generally refers to coverage for goods
in transport.
Umbrella Insurance
If you have a torrential downpour of claims and liability raining
down on you, you are going to want a very big umbrella. Umbrella
insurance is excess liability insurance that provides coverage
beyond your existing limits.
How does umbrella insurance work?
Let’s say you are involved in a claim and a judgement of $1.5M is
awarded against your company. Your insurance policy coverage
extends up to $1M.
What would happen to your business or personal assets if you
had to come up with the remaining $500,000 out of pocket
needed to satisfy this judgement?
If you have excess liability insurance, your umbrella insurance will
cover it. For many business owners, umbrella insurance could be
the difference between business as usual, and “business
is closed.”
Excess liability umbrella insurance is there to protect you from the
true emergency situations that could arise in your construction
business; the situations so immense that the risks to your
business extend far beyond the coverage limits of your other
policies. It is the ultimate protection to keep your doors open and
your employees working.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p31
Put Some Money Back in
Your Pocket
Ready for your risk management practices to pay off? Certain risk
management techniques could lead to lower rates, or a “credit”
on your insurance policies. Your attention to risk management
can literally put more cash back into your ledgers.
To increase your chances of paying the lowest rates possible, talk
to your insurance broker about the specific actions you need
to take.
Here are some of the easiest, cost-savings techniques to help
lower your rates and save you money.
Tip #1: Put Safety First
Many accidents in the workplace can be prevented with the
application of risk management techniques. Analyze the safety
risks that are specific to your contractor specialty, eliminate
hazards, and put systems in place to control the existing ones.
Be aware of the Fatal Four accidents that make up the majority
of construction industry fatalities, and have specific measures
put in place to protect your employees. Be sure to keep all of the
tools and equipment you need, including trucks and other autos,
maintained and in good working order.
Talk to your insurance broker about specific actions you can take,
above and beyond OSHA safety requirements, that can earn your
construction business credits on your insurance rates.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p32
Tip #2: Don’t Let Coverage Lapse
It can be tempting for some construction business owners to let
certain coverages go during off-season, or between projects.
This can actually cause your rates to increase, or even put you
at risk for not getting coverage in the future. Determine the best
insurance policies that work with your risk management practices,
and keep them year round.
Maintaining insurance coverage can actually save your
company money…
Here is something you may not know: Insurance companies often
offer premium discounts for no-lapse coverage.
By keeping the coverage that you need current, you put more
money back into your pocket.
Remember, just because you aren’t currently working on a project
doesn’t mean you are safe from liabilities on projects that you
have previously completed, and it doesn’t mean that burglary,
vandalism, or natural disasters won’t strike your materials, tools,
or equipment. Stopping and restarting your coverage won’t
save you money in the long run, can cost you big in premium
discounts, and can even put you at risk for a loss.
Tip #3: Read and Understand Contracts
If you put your signature on a document, make sure that you have
carefully read and understand what it contains. Big liabilities can
arise from contractual issues, or equipment lease agreements.
Be sure you understand what is included in any indemnification
clauses - specific wording in a contract or agreement that
obligates a party to compensate another party for losses or
damages. Are your indemnification clauses working in your
benefit, or someone else’s?
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p33
Tip #4: Know Your Limits
Don’t let a limit on your coverage policies come as a surprise.
Your commercial general liability policy, for example, lists six
different limits on the policy’s declarations page. These limits are
interrelated, and the payment of damages for one limit can affect
another.
• General Aggregate Limit - The maximum amount that
will be paid during the policy period for all damages. This
includes bodily injury, property damage, personal injury, and
advertising injury.
• Products Completed Operations Aggregate Limit - The
maximum amount that will be paid for damages caused by a
completed project.
• Personal and Advertising Injury Limit – The maximum amount
that will be paid for damages due to personal and advertising
injury offenses. • Each Occurrence Limit - The maximum that will be paid for
the sum of all damages due to bodily injury, property damage
and medical payments. • Damage to Premises Rented to You Limit – This coverage is
actually an exception to provide coverage for rented property
damage to a premises and its contents when liability has been
imposed.
• Medical Expense Limit – The medical expenses coverage for
bodily injury, caused by an accident, without regard to fault.
The medical expense limit applies separately to each person.
However, medical payments will reduce the each occurrence
limit for that same occurrence and will also reduce the general
aggregate limit.
Understanding your limits on your coverage policies allows you to
make the best choices for your policy coverage, and can possibly
save you from out of pocket expenses in the event of a liability
that exceeds your limits.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p34
Tip #5: Advertise Your Insurance Coverage
Your insurance coverage makes you more desirable to
homeowners and bid decision makers, so why not let them know
about it?
Ok, so you probably won’t take out a billboard that shouts “I’m
insured!” for the world to see. But letting future clients know that
you are covered is a savvy move to get you more business. Here’s
how:
Online: Your website, social profiles, even your email signature
line are all places that you can advertise the fact that you are
insured and bonded. The “about me” sections of your social
accounts and website give you plenty of space to talk about the
coverage you carry, and how that adds value to your company.
(Not sure how to word that exactly? Use this guide as a
reference!)
Print: What sort of print collateral do you use for your business?
Do you have business cards? A printed packet that you give
to homeowners about your services? Do you place ads in local
magazines or papers? Anything that you present to a potential
new client or to the public is an opportunity to advertise that you
are covered.
You have the right insurance in place to protect you, and your
clients, in case the worst should happen. Let them know it.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p35
Conclusion
Business risk management helps your construction business stay
in operation, and improves profitability. It increases cash flow,
improves stability and good credit, and leads to longevity and a
better reputation.
Assessing business risk is not easy, and it is not a one-time shot.
Risk management is about more than preventing losses to your
business. It is about protecting your business, your employees,
your personal assets, and your future. After all, you have built
your business brick-by-brick. Let risk management be the mortar
that holds it together.
© 2015 Citizens General Insurance Brokers
Increase Profits with Risk Management
p36
11601 Blocker Dr #203 Auburn, CA 95603
(800) 498 0884