Hello everyone,
I am doing a little research before I take the big plunge and start up “officially” my own company. There are a few items which have me a little worried, but the one I would like to discuss is insurance. I have talked to several companies and none of them want to insure me.
After explaining that I will be a GC mainly focusing on remodels, they say that there is to big of a risk insuring GC’s. If I were to start a “carpentry” company, then they could insure me because I would mainly be a subcontractor working for GC’s.?..? What? When I told her that makes no sense, she just kinda laughed and said that was the policy. She said a lot of the bigger firms a rewriting the policy on insurance in the “construction field”.
So, I guess my question is…..where are all these general contractors getting their insurance from? What are the rates and coverage amount? Are you satisfied with the service?
I know that there was a post on here from someone that had an established company and was looking for insurance advise, but I belive these are different questions.
Replies
You need to find an insurance broker who deals with the construction industry specifically. Were you talking to an agent who reps one company? If so, forget it. Talk to other GCs and see who they are getting insurance from, and ask for broker referrals. Can you look up contractor's license info online in your state? If so, do it and see who generals are insured by, then call those companies and ask who their local brokers are.
It can be hard / expensive getting insurance your first time. For that matter, it can be hard renewing it even if you've had it for years. It's a b!tch, plain and simple.
My story: I upgrade from a buick station wagon to a nice little GMC sonoma. They ask,, what do you do? "I say,, I'm a carpenter. Auto upgrade to Commercial insurance. No discussion, even when I ask what's the diff with me and a travelling salesman. Anyway, bring my truck to a dealer for a recall. They park my truck after the service in a way that I wouldn't,, (truck cap aint' great for backing up)and I back up into a new cobalt on lease. 1500 bucks for a new door panel, dent the size of my fist! Call my insurance agent,, (I've got a CLEAN record) sorry,, you're best to pay it , cuz if you make a claim,, you're rate will double and you'll go from 5 stars to 1. Then she says,, oh,, there is a new option of 1 freebie no charge would have cost you 30 dollars a year, but you dont' have it!
Took my truck, car, two houses and commercial hard hat policies to another broker,, told him my story, and he said he'd set me up. Saved me about a grand a year. I like him,,and basically said,, "I don't know this insurance mumbo jumbo, but I trust you and want to know that I'm covered!"
I don't even trust him. They're all out to screw ya!
Thanks for letting me rant!
I don't even trust him. They're all out to screw ya!
What you meant as a rant is actually good advise. They're not all out to screw you.
My insurance agent is part of my team. He administers my real estate, vehicle, general liability, WC, and equipment insurance. He gets a fairly good commision each year from my accounts, so it's in his best interest to take care of me.
Last year, he found a better deal on my general liability. Better coverage for about half of what I was previously paying. I didn't ask for him to look around - he just did.
Finding a good insurance agent and letting them do their job for you is key.
http://www.quittintime.com/ View Image
C U,
I acutally like my new guy. I do want to trust him,, but am anxious about the first let-down!
d
<<<I don't even trust him. They're all out to screw ya!>>>
but to be honest, insurance people all think the same thing about their general contractors.
Go figure.
cussy,
You're right. And I'm as honest as the next guy!
did you tell her " I'm from Missouri " ?
seriously.... it all depends on state law and the rules the Missouri Insurance commissioners set up
start with this ... do you belong to a professional organization ?
like your local chapter of NAHB ?... my dues are $340 / year for RIBA, but I get a lot more back from that than I put in. I joined back in 1975.
They will have people on staff and volunteers on committees who pay attention to everything that affects you as a builder.... including and especially.... insurance
for example: our old WC carrier affiliated with RIBA tried to do us dirty last year.. so the committee solicited for new proposals and found us a better deal with better premiums.
Also.... in 34 years in business, I've found there are a lot of insurance agents and agencies out there that really don't have a clue about contractors insurance or they didn't when I was looking for insurance.
And some agencies will place you with companies that become insolvent, then you find you have no coverage when you need it... or a claim may be filed that falls within dates of no coverage.. it's important that your coverage extends backwards as well as forwards
( see " occurence vs. claims made" .... here's a good link
http://demonstrations.wolfram.com/OccurrenceVersusClaimsMadeInsurancePolicies/
i would guess you are also thinking about what type of entity your company should be ???
Sole proprietor...... LLC.... Partnership..... S-Corp..... C-Corp ????
depending on your state.... it's important that you know what an LLC will really do for you... many people choose LLC because it is easy, or convenient.... or cheap....but it may not really offer the protection of a properly administered corporation if I were starting out today, I would probably choose an LLC, and I think my choice would be wrong
several key things helped me turn my occupation around from an expensive hobby to a good income producing company: more or less in order...
learning how to price jobs for a profit
writing a business plan
incorporating and hiring myself as the key employee
getting a payroll service for payroll and state & federal employment returns
finding a good contractor's insurance agency with a good agent
finding a lawyer
finding an accounting firm for our annual returns ( my original one fired me because i didn't generate enough income for them )
finding a part time bookeeper
lot's more.. but the Builder / Remodeler Association would be an excellent start
Explanation of Insurance
1] If you're rich [have something at risk like a house, fancy car, etc.], you need insurance. If you're poor, you don't need it because you're not worth suing.
1a] Insurance companies have their clients pass laws requiring everybody to have insurance.
2] Increases in premiums get increased willy nilly.
3] If something bad happens and it seems your policy has to pay, the insurance company has a horde of lawyers who refer you to the appropriate section of the fine print which exonorates them.
3a] If they really, really can find a way out, they still deny your claim. You hire a lawyer; he goes to them and they say, "How much do you want?"
4] The real source of an insurance company's income is not the premiums. What they do is take this pile of premiums and invest it in the stock market, derivatives and credit default swaps.
5] If a disaster happens, like a hurricane or forest fire, they are forced to withdraw some cash from their investments. This really hurts the barons and they increase the premiums. [part 2] [Hurricane coverage does not include water damage. You need "flood insurance" for that. Flood insurance is not available if you live in a 100 year flood plain. You need to pay a surveyor to get an official elevation certificate even if you live on top of a hill.]
~Peter
6) If there's a serious downturn in the economy and the insurance company's investments lose value, you can expect your premiums to increase significantly. Just wait a few years...
8] Insurance is simple; you may for the right to ask to borrow money to repair or replace the item covered. IF they accept your claim they will lend you the amount they deem necessary. Then they up your rates to cover the loan. Not as profitable as religion, but close.
Flood insurance is mandated if you live in a 100 year flood plain, under most normal scenarios.
Along with a journal of other restictions - none that jive with "common" sence.
Maybe it's one of those regional things. I have become very well versed in the Ohio flood plain sitiation - with no joy. I am not the normal scenario.
Between coastal management, EPA, Corps of Eng, local AHJ, state wanna bees........
Remodeling Contractor just on the other side of the Glass City
If you're working for someone doing remodels, ask them who's insuring them. Another option would be to stop by some job and ask the contractor.
An internet search for GC Insurance may turn up a few as well.
Insurance - You pay alot of money for pieces of paper that are not worth anything when you need them yet you cannot work without them. :)
Sorry, that was rude of me its just I pay almost $14k last year in various insurance (WC, GL and BR) yet I know if I ever made a claim, there would be some loophole where I wasn't covered.
What great advice. thats why I love posting on here. After posting, I talked to an independent agent that will be sending me quotes next week. I have an attorney and my wife, a liscensed CPA, will be doing the books.
Thanks as always. I will let you know how it pans out.
Mike's advice was awsome,
Good Professionals can make or break you,
One thing I think is important is to find someone who has survived an audit or insurance issue and see who they use.
A lawyer friend of mine told me once "Everyone thinks their lawyer is good, but maybe 90% of lawyers are incompetent. You don't learn the difference until it's too late"
More to your question:
Insurance Companies consider General Contractors to be businesses that function largely using subcontractors. They also consider them to be running several jobs at once. A job with 10 or 12 subs and maybe 3 hours of direct supervision a day presents greater risk than a job where the Carpenter who is doing the job is on site all day managing not just his own work, but providing direct supervision of his subs.
That's why the rates for GC would be higher than those for a Carpentry company.
But be careful here. The insurance company WILL audit you, and if the number of Subs you use exceeds their allowable percentage?
Not only will you get billed for it? But they will change your policy structure.
You also need to look at Workmans Comp. Here on the east coast some insurance companies are requiring that EVERYONE on a job they insure is covered. Meaning that if you hire a Sub and he's a Sole proprietor? And he has opted out of WC coverage on himself? Guess who gets the bill?
There is a fair amount of active debate over that issue.
look for a local organization like the Home Builders Assoc., or Remodeler's Assoc. and see who they recommend.
One last thing...........any agent who claims to be able to work around the issue and save you money? will probably end up costing you money the first time the insurance company audits you.
Thanks Robert and Mike for the good advice. I have contacted a painting contractor i have worked with in the past and I am currently talking with his agent about coverage. Thanks again.
"Here on the east coast some insurance companies are requiring that EVERYONE on a job they insure is covered. Meaning that if you hire a Sub and he's a Sole proprietor? And he has opted out of WC coverage on himself? Guess who gets the bill?"
That used to grate on me! I was a sole proprieter in NJ, working alone. In NJ at that time, you couldn't buy WC that would cover your own injuries as a sole proprieter. The builders I subbed to insisted I have it anyway because their insurance companies insisted. Back then - mid 1980s - it cost me the minimum premium of about $300 per year for insurance that did me no good at all. Twenty years later, I'm still bitter about that systemic screwing. Andy
"Never try to teach a pig to sing. It wastes your time and annoys the pig." Robert A. Heinlein (or maybe Mark Twain)
"Get off your dead #### and on your dying feet." Mom
"Everything not forbidden is compulsory." T.H. White, The Once and Future King
Andy,
there is and always has been a bunch of bad info going around about being able to cover yourself with W/C. In the mid 90's I was able to cover myself as a Sole Prop in either PA or NJ.
Of course, a lot of agents didn't know that......a lot of guys never asked because paying $300 so they could provide a certificate was all they were worried about........and to be honest..a disability policy with a 30 or 60 day waiting period was Far, Far cheaper.
In my case it was like $10 or $12 on the $100...............way more than a disablity policy.
NJ is at the head of the pack on that crackdown.
In a lot of cases, if you're self employed your personal health insurance, especially if it's thru your wife WILL NOT cover work related injuries.
That little revelation combined with the number of guys who opted out AND failed to secure disability insurance...........................
So now, if you are not covered on your own W/C? The contracotr who hires you pays HIS rate on the TOTAL amount he pays you.
What part of Nj did you work in?
I worked mainly in Warren, Hunterdon, Sussex, and Morris counties. I'm from the Belvidere area originally. The bulk of my work was around Hackettstown, Washington, and Andover. What about you?
If that was misinformation, it was repeated to me by several insurance agents. Perhaps it changed by the 1990s. I was a partner in an S corp by then, so wasn't paying much attention to sole prop issues. Except for requiring my subs to have WC. <G>Andy
"Never try to teach a pig to sing. It wastes your time and annoys the pig." Robert A. Heinlein (or maybe Mark Twain)
"Get off your dead #### and on your dying feet." Mom
"Everything not forbidden is compulsory." T.H. White, The Once and Future King
We deal with that all the time.My question is, what would happen if you took a header off of some unfinished stairs? Could you (or your survivors) sue the builder/homeowner, or we you legally restricted from pursuing that action?
Jon Blakemore RappahannockINC.com Fredericksburg, VA
That's a good question, but if the insurance didn't cover me, who would it have covered? the system may have improved since then, but it didn't make a lot of sense at the time.
In any event, the relationship between a GC and a sub isn't an employee/employer relationship, so WC would not have prevented that sort of lawsuit.
I always carried personal health and disability insurance, both of which I made sure covered work related injuries for the self employed. Andy
"Never try to teach a pig to sing. It wastes your time and annoys the pig." Robert A. Heinlein (or maybe Mark Twain)
"Get off your dead #### and on your dying feet." Mom
"Everything not forbidden is compulsory." T.H. White, The Once and Future King
I've been told that the WC coverage basically keeps litigation from working it's way up the food chain. If you were to die on the job, your estate (or the people you owed money to) would pursue the general contractor, landowner, and anybody else who has some assets that they can attach to.WC says that you can go after them, but once you hit the ceiling, the other parties (GC, HO) are protected from any suits because of the monies received from the insurance company.That makes sense to me- I know that we have to pay on anyone on our job who does not have their own coverage. Of course, I'm not an insurance expert AND I've never operated in NJ, so I could be completely wrong or things could be completely different.The system sure does seem difficult to navigate.
Jon Blakemore RappahannockINC.com Fredericksburg, VA
Question,, because I'm slow,, and need this spelled out.
I have disability insurance. I'm a sole proprietor, subcontractor. Is this enough? Here in Canada,, WSIB makes claims that it isn't. I'm covered,, leave me alone! Or am I?
what abiut your General Liability insurance ?that's what theoretically covers you if a customer sues youMike Hussein Smith Rhode Island : Design / Build / Repair / Restore
I have that! 2 million coverage. still pretty grey to me. My broker tells me I'm good,, so I suppose I should be happy with that!
dave
"Twenty years later, I'm still bitter about that systemic screwing."
I know the feeling. In MI, it was the same but they had the gall to send me a letter telling me that I should be "proud" to pay into the system, even though I couldn't collect. I think that was for unemployment when I was running a C-corp. Twenty years later, I still bristle at the thought of that letter.
Really, who are the people who think this stuff up, and where do we go to slap the snot out of them?Andy
"Never try to teach a pig to sing. It wastes your time and annoys the pig." Robert A. Heinlein (or maybe Mark Twain)
"Get off your dead #### and on your dying feet." Mom
"Everything not forbidden is compulsory." T.H. White, The Once and Future King
Your legislators. Vote them out. Or, at least bitch their ear off constantly until they change the codes.
I am in Missouri too (The other end of I-70) and can put you in touch with my insurance agent. I assume they can handle your area considering they are about 2 hours away from me. They supply me with my Gen. Lia./vehicle/and work comp.
I have used them from day 1 (been in business for about 5 years) and been happy with their service. Although, in this economy I am thinking about shopping the policies around.
Reply to my email and I would be happy to send you their info.