Bad News for Underinsured Roofing Contractors - Farmer Brown Insurance Agency - Contractor Talk

Bad News for Underinsured Roofing Contractors

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Old 09-13-2020, 10:26 AM   #1
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Bad News for Underinsured Roofing Contractors

Bad News for Underinsured Roofing Contractors

Every contractor wants to pay less for insurance. For many small business owners, insurance is a grudge purchase. However, in the construction industry, contractors are highly aware of both the safety and financial risks that put insurance high on the list of priorities.

Roofing contractors are more aware of this than most, simply because roofing is one of the most hazardous trades.

Even so, many roofing contractors find that they are underinsured. And when are you likely to discover this? Yes, when you are facing a claim, by which time it is too late!

What does it mean to be underinsured?

Your roofing business is classified as underinsured when you have insufficient coverage for the total amount of the claim. In other words, along comes a claim for property damage which exceeds the maximum amount that can be paid out by your Contractors Liability Insurance policy.

Are YOU underinsured?

The most common reasons for being underinsured are buying the cheapest insurance you can find; underestimating the financial implications of the risks you face; and failure to read the policy.

Buying on price alone is risky. In this scenario, where you have chosen by comparing policies from different companies to find the cheapest coverage, you may not be getting all the coverage that you need.

You could be paying less because there are exclusions, the value of the coverage could be very low, or the deductible could be huge. A high deductible will reduce the cost of the premium, but may put you out of business if you canít afford to pay it comes time to settle a claim.

When you are caught sleeping on the job ...

But there is another reason for being underinsured. This is one that can creep up on even the most diligent roofing business owners. Insurance coverage must be reassessed regularly. No business stays the same year-in, year-out. Any or all of the following will have an impact on both the coverage you need and the cost of the premium:
  • The size of your crew could have grown,
  • you may have invested in more assets,
  • your contracts could now be for higher-value projects,
  • you may have changed location.
It is important to note that the responsibility for setting the correct sum insured figure rests with you, the policyholder. This is true for the first time you purchase the policy, and holds true from that point on. But, what happens if you have set the insured figure too low?

Consequences of being underinsured

The short answer is that if you are underinsured, you will face financial loss. Here are 2 of the ways:
Reduced payout:
If your policy is inadequate and the claim exceeds the maximum sum insured, you will be penalized. The value of the claim will be reduced by the proportion by which you are underinsured.
Voided policy:
The worst case scenario is if your insurer not only rejects the claim, but voids your policy. If they find that you have failed to disclose important information or set a lower amount insured on purpose, then they could do this. A policy that is made void is as though it never existed, even if you are up to date with all your premiums. A voided insurance policy is made invalid from the start.
In their efforts to reduce their premiums, some contractors could end up with no coverage at all.

Key takeaways

Always invest in the best insurance you can afford. Set an accurate figure for the insured value. Regularly review your coverage.

For more information on how to avoid being underinsured, contact Farmer Brown Insurance at 888 973 0016
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Warning: The topics covered on this site include activities in which there exists the potential for serious injury or death. DOES NOT guarantee the accuracy or completeness of any information contained on this site. Always use proper safety precaution and reference reliable outside sources before attempting any construction or remodeling task!

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