How to save money on insurance (and how not to)

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Looking to save money on insurance for your construction company? There are several strategies that can help cut back on insurance costs – and a good construction-oriented insurance agent will help you implement them. But there are some cost-cutting methods you should avoid, as well. Keep reading for a list of cost-saving tips – the good and the bad.

Top 5 Worst Ways to try to Save Money on Insurance

  1. Minimize all claims and pretend they never happened. (None of these was your fault)
  2. Cut back on your coverage. (Not smart unless you plan to self insure and know insurance)
  3. Reclassify all of your employees as clerical. (No one will fall for this one)
  4. Only list the drivers with the best MVRs. (Bad ones will have a wreck and you will be cancelled)
  5. Down play anything you do that could be interpreted as dangerous or deadly.  (Practice a dumb look here with company loss control and you will be cancelled).

Thinking of saving money on your insurance costs?

Here are 10 legitimately good tips for saving on insurance.

  1. Find an independent insurance agent (represents many companies) or two that specialize in your trade.  They will represent you with the best insurance markets for your line of work.  Most agents work on straight commission, so find the best agency and develop a relationship with someone there that you like.  Once you find them pay promptly and take their advice if you want to develop a strong and long-lasting relationship.
  2. Make your insurance carriers hungry to quote your business by putting together an RFQ no more than once every three (3) years.  This RFQ or Request for Qualifications spell out all of the coverages that you need via copies of your current policies and include Currently Valued Loss Runs which shows all lines of claims paid over the last Five (5) years.  Asking your current agent for Loss Runs will let them know that you are preparing to shop your insurance, so let them know first what you are doing.  If you choose more than one agent, let each choose their top five (5) insurance Markets.  Your current agent will keep your current insurance carrier and the other agent will choose next, and so forth, until all markets are assigned.  Also, describe the service that you will expect from the agency that you choose. 
  3. Make your insurance carriers compete. Make sure your agent lets them know that you are going to choose the market with the lowest price for the coverages you need. 
  4. Put together a loss control report for your agent to include with your RFQ.  The better the insurance company the better the Loss Control.  Provide a copy to your agent and the Loss Control rep from the insurance company giving you a quote.  This information will include:  A Supplemental Questionnaire (Provided by agent), a copy of your current workers compensation Experience Mod report (EMR), OSHA lost time incident log, copies of your current safety plan, copy of the current contract that you have for subs to sign, introduction to your company safety person if applicable, proof of any telematics implemented or installed in vehicles and equipment, plus copies of any safety awards.
  5. Look at deductible programs or Captives.  Ask your agent about these options- pros and cons.
  6. Minimize your fleet.  The cost to insure your company pick up is now between $1,500 to $2,800 a year for a million dollar auto liability policy depending on the cost new and age.  Now is not a good time to have family vehicles on the company policy as it will cost you 3 times plus more than insuring it personally.
  7. Review how all employees are classified for Workers Compensation annually and make sure that you have them in the proper classification.
  8. Read your policy for extra premiums or fees that you may not need.
  9. Set a drop dead date for receiving the quotes. The drop dead date for quotes can not be later than 1 week before renewal to be fair to all parties.  Making it a month or more will not happen.  All agents and the carriers quoting will fight to be the last to turn in their quotes for fear that you will share their information with their competitors.  This tactic allows time for them to “requote” their premiums on an apples to apples basis which will make them amazingly come down.  Do this and burn some bridges.
  10. Don’t have a heavy hand.  Give all parties quality attention and information.  They are taking valuable unpaid time to provide you their quote.  Don’t share your quote with either agent.  Make your decision on what is best for your company and repeat as necessary.

Other things to know:

Right now, auto coverage is the tail that is wagging the dog.  It used to be that Workers Compensation was the biggest chunk of what you have to pay for insurance.  Don’t forget to apply your workers comp, auto, equipment, general liability, and umbrella premiums to job costs by allocating the right percentage.  Your agent can help with that.

Know that shopping your insurance out too frequently will burn bridges.  Cold insurance companies get hot and vice versa.  Value the agency you use as a trusted advisor and communicate and monitor your expectations of them, and you will do well.

If you need help putting together your RFQ, Loss Control, or just need a good agent, let me know.  I would be happy to help.

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