“Understanding different types of insurance carriers, what each provides, and pitfalls to avoid will help find the best option for you and your business.”
At Dunn Solutions, we’re dedicated to providing trusted information and advice to support trade contractors and craftspeople throughout the greater Seattle area. While we often share insight on quality materials and building techniques, we also understand that there are countless other facets of your business required to keep things running smoothly—like insurance.
From the basics of what contractor liability insurance is and how to read your policy to understanding policy exclusions and Washington laws that impact contractor liability insurance, there are a lot of factors to consider for your business. That’s why, for our Contractor Liability Insurance Series, we’re speaking to Shelli Lucus-Kennedy, owner and senior risk manager of Insurance Risk Services. With more than 40 years in insurance and risk management and a focus on the construction industry, Shelli is a wealth of knowledge due to her extensive experience and customer-driven approach.
The search for general contractor insurance carriers can be intimidating. Admitted or non-admitted? What are reserves? Understanding terminology and how carriers operate will help you make the best decision for you and your business in Washington State. In this episode, Shelli talks about the different kinds of carriers, how they function, and a word of caution when applying.
Watch our discussion in the video above, or keep reading to get the highlights.
Differences between admitted and surplus lines carriers
Agents are required to get coverage from admitted—or preferred—carriers, if available. Admitted carriers are licensed to do business within our state and qualified by the state’s insurance commissioner.
The benefits of working with admitted carriers:
- Thoroughly screened
- Financially sound
- Coverage forms have been approved and cannot be changed on a whim
- Lower cost
However, surplus—or non-admitted—carriers can be used if you’ve been denied coverage by admitted carriers or they can offer coverage that admitted carriers cannot, such as a high deductible. They are not licensed to do business within your state due to not meeting state regulations but can be an option if you are considered a high hazard, have bad losses or require specialized coverages.
What if your insurance carrier pulls out of the market—and can they do that?
It’s important to remember that insurance carriers are for-profit companies, so if there are lines of coverage that are not profitable, they’re likely to pull out of that market. If they aren’t licensed to do business within the state, they can easily jump in and out of markets, as there are no rules against this.
What does it mean if your insurance carrier pulls out of the market?
If an insurance carrier pulls out of the market, you will lose coverage when your current policy expires and will need to find a new carrier. As noted above, all carriers can decide not to renew policies should they deem them unprofitable, so working closely with your agent will help prepare you for upcoming changes.
What are insurance reserves, and why are they important to carriers?
An insurance reserve is the money set aside for claims. This money cannot be used for anything else and shows up as a debt on a carrier’s balance sheet. Carriers are for-profit companies, so their insurance reserves have an impact on the outlook of their business.
When you’re obtaining or renewing your insurance, one of the factors carriers will take into consideration is your loss—or claims—history. Open claims heavily count against you and stay on your record for years, often leading to much higher rates.
As the client, work closely with your broker to make sure all of your claims are finalized and actually closed. Even after claims are settled, they can remain on your loss history as an open claim. Your agent can help confirm closed claims are removed from your loss history and ensure you’re not charged a higher rate.
Interested in other ways to protect your business? Don’t miss the other helpful episodes in our Contractor Liability Series, covering topics like changing insurance carriers and how to read a contractor liability insurance policy.