Over the last few years, the cost of doing business has risen significantly. In the wake of the pandemic, owners have had to contend with persistent inflation, continued supply chain issues, and widespread skilled labor shortages.
All of these factors can make it more difficult to finish projects on time and on budget—a critical quality for the industry.
While inflation is easing, it’s still important to stay diligent about protecting your business’s financial future. Below are three steps you can take to help reduce the strain on your business when economic headwinds aren’t in your favor.
Obtain An Updated Property Valuation
Fires. Tornadoes. Water damage. All of these disasters, and other unexpected events, often lead to large property losses that can devastate businesses.
It’s more expensive than ever to replace equipment and materials—and it often takes longer now than before to repair or replace damaged items. That’s why it’s important to make sure you have the right types—and amount—of financial protection for your business.
My top recommendation is to get an updated valuation on your property. If it’s out of date, you run the risk of being underinsured, and you may find that the cost to repair or replace building supplies or equipment is much more than you expect. That leaves you vulnerable to large, unexpected expenses—and the safety net insurance can provide will be smaller.
You might be surprised at how much your coverage needs have shifted since your last renewal due to inflation and supply chain trends. But you’d rather discover the need for policy updates now and not wait to find out about the gap should there be a loss.
Schedule A Coverage Checkup
After completing an updated assessment, you may have several insurance coverages that have been affected. Your agent or insurer can help review your policy to account for recent changes:
- Builder’s risk insurance: Covers property losses that occur during the course of your construction project. This includes building materials, equipment, scaffolding, and storage containers. High inflation during the last few years probably drove up the costs of these items quite significantly, which means your current coverage may be inadequate compared to the cost of repairing or replacing damaged items if losses were to occur today. Review this area of your policy to make sure it accurately reflects updated repair and replacement values.
- Installation floater coverage: Insures property and materials that you plan to install on a jobsite. Protection can range from damaged items due to fire, weather, and theft. Similar to builder’s risk insurance, you’ll want to confirm your policy has kept up with inflation to avoid underinsuring your materials.
- Contractor’s equipment insurance: Helps protect your equipment and tools on jobsites, in transit, or in storage. Verify that your policy limits are high enough to cover the cost of repairing and replacing the tools and equipment needed to operate your business if they are damaged or lost.
- Business income insurance: Also known as business interruption insurance—can help you stay afloat if your business needs to pause operations after a major property loss. It can help replace lost income and profits, along with payroll and other operating expenses needed while you recover. Today, you may face extended downtime due to the longer delays to order and replace property. Make sure this section of your policy accounts for longer rebuild and recovery timelines.
In 2023 alone, there were 28 natural disasters in the U.S. that each exceeded more than $1 billion in damage—a new record. In total, they left nearly $93 billion worth of damage in their wake. This is in addition to the wintry weather events at the end of 2022 which also incurred a significant amount of property losses across the country.
Many businesses can’t afford the significant costs of rebuilding, which means without adequate insurance, many close their doors permanently. It’s a powerful reminder to review your insurance policy now, rather than later, to help ease the financial burden of potential incidents in the future.
Take a Safety-First Approach
While insurance is necessary—and can help you in the aftermath of an incident—it’s more cost-effective to avoid damage and claims altogether.
That’s why you should have a robust safety, inspection, and maintenance program in place. Your project sites change from time to time. Each of those changes could alter your risk.
A formal safety program can help ensure that you’re regularly checking your property, jobsites, equipment, and materials for any sign of damage, wear, or malfunction that could lead to larger issues later. Routine inspections can also help you address the physical security of your supplies and make sure high-value items are secured against weather events, fire, theft, and other perils.
You may already have a safety program in place. It’s still important to evaluate your plan for effectiveness and maintain ongoing training with your employees.
Risk will always exist throughout the construction industry. While you can’t eliminate risk entirely, you can take steps to help reduce it, avoid it, and protect against it.
When you make safety a priority and take the time to review your insurance policy, you make your business more resilient to today’s risks. The tips I’ve shared here can serve as a helpful starting point, but it’s best to talk with your agent or local experts for a plan specific to your business.
In the meantime, stay safe, and stay proactive.
