Why do you need Builder’s Risk Insurance? Well, in 2019, 78% of U.S. construction and engineering who were firms surveyed on risk, responded that risk is on the rise. Construction is risk-prone, this is a fact. However, certain measures can control the risk level a contractor is exposed to during construction. As a general contractor, you may ask yourself, “What can I do to mitigate my risks?”
A key step should be acquiring a Builder’s Risk insurance cover, tailor-made to suite your specific business needs.
Here are six steps you can take to protect you business.
A Builder’s Risk policy will compensate you in case of damage to property and materials incurred during construction. Depending on your policy, you will be partially or fully compensated for damage or loss due to theft, vandalism, explosions, fire, hail, lightning, and hurricanes. Paying out of your own pocket for such damage could seriously affect your business’s finances.
There is a dire shortage of highly skilled labor in the construction industry. A survey by the U.S Chamber of Commerce reported 92% of contractors had concerns about their laborer’s skill levels. Under-skilled labor can lead to high worker turnover, or poor quality output on your project. This in turn can lead to delays and additional project costs. Invest in attracting skilled labor with good wages and maintaining them with financial incentives and facilitating on-the-job training.
For accurate cost estimates, undertake a fresh estimate for new projects you take on. Break down your cost estimates by material costs, labor, overheads and targeted profits. Research up-to-date information on each. Use the current information to work a cost estimate. Volatility in the construction industry, especially in regards to labor and materials, may result in you underbidding on a project and consequently encountering costly overruns.
The demand for housing may have shifted greatly since your last project. Before offering a cost estimate, research market conditions in your area. Then gauge whether you can price your services higher, or need to cut costs to compete in a slow market. Having up-to-date information on markets and the economy play a significant role in calculating the right cost estimate.
It is important to bond your subcontractors in the event of breach of contract. The surety will be charged for damages, and not you. Bond subcontractors before work commences. During bonding, subcontractors are thoroughly vetted. Hence, there are lower chances of sub-par work or occurrences breach of contract.
A markup is the dollar amount you will charge to cover material costs, overheads and profit margins. Cost estimating can be complex and daunting, especially with larger scale projects. All the same, take the time to calculate your markups and margins correctly. Miscalculations can bring your business to its knees. Remember, the dollar amount left over after deducting costs and overheads from your markup is your profit margin.
In the construction industry, risk is par for the course. Risk can be mitigated and does not have to compromise your business. We are here to guide you on selecting a Builder’s Risk policy. Call us today on 888-676-0923 for a quote.