Roofing Business Insurance: Everything You Need To Know
Insurance is a struggle for many roofing contractors. This is because the price of roofing insurance can be very high compared to other types of construction businesses, and the typical coverages can leave much to be desired.
A large part of this is due to the inherent risks associated with the roofing business, especially on the workers comp side. These risks include employees working at great heights; lifting heavy material; and potential faulty work causing significant damage to a building.
Another aspect of the roofing business that can make it difficult to obtain quality insurance is the large utilization of subcontractors.
We’re here to help. Whatever your particular situation might be, we’ve put together this guide to help you navigate the situation. Here are some tips to help you save on premiums while getting the coverages you need.
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Two Insurance Policies Every Roofing Contractor Needs
Although roofing contractors might have some unique insurance needs depending on their operations and who their clients are, there are two policies every roofing contractor must obtain to cover the basics.
1) Roofing Liability Insurance
The first of the two core roofer insurance coverages is the general liability policy. This policy covers property damage or bodily injury that you or your crew cause while working on a roof. It can also cover these same damages if your faulty work causes damage after the construction is finished.
When someone talks about liability insurance, they are usually referring to this particular policy. Typical claims under this policy can include roofing material falling during construction and damaging client property, or a faulty roof causing damage to the inside of a building after the roof has been completed.
2) Workers Compensation
Unless you are subcontracting out all your work, chances are workers compensation will be your largest insurance expense.
Workers comp pays for the medical bills and lost wages of employees injured while working for you. Having this insurance policy is almost always required by law and enforced by the state you live in. If you have employees but don’t have this coverage, you can face penalties such as large daily fines and even criminal charges.
Unfortunately, roofing contractors are the source for a large frequency of claims, and that results in high workers compensation rates for roofing contractors across every state.
Coverage Considerations
1) Avoid any subcontractor exclusions.
Many roofing general liability insurance policies will include a subcontractor exclusion or limitation to avoid paying on claims that arise out of your subcontractors.
If you don't use any subcontractors, this might not affect your business. If you do, we highly suggest trying to get this endorsement removed. Although your subcontractors might ultimately be liable for the damage, that doesn't mean you won't also get sued. This exclusion also means that your insurer won't pay for your court costs to get you out of a lawsuit if the subcontractor caused the damage.
2) Look out for subcontractor warranties.
Many roofing contractor liability policies include a subcontractor warranty. This warranty can differ by carrier, but they usually require you to certify that:
- All your subcontractors will have the same liability limits as you.
- All you subcontractors’ insurance will be written on ISO (Insurance Services Office) forms.
- Your subcontractors will add you as an additional insured and waive rights to subrogation.
This has many problems. The largest of these is that as a roofing contractor, do you generally inspect your subcontractors to make sure they’re using ISO coverage forms? No!
In our experience, roofing contractors are not doing this. They are focusing on running and growing their business, not doing insurance audits.
But if, when filing a claim, it turns out that the subcontractor did not meet all requirements of the warranty, the claim can be denied.
We suggest trying to get this endorsement removed.
The reality is that some carriers might not remove this endorsement, especially if you are a small or new contractor. In that case, you need to know what the endorsement says and make sure all your subcontractors comply.
3) Make sure drone use is covered.
You might utilize drones to do roof inspections. Unfortunately, “Unmanned Aircraft” is also an exclusion on almost every general liability policy written today.
The good news is that if you use drones in your business, many roofing insurance programs have the option to remove this exclusion and cover drone-related claims.
Claims that involve drones typically involve invasion of privacy, which may occur when a video camera is flying a neighboring property. Additionally, if the drone crashes, it could damage someone's car or injure a person.
Roofing Contractor Insurance Costs
Since workers compensation is by far the largest expense for most roofing contractors, we put together a list of what a roofing contractor can expect to pay per $100,000 in roofing employee payroll in each state (excluding those states with a monopolistic workers compensation system). Here are our findings:
- Alabama - $17,650
- Alaska - $21,950
- Arizona - $8,550
- Arkansas - $10,800
- California - $15,510
- Colorado - $12,660
- Connecticut - $24,190
- DC - $9,870
- Delaware - $26,890
- Florida - $14,780
- Georgia - $39,590
- Hawaii - $17,880
- Idaho - $17,870
- Illinois - $23,330
- Indiana - $5,890
- Iowa - $16,530
- Kansas - $11,930
- Kentucky - $14,550
- Louisiana - $23,170
- Maine - $16,050
- Maryland - $11,350
- Massachusetts - $37,710
- Michigan - $40,980
- Minnesota - $28,980
- Mississippi - $12,450
- Missouri - $21,380
- Montana - $34,460
- Nebraska - $13,060
- Nevada - $12,030
- New Hampshire - $15,170
- New Jersey - $29,460
- New Mexico - $16,220
- New York - $25,830
- North Carolina - $14,130
- Oklahoma - $15,980
- Oregon - $11,630
- Pennsylvania - $16,840
- Rhode Island - $17,420
- South Carolina - $25,370
- South Dakota - $16,870
- Tennessee - $12,770
- Texas - $7,410
- Utah - $11,640
- Vermont - $22,590
- Virginia - $17,900
- West Virginia - $8,670
- Wisconsin - $22,170
How To Lower The Cost Of Roofing Contractor Insurance
There are many ways for you can save on roofing contractor insurance, but we recommend the following, which we will produce better results:
1) A low experience modifier is the best way to save on insurance.
Having a low workers compensation experience modifier is by far the best way to lower the cost of insurance.
An experience modifier is a number generated from a formula based on the claims history of your prior year. This formula predicts the losses you will have in the future compared to your peers in the industry. In doing so, it determines by what percentage amount the insurance company should increase or decrease your insurance premiums.
For example, an average experience modifier is 1.0. This tells the insurance company that they should neither increase nor decrease your insurance premiums, because your loss history is in line with the industry average. In contrast, a 1.3 experience modifier would cause the insurance company to increase your premium by 30%.
Experience modifiers can easily go into the 2.0+ range, which means your insurance company can double your premium!
Keeping a low experience modifier and having a low number of claims can help you save large amounts of premium dollars each year.
2) If done wrong, subcontracted labor could add to your GL and workers comp costs.
If you use subcontractors who are not insured, or if you don’t collect certificates of insurance from these subcontractors, their payroll will get added to both your general liability costs and workers compensation costs.
To make matters worse, the amount added to the policies can include the total cost of the subcontractors (labor plus materials) and not just the labor, causing the costs to be greater than an actual employee!
It is critical for you to acquire a certificate of insurance for every single subcontractor you use to avoid having those costs added into your insurance rates.
3) A written safety plan will get you additional discounts.
If you want an underwriter to give you their best pricing on an insurance product, you need to provide convincing reasons as to what makes you a superior business to insure.
One way to do this is to have a written safety plan that includes the required safety equipment and procedures your employees must abide by.
A commitment to a culture of safety in such a claims-ridden construction trade can go a long way in differentiating yourself in the insurance market and getting the best prices available.
4) Know your endorsement costs upfront.
We recommend knowing the price of your required insurance endorsements upfront instead of finding out after the policy is issued.
For example, for some insurance companies, an additional insured is $100, and for others, it is $250 for the same endorsement. Have an idea of what you will need for the upcoming year and form a strategy around the real costs of your insurance policy instead of just take the lowest rate.
Before you take the policy or renewal, you also have the option of purchasing an unlimited amount of additional insureds for a flat fee called a Blanket Additional Insured. This is the time to price the cost of this endorsement vs. individually listed additional insureds.
Summary
Roofing contractors have unique problems shared by very few construction trades. You have to not only stay on top of coverage, but also closely monitor your experience modifier and subcontractor certificates of liability.
If you are looking for help getting the best coverage and pricing on your roofing contractor insurance, let us know!
About The Author: Austin Landes, CIC
Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.