Contractors: How Rising Costs and Labor Shortages are Shaping Your Insurance Rates

If you are in the construction business, you already know the challenges. Skilled labor is harder to find, material prices keep climbing, and regulations seem to shift constantly. What many contractors do not realize is how directly these issues are affecting their insurance costs, particularly General Liability and Workers’ Compensation.

Here is a closer look at what is happening and what you can do to protect your business.

Fewer Workers, Higher Risk

The ongoing labor shortage is forcing many contractors to hire younger or less experienced workers just to keep jobs moving. While this may be necessary, it increases the likelihood of workplace injuries and jobsite mistakes. Insurance carriers are seeing more claims activity, which leads to higher Workers’ Compensation premiums.

At the same time, underwriters are paying closer attention to how you manage jobsite safety. If your business lacks proper training programs or has poor loss history, you are more likely to see rising costs or coverage restrictions.

Rising Material Costs Affect More Than Just Bids

A damaged jobsite or a lawsuit involving property damage used to be expensive. Now, it can be financially devastating. The cost to replace building materials like lumber, steel, and copper has climbed significantly, and insurance carriers are adjusting premiums to reflect this reality.

General Liability claims are more expensive to settle, which has led to increased premiums, reduced coverage limits, and more restrictive policy terms.

Stricter Regulations and Audits Are on the Rise

Many states are cracking down on worker classification issues. If your business is misclassifying employees as independent contractors, you could be facing back taxes, fines, and Workers’ Compensation audits that result in retroactive premium increases.

Regulatory agencies are also stepping up enforcement related to jobsite safety, environmental practices, and subcontractor management. Failing to meet these standards could not only affect your legal standing but also your insurability and premium levels.

What You Can Do to Protect Your Business

There are several practical steps you can take to reduce risk and control your insurance costs:

• Review your employee classifications and ensure they are accurate.
• Make sure all subcontractors carry valid insurance and have proper contracts in place.
• Document and implement a formal jobsite safety program.
• Maintain detailed records and be prepared for policy audits.
• Provide an orientation session for new hires that covers company policies, safety procedures, equipment use, and worksite standards. Follow this with a short-term mentoring or shadowing period led by a seasoned employee to help reduce the likelihood of early claims.
• Partner with an insurance agent who understands the construction industry and can help you navigate changing requirements.

Contractors are facing more complexity than ever before. But with the right planning and risk management strategies, you can keep your insurance program aligned with your business goals. Being proactive now can save you time, money, and frustration later.

If you would like help reviewing your current policies or identifying potential gaps in coverage, reach out to an experienced insurance advisor who works with contractors like you every day.