Monday, July 16, 2012

Bonding: Another Way to Protect and Grow Your Company

The risk factors in the Construction Industry are unique. Builders not only have risk exposure during the job but also after it has been completed. This risk is increased by the fact that a number of c0-workers are contractors.


Bonding is another way of protecting your company. It is also a passport to opportunities for growth. Many jobs require that you be bonded. If you get bonding, then you will be in competition for work that might not have been eligible for.

What You Need to Know About Your Bonding Agent

  • Does the agency do business in the state, where you plan to do work?
  • How many surety companies is the bonding agency licensed to work with?
  • Does the bonding company have A.M. Best Rated and US Treasury Listed Surety Bonds?

Types of Bonds

There are many different types of bonds. These are a list of some generally used by contractors:
  • Contract Bonds-The bond assures that you will meet the terms of the contract.
  • Subdivision Bonds-A local government authority requires this for public work, roads or street lights.
  • Bid Bond-As the name implies, supports your bid.
  • Performance and Payment-Refers to the standards set for the work and covers the eventuality if you fail to meet those standards.

What Data do You Need to Present to Get Bonded

There are certain data that a bonding agent will need, depending on the type of bond you desire.

Contract Bond

  • You need to bring company end-of the year financials
  • Cash Verification for both your business and personal monies. This you can do by presenting the first page of your bank statements.
  • Bank Lines of Credit verification
  • Resumes for key people
  • Reference Letters
  • Accounts Receivable info
  • Contractor’s Application (supplied by bonding agent)
  • Personal Financial Statements for each of the owners and stockholders
  • Contract Status Report- work you have on hand.

Subdivision Bond

  • Request Form for Site Improvement
  • Personal Financial Statement
  • Corporate Financial Statement
  • Letter from the County or City stating the bond requirements, indicating improvements and dollar amounts.
  • Resume or Company Bio, to show experience in development/subdivisions
  • First Page of Bank Statements to show corporate and personal cash
  • Letter from your Bank to prove funding is in place for the project
Sometimes you’re asked to fill out a Request Form for Bid Bonds and Performance and Payment Bonds.

Bid Bond Request

  • Contact Info for your company and the party that you are submitting the bid to.
  • Bid Date
  • Bid Estimate
  • Liquidated Damages per day
  • Bid Bond %
  • Completion Time
  • Warrantee Period

Performance and Payment

  • Contact info for you and the contractee.
  • Contract Description
  • Contract Price
  • Liquidated Damages per day
  • Completion Time
  • Warrantee Period
Getting bonded takes time and effort. However, it is one effective way to grow and protect your company.

For all your Contractors Insurance needs

How Builders and Sub-Contractors Can Take Advantage of the Rises in the Construction Industry

How Builders and Sub-Contractors Can Take Advantage of the Rises in the Construction Industry

Building Starts Rising

Up til recently, all construction news was bad news. Since November, we have seen some signs of an upturn in the market. These positives signs plus some upsurges in other sectors can help builders and roofers take a more methodical approach to finding business.

National Association of Home Builders (NAHB Survey)

The NAHB has taken the time to create an enormous survey. Based on Building permits, NAHB has been able to create a national picture of the construction market. Its data shows how many permits have been taken out for both single and multifamily housing in each region, state and the major cities in these states.
The information is extensive, but it can also be used by contractors to determine, where to look for work in their area. The best approach would probably be to contact the office that has issued the permits and find out, who is running these building projects. You can access this information at .

Housing Inventories

The glut of houses on the market has dealt a crushing blow to the construction industry. However, the light at the end of that tunnel can be seen. The important news is that home sales rose by 5% in December, and the inventory of houses dropped from a 7.2 month supply to a 6.2 months inventory in December.

Multiple Housing Units

The year 2011 ended with mixed, but positive results. The bad news is that building starts for structures with over five units dropped by 28%. However, the good news is that the rate of building was up 69% from last year.

Single Housing

Single home start increased by 4.4% in December. This shows a rise in building starts at a time (December) when buyers are not usually thinking about housing. They are more interested in shopping for gifts to go under the Christmas Tree.

Home Businesses

More people are starting home businesses. They are now looking to enlarge or design a new home because of the needs for an office, and in many cases large storage space. This bodes well for construction professionals.

Government Spending

President Obama is proposing a major national infrastructure program. Whether or not it will pass is questionable. However, the need for roads, transportation and bridges to heighten our economic competitiveness globally is not.
Sustaining your business in this soft construction era is not any easy task, but it is doable. Adjusting to new ways of looking for work is a national dilemma. Construction workers are faced with the same challenges, and to meet those challenges you must think out of the box to line up work.

For all your Contractors Insurance needs

Sustaining Your Roofing or Building Business Through Understanding Insurance

Sustaining Your Roofing or Building Business Through Understanding Insurance
Sustaining your roofing or building business not only hinges on understanding your liabilities, but also knowing the in’s and out’s of your client’s insurance. However, to get someone to become your customer, you need to have the credentials to prove that you do quality work.


  • You must be fully accredited through The Better Business
  • Find out how you can get on Angie’s List, which is used by consumers to find contractors.
  • Fully Licensed-You need to have a copy of your construction license to show to the customer.
  • Full Bonding Capabilities- Better than that is to be bonded. (We will be writing an article about that for a March 1st blog.)

Your Insurance

  • Make sure you have the General liability and Workmans CompensationInsurance need to protect your workers and your businesses.
  • Email your client a copy in a PDF of your insurance certificate. Your insurance agent can help you.

Your Customers Insurance

It’s important for you to understand what your client’s insurance covers.
  • ACV:  This is the amount that the insurance company computes initially, and it is the replacement cost minus the depreciation of the roof. This is not usually the final figure.
  • Adjuster: As you probably know, this is the insurance person that evaluates the damage to to the property.
  • Deductible:  This the amount the client will have to come up with on their own.
  • Public Adjusters: Are persons, who works for the client. They become involved when the customer has extensive damage.
  • PWI: It stands for Payment When Incurred. It usually has to do with tearing off the roof.  If PWI is in the insurance adjustment, it is an option. The insurance is telling the customer how much they will pay for having a specific type of work done.
  • RCV: This is determined by the local prices for construction.  Most insurance policies have an endorsement for this, and it means the insurer will pay full replacement costs.
  • Recoverable Depreciation: This means that adjuster will come up with a figure based on the value of the roof minus depreciation. If a roof is worth $10,000, and it is ten years old; then the depreciation is based on a roof life of 25 years. That calculates to a figure of $6,000, which $2,000 will be paid upfront, and the rest at the completion of the job.

Information that You Need to Give  to the Consumer

  • Workmanship Warranty: You need to emphasize to the client that if they have any problems with your work. They need contact you immediately to have you fix it.
  • Manufacturer Warranty: Explain to your customer that your materials are warranted by the manufacturer for a certain amount of years. Also make your client aware of the fact that the warranty is usually pro-rated after five years.
Insurance payouts are many times your major source of income. The more you understand about the owner’s policy, than the more likely getting paid for your service will go much more smoothly.

For all your Contractors Insurance needs

How Contractors Can Save on Worker’s Comp Claims Through Safe Work Practices

How Contractors Can Save on Worker’s Comp Claims Through Safe Work Practices

State Requirements

Whether you have one employee or a hundred workers, you are required to have Worker’s Compensation Insurance in most states. The rules for Worker’s Compensation varies with each state, which means that you have to comply with the regulations for Worker’s Compensation for each state that you do construction in. To find out the regulations for each state click on to

Worker Compensation Benefits

Worker’s Compensation applies to any worker, who has been injured in a job-related accident. It requires the payment of medical benefits, rehabilitation and lost wages to the injured employee. Worker Compensation includes a work related death benefit. In the case of a fatal accident, Worker’s Compensation pays a death benefit. The amount of the benefit is different in each state. For example, the state of Kansas death benefit is $50,000.

Fall Protection Plan

The Occupation Health and Safety Administration (OSHA) has certain requirements to avoid falls on construction sites. Building contractors can submit Fall Protection Plan if the regulations may create hazards. This plan has to be submitted in writing, and it is a complex document. If you want to see a sample Fall Protection Plan, follow this link

Safety Precautions

Whether you decide to submit a Fall Protection Plan to OSHA, it’s useful to review the sample plan because it outlines safety precautions that should be in place at a work site.The safer your work site is the less likely you are to have accidents and Worker’s Compensation Claims.
It is also important that your worker’s understand the safety regulations at your site, and how compliance to these rules protect the worker and the company. OSHA suggests that a conference on safety regs should take place before you start a project. You need to project to workers not only that they need to follow the rules, but also that the rules have been devised because you value them as employees.


OSHA considers foremen as automatically responsible for worker safety. A monitor would be a person other than a foreman, who is knowledgeable about the risks entailed in the specific work tasks that are being monitored. Legally, one monitor can only supervise six workers. The monitor needs to have reduced responsibilities to effectively ensure that safety measures are being implemented and to warn workers about hazards that they may not be aware of. Workers might not be conscious of a hazard because it is out of their range of sight.
A monitor must be able to be identified by wearing a blue arm band, hard hat or vest.
When a monitor approaches an open edge area, he must warn workers by voice that he is coming towards them. Voice warnings by the monitor are also required when pointing out a dangerous situation to workers.

Fall Protection Requirements 

OSHA states that any time a worker is placed six feet above the lowest level of a structure, fall protection strategies or equipment must be in place. Falls can happen to erectors in the framing of a dwelling. Roofers by the nature of their work must have fall protection measures in place at almost all times.

Safety Measures

Some steps need to be taken to put safety measures in place:
  • Recognize and list safety hazards for falls.
  • Understand and communicate to workers how to avoid safety hazards
  • Pay attention to weather and increase safety measures or cease work in response to windy, icy, rainy or snowy conditions.
  • Make a worker aware when he is displaying unsafe behavior on the job.
  • Restrict other workers from control zones, where they might be injured by falling materials.

Safety Equipment and Regulations

  • Have equipment available, in good condition and in use for fall protection.
  • Use scaffolds, ladders, platforms, guard rails, body belt harnesses and control zones to decrease injuries
  • Control Zones may have rope, wire, tape or other devices, such as a supporting stanchion.
  • Ropes or wires used for safety, including sagging, cannot be any less than 39” and at the most 45”above the walking surface
  • Lines used to prevent falling must have a minimum breaking strength of 200 lbs.
  • Holes greater than 12”X12” have to be covered or have guarding rails.
  • Holes created by precast concrete columns must be covered except for the column that is currently being worked on.
Implementing safety procedures can seem overwhelming to a small business owner, who wears many hats. However, job related injuries have a much larger impact on a small company. The loss of a worker due to an accident can extend the timeline of a project and increase the costs entailed.

For all your Contractors Insurance needs

Reducing Liability Claims in Green Construction

Reducing Liability Claims in Green Construction
Green Construction is a fast growing part of the building industry. More and more  contractors are bidding on these types of projects. Since for many builders this is a new type of construction, the risk of liability claims is increased.

Factors Cited in Green Construction Liability Claims

Buyers Expectations

Many potential customers want the square footage and high-end finishes, which they would get in a traditional built. Green structures usually have significantly less square footage with the emphasis on improved functionality rather than more space. The high-end finishes of natural materials will probably be replaced by man made materials.
The contractor needs to educate the consumer on what to expect the final product to look like. Clients must know that to go green entails sacrificing some of the space and amenities that they are used to. Contractors need to show in dollars and cents what will be saved on utility costs and improved health. Of course, the low impact on the environment has to be stressed. Furthermore, a buyer with realistic expectations will probably not move towards litigation, unlike a customer with unrealistic expectations.

Defective Materials

The standards for green materials are specific. However, the quality of these different materials may vary significantly. Talk to people knowledgeable at your hardware store and find out what products they would recommend. Likewise, discuss with a green builder in your area about the best techniques and materials to use.


The codes and rules for your community, state or federal government may be different from those for traditionally built housing. The bidding practices may also be dissimilar when competing for a green project.
Your best option is to start with your local building agency to find out the town regulations and get contact numbers for the state entity. Find out from the state organization their regulations and if they offer training or information guides. Have your state professional inform you about any federal regulations that must be followed, and who to contact about these rules.


In the competition for bids, builders may exaggerate what they can deliver to the homeowner. Construction companies need to consult with a green construction lawyer to ensure that their contractual agreements are doable and don’t overexpose the company to high risk, which could result in a lawsuit. Use Google to find a green construction lawyer in your area.


Lying to a customer about what you can deliver could set you up for a liability claim. The revenue that is produced by unethical procedures could be outweighed by the costs of litigation, insurance premiums and to your company’s reputation.

What Does Green Building Entail

Energy Efficiency

  • A high level of insulation
  •  Energy efficient HVAC  equipment, windows and appliances

Water Conservation

  • Water efficient appliances and fixtures
  • Drought resistant landscape with low maintenance

Resource Conservation

  • Use materials and techniques that conserve resources
  • Engineered wood or wood alternatives
  • Recycled construction materials
  • Sustainably harvested lumber
  • Durable products

Indoor Environment 

  • Effective HVAC equipment
  • Formaldehyde free finishes
  • Low allergen materials
  • Products with minimum off-gassing
  • Low volatile compounds

Site Design

  • Supply homeowner with education manuals or operating guides.
  • Use delivery and in-house vehicles in a way that they have less impact on the environment.
  • Adopt business practices from other industries to save resources and money.

How do you Learn More About Green Construction

Information about green construction is scattered and sometimes cost money. Wikipedia has a free overview of the green construction industry. Leadership in Energy and Environmental Design (LEED) has developed a set of standards that are widely used in the construction industry. It can be accessed through the United States Green Building council
To get any in-depth info from LEED, you need to go through one of their certification programs. If you decided to do that, the cost is tax deductible. The National Association of Home Builders (NAHB) has a Green Tool on its website that is a spreadsheet that can be used to evaluate a green project. To utilize this, you must join NAHB. Again the cost of membership is tax deductible.


In green projects, certain tasks will be contracted out. You need to educate sub-contractors about the requirements of a green project. You may want to hire contractors based on their experience with green construction.
To reduce the frustration of a homeowner, you might encourage sub-contractors to leave a business card for the homeowners. This would enable your customer to speak with the individuals, who were directly responsible for that piece of work. The caveat that must be mandated is that you must be aware of any and all complaints.

Contact Your Insurance Agent

Your insurance agent deals with liability claims routinely. He or she has a reservoir of information and contacts that could help you avoid litigation. Ask your agent for any suggestions that she or he might have. Become knowledgeable about green construction, so you don’t leave your business exposed to high risk.

For all your Contractors Insurance needs

How to Avoid Bogus Workers Compensation Claims

How to Avoid Bogus Workers Compensation Claims
Facts On Illegal Claims

False workers compensation claims can have a harmful effect on residential building companies. The numbers of fake claims vary from 1% to 20%, so it is not easy to obtain a solid picture of how widespread the phony claims are, and what they cost business owners.

Reasons For False Claims

The reasons for false claims stem from many dissimilar motives and circumstances:

Working Environment:

A company needs to show that it appreciates its workers. When an organization fails to sustain a high level of morale, a discontent worker may go as far as creating an accident on the job to collect workers compensation. Businesses need not only to correct errors, but also they need to praise employees for well done work. Happy workers are less likely to file worker compensation claims.

Low Wages:

Many owners want the most out of a worker at the least amount of money. Low salaries that are below the norm can create a workforce that cannot meet their personal obligations. Filing a phony workmen comp claim can allow an employee to get income and have more time to make undeclared money; by creating a home repair service, where the claimant adds those funds with his workers comp.

Hazardous Work Circumstances:

Safety is not always the number one concern of some building contractors. Workers, who are faced with laboring at an unsafe building site, may be tempted to file for workmen comp. In a hazardous situation, it would not be hard for an employee to fake an injury. The owner’s disregard for the well-being of his crew could easily motivate a worker to file the claim to gain the time to locate a job with a much safer working conditions.

Ripping Off The Owner:

Once and a while, an employee wants to rip off the owner of a company. Sometimes this worker is spurred on to do this by egotism or just plain spite. One way to take advantage of the boss is sometimes by filing a false workers com claim. Spotting individuals like this can be done through effective interviewing or by listening to the worker and what others have to say about this person.


Some workers compensation scam artists, who include phony medical clinics and shady lawyers, hire runners to recruit employees to file bogus claims. Stress to workers that getting involved in this type of scam can entail serious fines and jail time. Encourage staff members to report any approaches by runners to management.

Battling Bogus Claims

  • Require employees to inform management directly after about any accidents on the job.
  • Create a rapport with your workers. Use your conversations to gauge what type of ethics that a person has and would that individual be likely to file a phony workers comp claim.
  • Teach your staff the techniques that will keep them out of harm’s way. Make sure that the persons in a restricted zone are there to complete tasks.
  • Utilize monitors to identify and rectify hazardous conditions. Monitors should also reprimand any employee, who displays unsafe behavior on the job. Foremen are automatically responsible for worker safety, and should not be the designated monitor.
  • The monitor needs to be well-informed about the work to be evaluated for safety issues. This individual should have a lighter schedule, so he can effectively apply the safety precautions. By OSHA regulations, the monitor cannot supervise more than six workers. Monitors can gather and give information about a witnessed accident.
  • Check on the backgrounds in-depth of each new worker. Ascertain whether a recent employee has been convicted of fraud.
  • Let your employees know how invalid workers compensation claims by co-workers can put their jobs at risk and add to their duties.
  • Offer monetary rewards to workers, who identify an individual that has filed a false worker comp claim.
  • Check with your insurance company to find out if they employ insurance investigators to validate claims. These investigators monitor the claimant’s behavior. If the “injured” worker is performing hobbies that require an individual to be in fit physical condition or doing odd jobs that are strenuous, the investigator reports that to the insurance company. These types of reports usually result in the immediate termination of the claim.
  • Make sure that your insurance company utilizes medical staff and procedures to determine return to work status. If you feel one of your workers may be ready to return to work, notify the insurance company’s medical staff.
  • Company owners are required by most state to carry workers compensation insurance. Do not embark on a project without workers compensation insurance. This coverage protects your business as well as your workers from liability. Without workers comp, your exposure to risk is dramatically expanded, and that places your personal assets in jeopardy.
Workers compensation claims will increase an employer’s insurance costs. However, do not make the mistake of questioning the validity of a claim when honest accidents and injuries are part of the building trade.

For all your Contractors Insurance needs

Make Sure Your Insurance Coverage Meets the Contract Requirements

Before Bidding

To bid on a project, you need to have accurate information on what insurance you have, what your premiums cover and the overall cost. To get an accurate picture, contact your insurance agent. That person can give you an exact statement of your insurance costs. He or she can also estimate the cost of additional insurance, required by the project, and whether or not you are eligible for it.

Before you make a bid, you should factor in these insurance costs. In a soft construction market, many builders low ball a bid. This strategy can force owners of the company to use inferior materials to make up the difference or to drastically reduce their profit margins.

What do Your Insurances Cover

General Liability

  • Bodily Injury on the Job
  • Property Damage
  • Advertising-Making False Claims About Your Services
  • Personal Injury-damage caused to another person or business

Workers Compensation Insurance

  • Medical Care including Dental, Prescription and Rehabilitation
  • Temporary Disability-Pays 2/3 of worker’s salary while recovering
  • Permanent Disability-Life Long Injury That Impairs Ability to Get Employment
  • Vocational Rehabilitation-When Company Cannot Rehire the Individual
  • Repeated Injury-Carpal Tunnel caused by Repeated Hand Motions
  • Transportation-Travel to Doctors or Medical Facilities
  • Death Benefit-Paid to Heirs of an Employee, Who Dies on the Job
  • Mental Illness-Even Without Injuries, Most States Pay for Mental Illness Due to on the Job Unusually High Stress Levels or Abuse.

Contract Requirements

Besides the usual insurance most builders possess, buyers may require other types of coverage. It’s important to understand what liabilities these added policies would cover. Your insurance broker will be able to determine, whether or not the new insurance would overlap on your current coverage.
Furthermore, how much these new insurances would cost, given any innate risks: proximity to a floodplain, in a coastal area or vulnerable to severe weather would increase the expense of this premium. All these expenditures must be included in any bids that you make.

Additional Insured Endorsement for Completed Work

Many insurance companies will not insure the builder or subcontractors for work after the build is completed. If this type of insurance is required in a contract, the construction company owner needs to negotiate with the homeowner to be freed from that requirement of the project. If builders agree to pay for completed work damages out of their own pockets, their company could be damaged by financing completed work claims.


Insurance is priced based on the level of risk involved-the greater the risk-the higher the premiums. However, risk management is an integral part of good business practices. To make certain that your company isn’t overexposed on a project, it is important to have a construction lawyer evaluate the contract’s content.


Subcontractors need to carry their own liability insurance. This makes good sense for the builder, subcontractor and homeowner. A claim of defective work, which was done by a subcontractor, will be paid for by the subcontractor’s insurance-not through the builder’s coverage.
Making the subcontractor’s insurer responsible for defective work enables the buyer and a subcontractor to discuss how the work could be righted without making a claim. The claim to a subcontractor’s insurance signals the builder to troubleshoot other work that the client might view as below standards.

Homeowners Help

If you are doing residential construction, some homeowners want to participate in the building of their structure. It is not a good idea for the builder to allow homeowners to take on tasks at a work site for a number of valid reasons.
First, the homeowner might produce work that is substandard and doesn’t meet the code and contract requirements. That would force the builder to redo the work. This defective work can endanger the work quality of professionals in the builder’s employ. The homeowner’s sweat equity may lengthen the project’s timeline at the builder’s expense.
Second, if the homeowner is injured on the job, the insurance may not cover the costs incurred. If the injury entails extensive medical expenses, again the builder may be liable for the costs not covered by medical insurance.

Client Risk

To reduce liability from the client’s presence at the site, limit or eliminate the client’s access to the work site during the erection of a commercial or residential building. The customers, even if not actually involved in the construction, can be injured by falling materials, walking on uncompleted flooring or being near other unfinished projects.

Builder’s Risk Insurance

Builder’s risk insurance covers all costs that were not caused by the builder’s negligence during the erection of a dwelling. That means that the homeowner is liable for damages outside of the contractor’s defective work. The client’s liability would include fires, hurricanes, tornadoes or any type of activity that resulted from something other than substandard work produced by the builder.
If builder’s risk insurance is required for a contract, the construction owner can suggest that the homeowners add endorsements to their current insurances or obtain insurance with builder’s risk as part of its coverage.

Insurance Agents Provide Invaluable Information

A knowledgeable agent can reduce your risk and save you money. Diminished risks and costs are crucial to a successful business. If you want to lower the cost of doing business, then you need to speak to one of the experts at Custom Contracting Insurance. Let it be your resolution to find out more about your insurance and how to effectively purchase coverage that will make your projects less risky and more profitable.

For all your Contractors Insurance needs