Rates gone up on your liability insurance? Welcome to the club. Do they always go up? No, and this article's goal is to give you some insight on how to purchase your insurance and keep the cost down.

This article has been compiled, in part, from advice given by Andrea Craighead, owner of ComSure Direct Insurance Services in Ramona, CA. We have gotten to know Andrea as a "make it happen" person and everything in this article is based on that philosophy. Quite often her contractor clients find that their liability insurance premiums are less this year than last. That's the kind of insurance broker you want to find.

And you may want to work through an insurance broker rather than an agent. Agents can be restricted to the offerings of their particular company. Brokers have the ability to go into the marketplace and see what's available and at what rates. You want to find a broker who specializes in the construction business and deals with multiple carriers. Start the purchase process at least 90 days before your old policy is due to expire.

If you have been in business for at least three years, request a loss history in writing from your existing agent or broker. If you have been in business more than five years, order your history for the last five years. If there have been no losses, the report will say no losses reported or no claims reported. If you have filed a loss, it will list the claim activity. You need to show your history to shop for a new policy.

When you ask for it, your agent or broker must get you a copy of your loss history within 10 business days of your request. (This is by law in most if not all states.) The history will come directly from the carrier. Be sure and ask for both a faxed copy and a mailed copy.

When you request your loss history, your current agent or broker will know you're shopping your insurance. There's a good chance they will stall to keep you from shopping other carriers. In most cases, there is a limit to the broker fee they can charge so it is to their benefit to sell you a policy with the highest possible premium from the carrier.

If you have not received the report within five-six business days, call and ask. Be proactive, don't depend on the agent or broker to call you.

If after 10 business days you still don't have the loss history, call the carrier direct. The carrier information is found on your original policy. The carrier really doesn't want to deal with you directly, so they'll probably be a little upset that your agent/broker didn't help you as they promised.

Be prepared when you start shopping. Have your policy coverages on hand. You can find them in the original policy you received from your current carrier. Look for the "Declarations Sheet". If you can't locate it, look for a certificate of insurance.

Know your operations! You'll be asked for your estimated gross receipts, employee payroll (excluding clerical), and sub-contractor costs. If you aren't sure, use the past 12 months as an estimate. Don't underestimate your potential sales too much, you will end up paying the higher premium when you are audited.

Be prepared for either a phone or a book (in house) audit. You do not have control over which the carrier will ask for. A good broker will help you get prepared so there are no problems. If the carrier asks to see your books, ask for a phone audit if possible as you want to avoid a book audit (in house).

What do you do if the insurance company insists on an in-house audit? Be as organized as possible. The carrier's auditor will provide a list of requests prior to the audit. Do your best on all the items on the list, even if you feel they aren't important. This isn't the time to be rebellious. You'll do yourself more harm than good.

There are things you can do to help control your liability insurance premiums.

If you are a general contractor, don't do roofing and foundations. Those are two trades the insurance companies do not want general contractors doing. Hire a specialist to do these jobs.

When you hire a sub, be sure they have a current license, bond, and insurance of their own. Most important, ask your sub to name you as additional insured on their policy. A "Hold Harmless Agreement" also needs to be signed between you and your sub-contractor, along with the sub-contractor agreement.

The AGC (Association of General Contractors) has a number of contract forms that may be purchased for your use - the following language is an example of hold harmless language. (You can go to the AGC website at: http://www.agc.org)

HOLD HARMLESS LANGUAGE

All of the work performed at the site of construction or in preparing or delivering materials or equipment to the site shall be at the risk of subcontractor exclusively. Subcontractor shall indemnify and hold contractor harmless from any claim, liability, loss, damage, cost, expense, including reasonable attorney's fees, award, fine or judgment with respect to or arising out of the work, including without limitation, any such claims, liability, loss, damage, cost, expense, award, fine or judgment arising by reason of death or bodily injury to persons, injury to property, defects in workmanship or materials, or design defects (if the design originated with subcontractor), or arising by reason of contractor's alleged or actual negligent act or omission, regardless of whether such act or omission is active or passive. Subcontractor shall not be obligated to indemnify contractor with respect to the sole negligence or willful misconduct of contractor, its agents or servants or other subcontractors who are directly responsible to contractor.

This language is not bullet proof, it is simply a reference point. Have your attorney review and possibly re-write this language for your contract with your subs. It's best to have your attorney check your contract language at least once each year and notify your carrier (through your broker/agent) that you have done so. Make sure that your attorney understands that s/he is responsible for any errors or omissions to your contract language if they do not have the correct or complete language in your contracts.

All insurance carriers are now requiring the hold harmless agreement with your sub-contractors. If you don't have it, the carrier may penalize you.

Don't let your sub start a job until all of these items are taken care. Remember that if you are a general contractor, you are taking 100% responsibility for the job under your license, and you need to protect yourself legally.

When you ask for a liability quote from your broker, it should come back in about two weeks (10 business days). If it doesn't, ask what carriers they have contacted and what the results are. If they won't give you the info, it is time to move on to a new broker immediately. This is why you want to get started shopping for a new policy at least 90 days before your present policy expires.

We have had our coaching clients tell us that their broker or agent wouldn't even submit an application for renewal or new insurance this far in advance of the renewal date. The broker or agent states that "The underwriters (for the carrier) won't give me a quote this far out."

My response to that agent or broker would be, "Fine, tell the carrier we will take our business elsewhere." The underwriter and the broker/agent know that if they wait until the last minute to give you a quote, you will not have time to go elsewhere. They also know that by law, you can't work without an insurance policy in effect. You do not want to let your present policy lapse, so the closer you get to the expiration date, the fewer options you have. Don't play that game.

To find out if your broker/agent is working for you, ask yourself:

1. Will they provide you with the proof of loss history?
2. Are they willing to tell you what carriers they are working with?
3. Did they get back to you within the 10 days?
4. Are you calling them more than they call you with status of your quote?

Only go to one broker at a time, not multiple brokers. Each broker may put different things on your application for the new insurance and that will red flag you with the underwriter if they get more than one application for your company.

Remember, it helps when your insurance broker/agent is personable and easy to deal with. But, regardless of their personality, this is business. If they don't perform to your time schedule and get you the insurance you need, move on and find someone who will.

Two last items on your new policy. Don't necessarily go with the lowest quote. This can be dangerous. Insurance brokers/agents can and will under-quote a policy just to get your business, like the low balling general contractors in our business. Then when you are audited the following year, you will have to make up the premium difference and this can get very expensive.

By the same token, don't overestimate the amount of business you will do in the coming year. This will raise your premiums significantly and tie up your money until the next audit.

The way to prevent this is to be sure both carriers are quoting on the exact same coverage.

By Michael Stone Markup and Profit Michael Stone has more than three decades of experience in the building and remodeling industry. He can be reached by e-mail at michael@markupandprofit.com, by phone at 1-888-944-0044, or on the web at www.markupandprofit.com.