The Most Common Insurance Mistakes Contractors Make at the Start of the Year
Mr. Hoots breaks down the small oversights that turn into big insurance problems once work picks up.
Hoo’s there? Mr. Hoots here, watching the calendar flip and the same mistakes roll in year after year. The start of a new year brings new jobs, new contracts, and new opportunities. It also brings some of the most expensive insurance errors contractors make, usually without realizing it until a claim or audit shows up.
Let’s walk through the most common start-of-year insurance mistakes and how to avoid them before they cost you time, money, or contracts.
Assuming last year’s policy still fits
One of the biggest mistakes contractors make is assuming nothing needs to change just because the policy renewed. In reality, businesses evolve quickly. You may be doing different types of work, handling larger jobs, or using more equipment than you were a year ago.
If your coverage did not change as your business grew, gaps are likely already there.
Underestimating payroll and labor changes
Payroll is often guessed at the beginning of the year and forgotten until audit time. Problems usually come from:
- Overtime increasing during busy seasons
- New hires not reflected in estimates
- Owners incorrectly included or excluded
- Subcontractors without proper certificates of insurance
When payroll does not match reality, audits become expensive very fast.
Using personal auto for work vehicles
This one shows up constantly. Contractors add a truck or trailer and assume their personal auto policy will handle it. Most personal auto policies exclude business use entirely.
If the vehicle is used for jobs, hauling tools, or transporting materials, it needs to be on a commercial auto policy.
Forgetting to update tools and equipment values
Tools wear out, get replaced, or get upgraded. Many contractors forget to update values on their tools and equipment coverage. When theft or damage happens, outdated limits can leave you short on replacement costs.
If your gear is worth more today than it was last year, your policy should reflect that.
Letting subcontractor paperwork slide
Missing or expired certificates of insurance are one of the biggest audit triggers. If a subcontractor gets hurt or causes damage and their coverage is not verified, that exposure can fall back on you.
Subcontractor paperwork is not optional. It protects your rates, your workers’ comp audit, and your liability coverage.
Not reviewing contract insurance requirements
New year, new contracts. Many clients update insurance requirements annually. Common surprises include:
- Higher liability limits
- Additional Insured wording changes
- Waiver of Subrogation requests
- Primary and Non-Contributory language
If your policy does not match the contract, you may not be allowed on the job site.
Coverage mistakes to avoid starting the year
- Waiting for a claim to review coverage
- Assuming small changes do not matter
- Skipping coverage reviews to save time
- Relying on memory instead of documentation
- Ignoring renewal questions from your agent
These shortcuts usually cost more than they save.
Quick ways to avoid these problems
- Review coverage any time work changes
- Track payroll and subcontractors monthly
- Update vehicles and equipment immediately
- Keep certificates of insurance organized
- Ask questions before signing new contracts
A little organization early in the year goes a long way.
Mr. Hoots’ Bottom Line
Most insurance problems contractors face are preventable. The start of the year is the best time to catch small issues before they turn into denied claims, failed audits, or lost contracts.
Protect the work. Protect the wallet. Because fixing insurance mistakes after they happen is always more expensive.