Insurance Mistakes That Can Cripple a New Contracting Business
The Mistakes You Don’t See Until It’s Too Late
If you’re a new contractor, you’ve probably been told to “just get a policy and get started.” But no one tells you that the wrong insurance setup today can quietly lock you into high costs and missed opportunities for years.
These are the seven mistakes I see over and over — and how to avoid them.
1. No Comprehensive Plan
Myth: “My personal and business insurance don’t affect each other.”
Truth: If you cause a car accident and get sued personally, your business is fair game. Or vice versa.
Fix: Coordinate your coverage. Think of your business and personal policies as one connected plan — or risk one lawsuit taking out both.
2. Over-Insuring Small Stuff, Under-Insuring What Matters
Startups often obsess over insuring tools, trailers, or cracked glass — while cutting liability coverage to the bone.
Fix: Self-insure the stuff you can afford to lose. Buy real protection for lawsuits, injuries, and major losses. Those are what take down new businesses.
3. No Long-Term Insurance Strategy
Mistake: You grab the cheapest policy to get started, switch carriers yearly, or carry weak limits.
Problem: Insurers track your entire history. Weak coverage, claim activity, or instability means you’ll pay more later — or get blocked entirely.
Fix: Think 2–3 years ahead. Build a clean record now and unlock better pricing later.
4. Assuming “It Won’t Happen to Me”
Myth: “I’m just getting started — big problems won’t hit yet.”
Reality: One injury. One fall. One property damage claim. That’s all it takes.
Fix: Get real liability protection from day one — not just enough to tick a GC’s box.
5. Bad Books = Big Trouble
This is the #1 way new contractors get wrecked by insurance:
No COIs from subcontractors? You get charged for their payroll.
Sloppy payroll tracking? Big corrections at audit.
Inaccurate receipts? More adjustments.
Result: A surprise bill that wipes out your first-year profit — or cancels your policy. If that happens, other companies won’t touch you.
Fix: Hire a bookkeeper. Track payroll, receipts, and subs cleanly. It’s worth every dollar.
6. Focusing Only on Price
Myth: “Just give me the cheapest policy that gets me on the job.”
Mistake: Some insurers make audits and claims easy. Others nickel-and-dime or delay for months.
Fix: Choose based on total value — not just price. A $2,000 policy that delays your cert can cost you a $20,000 job.
7. Not Knowing Enough to Spot a Bad Agent
Myth: “I’ll let my agent handle everything.”
Truth: If you don’t understand how audits work, what coverages matter, or how subs affect your pricing — you won’t even know when your agent is selling you short.
Fix: You don’t need to become an expert. But you do need to understand enough to have a real conversation — and see when someone’s not doing their job.
Quick Win: Ask Yourself These 7 Questions
Are my business and personal policies part of one plan?
Am I insuring lawsuits — or just my tools?
Will my choices today help me qualify for better pricing in 3 years?
Do I have umbrella coverage in place yet?
Are my books audit-proof?
Do I know which insurance companies actually support contractors?
Can I tell if my agent is guiding me — or just selling to me?
Why It Matters
Insurance mistakes don’t show up on day one. They show up when you try to grow, when audits hit, or when a real claim lands.
That’s why I review startup policies with fresh eyes — to spot the traps early and build something strong.
Bottom line: The decisions you make in year one will either protect your business… or cost you every step of the way.
