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How Credit Score Influences General Contractor Insurance Premiums

Whether you’re remodeling a kitchen or overseeing the construction of a new home, many things could potentially go awry during the process. For example, faulty plumbing may lead to water leaks and property damage. Or an employee might get into an accident and injure themselves while working. This is why insurance is necessary as a general contractor. 

Much like how contractors need to customize their work for clients, insurance is a tailored policy that includes different types of coverages to protect the business from specific risks associated with the work.

What do general contractor policies cover? 

A good general contractor insurance policy usually has various coverages to keep the business protected against different problems, including but not necessarily limited to property damage and lawsuits. Of course, the type of coverage you pick must depend on your company’s specific needs. But an excellent place to begin is with a business owner’s policy or BPO, as it bundles the essential policies and is much less expensive than purchasing them individually.

  • General liability. The foundation of insurance policies for business, general liability covers injuries sustained accidentally to those outside the organization and property damage. For example, if a tree service business is responsible for damage to the roof of a client because of a large branch falling onto it, business liability will cover it.
  • Commercial property. Commercial property policies cover the location of the business and equipment damaged due to problems like a natural disaster. They include owned and leased assets, from computers to furniture.
  • Business interruption. If operations need to be temporarily suspended, this insurance policy can replace any lost income.   

Does credit score impact insurance premiums?

Credit score is undoubtedly an influential factor when concerning financial factors, such as obtaining mortgages and loans, as well as interest rates. Another aspect that it affects is insurance premiums. And lower scores generally mean higher prices for coverages. Therefore, many insurance providers factor in credit scores to generate an insurance score that’s credit-based to determine premium prices.   

The insurance score focuses on specific credit history factors to gain better insight into how they manage risk. Some of the factors include the following:

  • History of payments
  • Debt amount
  • Credit history length
  • Recent credit applications
  • Credit types possessed

In specific states, insurance providers may be limited in their use of credit-based insurance and their extent. While influential, they’re also only a single factor in the process behind determining the prices for your premiums. 

Improve your score

The best way to improve the score for credit-based insurance is to work on your real credit score. Healthier credit scores will lead to cheaper premiums and help you save more money. In other words, improving your score can be incredibly helpful for your present and future.

Conclusion

Every general contractor needs to be covered by the right insurance policies. By working on your credit score, you’ll be able to lower your premiums significantly, making it possible to obtain the coverage you require to operate safely.

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