What You Need to Know

As a contractor in the Midwest, you know the challenges that come with the job—unpredictable weather, long winters, and the need for solid coverage to protect your business and employees. The risks can be significant whether you’re working on a commercial build or a smaller residential project.

At Central Insurance, we understand these challenges and are here to help. In this article, Shawn Gentry—Central’s loss control construction specialist—offers valuable advice on the specific insurance policies every Midwest contractor needs to protect their business.

Keep reading to learn how to navigate the complexities of construction insurance and keep your Midwest business safe.

3 Key Risks Midwest Contractors Face

#1: Severe Weather & Low Temperatures

One of the most significant challenges for contractors in the Midwest is the weather. Winters are harsh, with freezing temperatures that can cause a range of issues on construction sites. One of the most common risks is frozen pipes, which often go unnoticed but can cause significant damage.

“Frozen pipes within construction projects are one of the biggest losses we see.”
—Shawn Gentry, Loss Control Construction Specialist, Central Insurance

In addition to frozen pipes, the region’s unpredictable weather means contractors need to be prepared for everything from severe storms to extreme temperature fluctuations. Delays to timelines caused by weather can lead to additional costs and project overruns, making weather-related risks an ongoing concern.

#2: Legal and Liability Risks

In recent years, the construction industry has seen an alarming rise in “nuclear verdicts,” which are lawsuits resulting in extremely high punitive damages. These verdicts are often linked to serious injuries or fatalities on job sites, and can have a massive financial impact.

With lawsuits becoming more costly, staying on top of legal compliance and ensuring your safety practices are airtight is essential. Discover how a dedicated loss control specialist could help you assess hazards on your site.

#3: Labor Shortage and the Aging Workforce

One of the growing concerns in the construction industry is the ongoing labor shortage. This issue has led to an aging workforce with vast amounts of knowledge but also a shortage of younger, skilled workers. The lack of experienced labor can increase risk due to a potential skills gap.

Though eager, emerging workers often lack the hands-on experience to manage complex projects safely. Gentry explains that the challenge is finding skilled subcontractors with the right training and insurance coverage to minimize these risks.

 “With the labor shortage in construction, it’s getting tougher to find qualified workers,” Gentry says. “Larger contractors are sometimes turning down work because they can’t find the right people.”

Learn More: Why Is the Labor Shortage in Construction Driving Up Insurance Risks?

This combination of an aging workforce and an inexperienced younger generation increases the risk of accidents, inefficiencies, and delays. Contractors must invest in training and education programs to equip their teams to handle the demands of modern construction projects.

Essential Insurance Policies for Midwest Contractors

Having the right insurance in place is essential for managing these risks effectively. The right policies provide coverage to protect your business, employees, and assets. 

Here are the key policies you should consider according to Gentry:

#1: General Liability Insurance

One of the most important types of insurance for contractors, general liability insurance can protect your business from third-party claims related to bodily injury or property damage caused by your operations. 

Whether it’s a slip-and-fall accident on a job site or damage to a neighboring property, this insurance may provide financial protection from legal costs and settlements. In the Midwest, where weather and job site conditions can be unpredictable, general liability coverage ensures you’re covered for unexpected incidents that may occur during construction.

Learn More: What Damages Are Covered by a Commercial General Liability Policy?

#2: Workers’ Compensation Insurance

Construction is a high-risk industry, and workers are vulnerable to accidents, injuries, or illnesses. Workers’ Compensation insurance may cover medical expenses and lost wages for employees who are injured while working. 

Learn More: Worker’s Compensation Insurance: What Large Construction
Companies Need to Know

This coverage could protect your workers and your business from legal action. Many states in the Midwest require contractors to carry Workers’ Compensation insurance by law, and failure to comply could result in penalties, fines, or the inability to work on certain projects.

#3: Builder’s Risk Insurance

Builder’s Risk insurance is crucial for protecting the structure being built while under construction. This policy may cover damages during the construction phase, including fire, theft, vandalism, and severe weather, such as storms or tornadoes, which are common in the Midwest.

As the property owner or contractor, you could face significant financial loss if a major incident happens on your job site without this coverage. Builder’s Risk ensures you won’t be left footing the bill for costly damages during construction.

#4: Commercial Auto Insurance

Commercial auto insurance is necessary for contractors who use vehicles to transport equipment, workers, or materials to job sites. This insurance may cover accidents involving company vehicles, including damage to other vehicles or property and injuries sustained by employees.

Commercial auto insurance is even more important for Midwest contractors due to harsh winter conditions that increase the risk of accidents. Whether a snowstorm damages your vehicle or your driver causes an accident, commercial auto insurance can protect your business from unexpected financial liabilities.

#5: Umbrella Insurance

Umbrella insurance can provide an extra layer of coverage on top of your existing policies, offering broader protection if you exceed your liability limits. For instance, if your general liability insurance coverage doesn’t fully cover the costs of a lawsuit or claim, umbrella insurance could help fill the gap. 

Remember: In the Midwest, where “nuclear verdicts” — lawsuits that result in enormous settlements — are becoming more common, umbrella insurance can offer peace of mind that your business won’t be financially devastated by a catastrophic claim. It’s an affordable way to boost your protection without worrying about out-of-pocket expenses when your primary policy limits are exhausted.

#6: Pollution Liability Insurance

While not always required, pollution liability insurance is a key consideration for contractors in the construction, demolition, and excavation industries. This insurance can protect your business from claims related to pollution or environmental damage that may occur due to your work, including spills, contamination, or the release of hazardous substances into the environment.

Keep in Mind: In the Midwest, where manufacturing, construction, and energy industries are prominent, pollution liability insurance can help protect against the high costs of cleanup, legal fees, and damages. Even if your work doesn’t directly involve hazardous materials, accidents can happen, and having this coverage can shield you from unexpected costs related to environmental risks.

These insurance types help contractors safeguard their businesses, employees, and projects from financial loss.

The Importance of Loss Control and Risk Management

One of the best ways to mitigate risks and secure affordable insurance rates is by implementing strong loss control and risk management strategies. Contractors who invest in loss control programs can reduce the likelihood of claims, improve safety on job sites, and ultimately lower their insurance premiums.

As Gentry explains, “If you don’t have effective loss control, it can prevent you from being insured.” 

Effective loss control measures can include routine safety training, thorough documentation of worksite conditions, and regular maintenance checks to ensure everything is in working order.

Learn More: Loss Control Tips for Construction Companies

Contractors who demonstrate a solid safety record and a commitment to risk management are more likely to be viewed favorably by insurers, resulting in better coverage and more affordable rates.

Moreover, loss control is essential for maintaining a good reputation in the industry. Attracting top clients or workers will be harder if your company is known for frequent accidents or claims.

“If you’ve had a history of claims and your reputation with incidents is poor, you risk not being considered to be contracted for big jobs.”

Shawn Gentry, LC Construction Specialist at Central Insurance

A strong focus on safety and risk management protects your business and improves employee morale. In Gentry’s experience, workers are more likely to stay with a company that prioritizes their well-being, which leads to higher productivity and lower turnover rates. These efforts help combat a skilled labor shortage, as workers feel empowered to learn and grow with a company that cares for them.

Artificial intelligence is also becoming a powerful tool for loss control in construction. According to Gentry, “the better risk history is proven, the better risk management program you have, and the more controls you allocate towards risk, the better insurance rates should be.”

AI can help identify and manage risks on construction sites by analyzing data from past incidents, monitoring site conditions in real-time, and providing predictive analytics. This technology enables contractors to spot potential hazards before they become costly problems, ultimately enhancing safety and reducing overall risk exposure. 

By incorporating AI into their loss control efforts, contractors can improve decision-making and mitigate risks more effectively.

Learn More: Loss Control Applications of Artificial Intelligence on Construction Sites

Partnering with the Right Insurance Provider

Choosing the right insurance provider is as important as choosing the right policies. Contractors should work with insurance providers who understand the unique challenges of the construction industry, especially those specific to the Midwest. A strong partnership with an insurance company that values customer relationships can make all the difference.

Learn More about Central’s Construction Expertise:

Gentry highlights Central Insurance’s customer-focused approach: “Central believes it’s a pleasure you’re with us. We want to help you out.”

Working with an insurer who values relationship-building, listens to feedback, and provides tailored coverage can help you navigate the complexities of construction insurance and ensure you have the protection you need to succeed.

Get started by connecting with an independent agent below.