Contractor Insurance Secrets: How to Cut Costs in 2026

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ℹ ABOUT THIS EPISODE

Your insurance premiums don't have to feel like surprise change orders. Wade Carpenter (CPA) and Stephen Brown (bonding/insurance expert) reveal actionable strategies to control your construction business insurance costs in 2026. 

Learn what's driving premium increases, common contractor mistakes that spike rates, and proven tactics to get better coverage for less. 

From vehicle insurance to workers' comp, discover how to work with your agent proactively instead of reactively to protect your cash flow and profitability.

⌚️ Key moments in this episode:

• 00:00 Why Premiums Keep Rising
• 00:22 What Drives Pricing
• 02:42 Insurance Is Not A Commodity
• 04:50 Hidden Premium Triggers
• 08:46 Claims History And Hiring
• 11:17 Best Contractors Win Rates
• 13:06 Proactive Service Mindset
• 16:19 Hard Versus Soft Markets
• 20:19 Year Round Cost Control
• 23:41 Key Takeaways And Wrap

The Contractor Profit Blueprint is a complete guide that breaks down exactly how to identify where your money's going and start keeping more of it. This isn't theory. It's the same framework I use with contractors I work with every single day.

Head to profitfirstconstruction.com/blueprint to download your free copy. 

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Find all episodes and related links at ContractorSuccessForum.com.

Join the conversation on our LinkedIn page: https://www.linkedin.com/company/CarpenterCPAs
   
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Wade Carpenter, CPA, CGMA | CarpenterCPAs.com
Stephen Brown, Bonding Expert | SuretyAnswers.com

Transcript

[00:00:00] 

Wade Carpenter: For a lot of contractors, insurance premiums feel like a mystery change order. You didn't ask for it, you didn't approve it, but somehow the price just keeps going up. Today we're talking about how contractors can actually control insurance costs heading into 2026. 

This is the Contractor Success Forum. I'm Wade Carpenter with Carpenter & Company CPAs alongside Stephen Brown with McDaniel Whitley Bonding and Insurance. Stephen, what is driving prices? Is it claims history? The overall market? Are there things contractors are doing in their business that increase risk without even knowing it?

Stephen Brown: Yes. The answer to that is yes. There are things contractors are doing to increase risk without even knowing it. So that's a big driver in the price. You look at the big picture, remember the whole concept of insurance is to take a risk and spread it out over a large area with a lot of different customers.

If you have certain areas like hurricane or tornado prone parts of the country, you've spread that risk out. So if you don't spread that [00:01:00] risk out properly, that's how insurance companies manage risk and make money. Also, it has to do with the pricing that they give you for your insurance.

And as contractors, the main pricing I've always looked at in the past, because it's so important to plugging in the accurate data when you're bidding a job, is your general liability and your workers' comp rates, because they're based on payrolls or sales, contract amounts.

This is something that you always look for to make sure you get those numbers as fast as you can plugged into your estimating system. And also that it's the net rate, not the gross rate. Because the net rate is after the experience mod and premium credits and everything. But it is a rate per classification.

So that's one thing. Before I put our listeners to sleep with talks of insurance rates and classifications in payroll. Let's just forget about that. Let's talk about you as a contractor, and how you need to [00:02:00] think about insurance.

Wade Carpenter: Yeah. Well, I'm glad you brought some of that stuff up because for a contractor, if they go bidding a job, they're obviously gonna look at, okay, here's the costs that go into it. Here's the labor and materials, or subs, all this equipment, whatever it takes to get it there.

But they also need to look at what is the risk for doing this job? In a way, this is the way that insurance companies are looking at it. What is the risk for us, bidding this job for you. 

Stephen Brown: Yeah, it absolutely makes risk and it absolutely makes sense, Wade. Just to say, a Contractor can't be expected to know everything about accounting and the law. They can't expect to know everything they need from an insurance and a bonding standpoint.

So that's why McDaniel Whitley we specialize in contractors. That's all we do is contractors, and that's all we've ever done. I wanted to read a brief comment made by someone that Richard, my office and I follow a guy named Nathan Shanks. He's with [00:03:00] Shepherd Insurance in Louisville. He really hit home on a point for Richard and for me, and that I think our contractors need to listen to when they're thinking about insurance.

And then we'll get in a little bit about what the pricing's doing and how your agent should be handling your account to get the best pricing and the best coverages.

Nathan says, "I've always found it interesting how insurance gets shopped. Most business owners don't rebid their CPA every year. They don't ask their attorney to match another fees firm. They don't assume all professional advice is the same. But with insurance, the first question is almost always price. Here's the thing most people don't realize. Agencies don't set insurance pricing. Agencies are service providers. Carriers set pricing. What agencies actually influence is structure, coverage terms, deductibles, limits, exclusions, claims support, risk strategy, the stuff that only matters when it really matters. [00:04:00] Insurance feels like a commodity because the consequences of getting it wrong are delayed until they aren't. It's very important to have an agency that you can be confident, has the best carrier appointments for your company's industry, and has your best interest in mind. That shift in mindset changes everything."

What do you think of that comment?

Wade Carpenter: I guess from a CPA perspective we obviously don't like those that shop us either, but we also appreciate those that listen to what we advise. And, sometimes if a Contractor does not realize that you got a bond agent that's in your corner looking for ways to help you keep those prices down, they're out there actively shopping it.

I think that's what people don't understand the service behind the insurance game is, and finding a great agent that really knows their market and shopping it and advising their contractors. Because I do think there's a lot of things that sometimes the Contractor behavior is [00:05:00] driving some of those things that if I can put it back on you, what would be some of the most common things contractors do that make their insurance premiums more expensive without realizing it.

Stephen Brown: There's a laundry list of things. First and foremost vehicle insurance has gotten to be really expensive in some states. It's just absolutely insanely high, and you've gotta pass those costs on. So the drivers that you're hiring send me some bad MVRs motor vehicle MVR reports, and I'm might get one or two to slide in every now and then.

But you keep asking an underwriter to add a driver with a bad driving record and they're gonna dry up and shut down their pricing. They're not gonna be competitive and they're gonna try to make up that pricing in other lines of business. They can't just automatically say, we're not comfortable with auto so we're gonna raise it 20%.

No, they raise all the lines to show us a smaller increase. But you see the overall amount is more because [00:06:00] it's a total, not based on any one line of insurance. So they're doing that. They're also getting in and doing projects that they're not telling their agent about. If I'm your bond agent and you do bonded work, I know what you're doing.

I don't think most contractors realize how much paperwork their agents have to do just to get them a quote. There's supplemental questionnaires, there's applications, there's all the information on the vehicles, the drivers, everything about the type of construction of your building, every detail of your vehicle and who's driving it, all your equipment.

Then you fill out a supplemental questionnaire that includes everything about the company, how long they've been done in business, a list of projects they've done when they were completed, jobs in that are currently in progress. And then what do you do? Mr. Contractor or miss Contractor to keep claims from getting worse.

What do you do? Do you have a subcontract agreement that has all the proper hold [00:07:00] harmless language and additional insured language in there that you make your subcontractor sign? Do you do that? Do you run MVRs? Do you have a drug flip free? Are you a drug free workplace? Do you have telematics in your vehicle?

What do you do to protect your equipment? Either at the job site or at night to keep it from being stolen. Do you have a lot of older equipment? Do you maintain your equipment? Also, do you have a full-time safety person? Do you do toolbox talks? I'm talking about workers' comp claims, someone getting hurt on the job.

So there's so much risk. Then if you're doing a job and your agent doesn't know what you're doing, how can they advise you on your risk? Are you covered? That's the first question I find out. They say, am I covered? And I'll say what are you doing?

Just like an attorney or CPA knowing the laws that are involved we know that an insurance policy is a [00:08:00] unilateral contract where they set the terms and conditions and you accept it. Okay? You accept it because you can't draft your own insurance contract and get someone to agree to it.

So you accept what they offer and you have to depend on your agent to make sure it's good. There's some real junk out there, Wade, and everybody knows that.

So what I loved about Nathan Shanks comment that he posted on LinkedIn is it's just a lot of common sense. You talked a little bit a while ago about what do I do as a Contractor for getting my insurance prices down? First of all, whoever you're with right now, what kind of service are you getting from 'em?

To me, that's number one. What kind of service, what kind of communication, what kind of confidence do you have in them that they're looking after you? Every time you call, anytime you need their help. How hard is it to get ahold of them? How hard of it is to get advice and counsel from them? And the second thing would be [00:09:00] price.

Okay. I've gone one, two insurance companies look at five years worth of losses going in the back. Used to be three years, it's five years now. And they used that in their rating equations to figure out your pricing. They're gonna look at the claims that you had. So you may have had two good years of no auto claims, but the third or the fourth year you had a million dollar claim. That's all spreads out.

Well, if insurance didn't spread out these huge claims that they have over a five year period for rating purposes, then they just simply cancel your insurance after having a million dollar claim.

I had a $2 million claim. Not only was insurance not canceled, but their relationship thrived because the company stood by them, protected the assets, did everything they were hired to do, were incredibly professional, and didn't raise their rates to the roof because of the claim they had.

They had spread the risk. They knew the risk. It was a one-time [00:10:00] deal. It wasn't a bunch of small claims. So if you wanna drive an agent crazy, keep sending over a picture of a driver's license on a text that you've already hired, and then let us run the MVR to tell you that you can't hire 'em 'cause we just don't have time for that.

And you as a Contractor should get a simple release form and run that MVR before they hire 'em. Road test them. Are they CDL licensed? Okay? And also look at 'em. Are they sober? Do they seem to be normal? Are they on drugs? They smell like pot.

Seriously, Wade, some people are so desperate for drivers. They're like, ah, I don't know. You don't have to be a rocket scientist to drive a dump truck. Yeah, you do if you don't want to kill people. You don't have to be a rocket science. You just have to be conscientious and can you teach that to someone who's not? The insurance companies don't want to, so you can see how they look at things maybe. 

Wade Carpenter: Yeah, it's kinda like a lot of [00:11:00] contractors that you walk on their job site, and see that, okay, one contract looks like they've got it completely in order and everything is in, versus another job site that you go on this Contractor and there's chaos and there's trash and debris everywhere, and they're just like all over the place.

But the way they run their jobs and all that stuff, it does play into the risk. I know you see a lot of contractors out there. What would you say are some of the biggest differences between those contractors that just get the best insurance rates versus the ones that struggle to get coverage at all?

Stephen Brown: They're the ones that especially if they use subcontractors, have very good controls over it. Don't assume your subcontractors have proper insurance coverage when you have a claim. People seem to forget that all the time.

If I was looking at the absolute best Contractor, I would preferably handle their bonds, have their financials, know what projects they're working on have visited those projects myself to see what they're doing, [00:12:00] understand the work that they're doing, and make sure that I'm advising them to absolutely put a perfect submission together when we're sending it out to market.

When I say a perfect submission, you got to realize perfection is hard to get. But with AI every company that handles contractors have lost control. They're gonna visit you before they give you a quote, most of them. If they visit you after the quote, then they're gonna reign a bunch of requirements down on you to implement immediately, or they're gonna cancel you.

So why not just get it right from the beginning and make everything smooth, do things right? Some companies have, and over the top requirements, there's certain customers that I know would not be a good fit for a certain company. There's other companies that insurance carriers that we represent whose loss control is so good that when they're looking at the premium pricing and they think of the loss control services they're getting from that carrier, they're like, [00:13:00] wow, that's worth every bit of a hundred thousand dollars a year to us. They can put a price right on that.

So you say to yourself, what does the best Contractor look like that gets the best prices? They have active risk control measures in place. They worry about it and they plan for it systematically, and they can prove it.

Wade Carpenter: You just led straight into my next question actually. That's where I see with contractors that you know from a CPA standpoint, the ones that see me once a year versus some that we're gonna do planning ahead. It's like we want to know what that taxes are versus, we show up in April and we're surprised by our tax bill.

I think insurance is something that if they only talk to their agent one time when their renewal time, during the year, that's just the wrong time to do it. And from an insurance company or insurance agency perspective. How do you feel like, the ones that actually come to you with your thoughts and questions and those kind of things?

Those that plan [00:14:00] ahead throughout the year versus, just surprising you at the year end. 

Stephen Brown: Yeah. At McDaniel Whitley, we just don't do business with people that aren't proactive. That's our goal, of course. Maybe not every customer, I remember once that old expression that you wanna keep as customers, people that pay their bills on time, 80% of the time and take your advice a hundred percent of the time. Or maybe I got that reversed, I don't know.

But when you think about the advice that you get, good advice or bad advice. I've always said, you get what you pay for in a CPA. You don't pay enough or you paying for bad advice. And what does that bad advice cost you? Same with insurance, am I covered? Oh, that's the kind of phone calls you get customers being very friendly and there's a claim. And then they went, what's this gonna do to my insurance? I don't know. But here's the thing too, when you're paying a lot of money for your insurance, you should be getting more, you should be getting [00:15:00] better service from your agency and a better service from your company. Not only in claims, but also in loss control, audit support, everything an insurance company can provide.

I had a customer who was working around a hotel. That night the hotel caught on fire and burnt down. The owner pursued every single person on the job site, and my customer's working outside the building. But because there was electrical trunk line or something that they didn't even hit it, but they wanted to immediately defend themselves so that the judge would just throw them off the lawsuit list.

The insurance carrier sent three experts from Nashville to the job site to meet with the owners. They documented everything to the nth degree. And it absolutely blew my customer's mind how outrageous that their service were. And they didn't wait [00:16:00] around, they stopped what they were doing.

They sent three top tier, high dollar experts to the job site. So what kind of price do you put on that? You say well, if they didn't send someone good, they just have paid a big claim. Yeah. And what would that have done to your insurance prices down the road or your reputation? Because a lot of times you turn claims in and a bad insurance company will pay that claim because it's less expensive than litigating it or sorting it out. So it's another consideration, Wade. 

Wade Carpenter: Yeah, that's a great story actually to hear. But I guess that does play into a lot of it. We hear terms like, hard market, soft market. Going into 2026, can you explain what that means and what kind of market we're in and what contractors can do about those kind of things.

Stephen Brown: Sure. We're coming maybe still in a little bit, but coming off a hard market for property [00:17:00] insurance and for vehicle insurance.

Wade Carpenter: Can you explain what hard versus soft market would be? 

Stephen Brown: Hard market means that the industry as a whole have had certain claims among certain lines of business where they've lost money. An insurance company can pay out a hundred percent of their premiums and claims and still make money off the investment income of your premium that you pay in.

A lot of contractors don't realize they may have had a good year, but that particular company or industry-wide have had a lot of claims. In a certain regard, you look at the tornadoes in the United States, tornado alley that used to be straight through a certain section of the Midwest is now expanded and moved hurricane damage, coastal flood damage. Then there's just fire and there's the wildfires out west. There's all these natural disasters that we have and that's why you get insurance.

From a liability standpoint how litigious is everyone out [00:18:00] there? On vehicle insurance, a certain amount of that insurance is paying for claims for all these billboards up and down the road for attorneys that do that. Certainly if you're entered in a claim and you're being jerked around by an insurance company, you need a good attorney.

But the insurance carriers say they go too far. They don't just say that they promise that we will get you more than anyone else because we know how to work these insurance companies and make 'em pay, and we've gotten millions of dollars worth of settlements.

Anytime you have an insurance settlement and someone's wrong, you're gonna get paid. That doesn't take incredible legal prowess, but you're gonna get paid.

So back to the point of hard market, soft market the litigation that is involved, you can almost see what's going on in the legal community by what the billboards say.

You see a lot of 'em going toward truckers right now, going after truckers. You claims for slip and fall injuries. [00:19:00] Did you slip and you fall? If you slip and you fall, is it always someone else's fault? Oh yeah. Oh yeah. I've never slipped and fell on my own. It's somebody else's fault and I gotta sue 'em. So I'm very careful, Wade not to slip and fall on my own property. Okay. No, I'm kidding.

So there's trends that move the ebb and flow with the economy. Also a lot of insurance companies that used to flee from general contractors now embrace them.

If they have all the controls in place, they're realizing that if they're really controlling their subcontractors and their workforce they're gonna be a good risk. So prices are coming down for general contractors.

What other trades you have to look very carefully at the installation. Subcontractor traits, the heavy HVAC contractors, the electrical contractors, the plumbing contractors that are putting in specialized systems. How is that covered? We talked about that [00:20:00] last week, I think, on building these new data centers, the risk involved with that.

So you want your policy to make sure it covers that and the right ones do. And they're fantastic. You're like, whoa, I can't believe they're willing to insure this risk. They're like, yeah, we understand it's a significant financial impact to you if this happens, and we'll insure it. That's why you should buy insurance from us.

Wade Carpenter: That's interesting that you talk about those legal commercials and how that affects the insurance markets. I'm sitting there thinking about watching the news this morning and the ones that came on, and whether they were talking about trucks or suing a business for something that happened or whatever, but interesting insight.

As far as our contractors go, going back to the point I made a while ago about those contractors that see their insurance agent once a year. There's almost like the ones that see them once a year is more a renewal time. It is like waiting until the engine blows before you change the oil.

What are these things that [00:21:00] contractors need to do and can do throughout the year to help keep these invisible Profit leaks? The insurance really, it can be a high ticket item that is on your P&L. And so what can we do to keep these Profit leaks down?

Stephen Brown: I'd say, first of all let your insurance agent know that you want to talk to them and you need their advice, just like that. Every professional likes and wants to hear that their advice is appreciated and they need you and call when you're looking at a certain project that is incredibly risky.

Call and talk to your agent about it and your agent ought to be good enough to ask the right questions to tell you. Have you considered this? I'll tell you what, I need to get a builder's risk quote for you on that. We need to increase your installation floater coverage. Are you gonna be using cranes? What type of cranes? What subs are you gonna be using? What timeframe is the project? When I handle your bonds, I'm looking at that [00:22:00] automatically. I can't cut it off. I'm looking at what you're bidding in the contract. So many times, especially on municipal jobs, the contract, it'll be blank, but it'll be right there in the specs when you're bidding the job.

So you're saying not only here's my price, but I agree to this contract terms and conditions. Remember the bonding company's agreeing to it too. And as an agent the last thing you want is a phone call saying, am I covered? And you say, no. Nobody likes that. We want you to be covered. We don't want you to have claims. You don't wanna have claims. It costs money to have claims, but if you have one, we want you to be covered.

That's all part of managing risk. And to me it's very interesting. It's always changing. I was telling you how much time we spend with our insurance carriers learning their products, what changes are occurring, what personnel have changed, and how are we gonna work with that personnel? How are we gonna doing business with them?

If you think as a good agent that [00:23:00] we're spending all our time goofing off, we're spending insane amount of time with our insurance carriers. And that's a good thing. They're as big a partnership of us, even though they don't pay us as our customers are to us.

Wade Carpenter: I think that's a great observation too. That's what I hate as a CPA. We find out after the end of the year that you did something that it's okay, I didn't want to pick up the phone and call my CPA, I didn't wanna call my lawyer 'cause I knew it would cost me money 

Stephen Brown: Or I I just wanted to do it. I didn't want you to tell me I couldn't do it.

Wade Carpenter: Maybe it's that 15 minute phone call. It's I didn't want to get a bill for it from my CPA, my lawyer. And that's really why I implemented the call as much as you want. Email, whatever, and we'll meet as much as you want on our back office and CFO level plans.

But in your insurance agent when you've got a good one like Stephen, he wants to hear from you regularly. And if just like me, I'd rather hear about it before it becomes a problem. So I think that's a great thing that people don't take advantage [00:24:00] of. You need all the advice you can get in this industry and I don't know how you feel about that. But what are some of the key takeaways that you could take from this and what are contractors can take from this? 

Stephen Brown: Yeah I think the key takeaway is from my perspective, is what Nathan said in his comment. Another great Nathan comment and I'll see if I can get him on our podcast, but it's " you're leaving your entire balance sheet on your construction job site", think of it that way. You're leaving your what is insurance? How does insurance play into that?

Insurance is not a commodity. It's a service and your agent should be getting you the best prices. And if you don't trust your agent to do that, then you need to get another agent.

How do you get another agent? You ask around. If a certain name keeps popping up and someone keeps bragging about that person. Then that might be a good place to start.

Wade Carpenter: Just as we talked about many times in this industry that a good CPA, a good [00:25:00] lawyer that knows construction well, this exact same thing applies to insurance agents. So any way, final thoughts as far as contractors trying to keep their prices down in 2026.

Stephen Brown: Talk to your agent. Do the things that the insurance companies want you to do to give you the best possible pricing. Clean MVRs, telematics on your vehicle, good safety procedures, toolbox talks and look at those rates and how they're classified.

Talk to your agent and let 'em know what you're doing before you do it. See what kind of prices involved. So at least when you're bidding the job, you can plug that price into it, right?

Wade Carpenter: Absolutely. Stephen, I appreciate you bringing all this good information for us today and how can they contact you if they've got any question?

Stephen Brown: They can contact me Stephen Brown at McDaniel Whitley Inc. We're located in Memphis, Tennessee, and they can reach out to me on my phone number (901) 340-8085. And if you're in [00:26:00] Louisville, lemme give a shout out to Nathan Shank who wrote that nice commentary and seems to be a very good, smart, young insurance professional. 

Wade Carpenter: Yeah. Okay. I know you work with contractors all over the country too, so you know, 'cause you're not in the same backyard you can still call Stephen.

Thanks for all this. If you got any value from this, we appreciate it if you'd like, comment, share, if you got any questions, put 'em in the comments below. We appreciate it. Always helps us out. We do this every single week and we will see you on the next show.