Common Insurance Gaps That Put Your Business at Risk

No business owner wants to discover an insurance gap after an incident occurs, yet many policies leave critical risks unaddressed. These gaps can result from changes in your operations, overlooked details in policy language, or even misconceptions about what your coverage actually includes.

For industries like construction, where risks are inherently higher, identifying and closing these gaps is crucial to protecting your bottom line. In this post, we’ll highlight common insurance gaps and share tips to help you address them before they become costly mistakes.

• Inadequate Liability Limits

One of the most common gaps is insufficient general liability or umbrella policy limits. As your business grows and project values increase, your exposure to lawsuits and damages grows too.

Example: A contractor completes a $2 million project, but their liability coverage only goes up to $1 million. In the event of a lawsuit, they’d be responsible for the remaining costs.

How to fix it: Review your liability limits annually and increase them to align with your current project sizes and overall business risk.

• Uncovered Equipment and Tools

In the construction industry, tools and equipment are essential to operations—but they’re also costly to replace if damaged, stolen, or destroyed. Many businesses mistakenly assume their equipment is fully covered under their property insurance policy.

Example: Your equipment might not be covered while being transported between job sites or stored at temporary locations.

How to fix it: Add an inland marine policy or specific equipment coverage to protect your tools and machinery, wherever they are.

• Gaps in Builders' Risk Coverage

Builders' risk insurance is designed to protect projects under construction, but it’s critical to ensure it covers the full scope of potential risks, such as weather-related delays, theft of materials, and even vandalism.

Example: A contractor assumes their builders' risk policy covers weather delays, but the policy language excludes this type of disruption. The result? Out-of-pocket expenses that could have been avoided.

How to fix it: Carefully review the terms of your builders' risk policy and customize it to your project-specific needs.

• Employee-Related Risks

Workers’ compensation policies are mandatory, but they don’t always account for every employee risk. Misclassifying employees, not accounting for subcontractors, or neglecting safety training can lead to gaps in coverage.

Example: An accident involving a subcontractor may not be covered if they weren’t listed properly under your workers’ compensation or liability policies.

How to fix it: Ensure accurate reporting of employees, subcontractors, and job classifications. Regularly update your payroll estimates with your insurance provider to avoid surprises.

• Overlooking Cybersecurity Coverage

While physical risks dominate concerns in construction, cyber risks are growing as businesses increasingly rely on digital tools for project management, billing, and communications. Standard business insurance policies rarely cover these threats.

Example: A ransomware attack locks you out of critical project files, delaying work and resulting in financial losses. Without cyber liability coverage, you could face significant costs to recover.

How to fix it: Consider adding cyber liability insurance to protect your business from digital threats like data breaches and ransomware.

Insurance gaps are often discovered too late—when a claim arises and you find yourself underinsured. By proactively identifying and addressing these gaps, you can avoid financial hardship and focus on what matters most: running your business.

At Powerhouse Insurance Consultants, we specialize in helping construction businesses identify and close insurance gaps with tailored coverage solutions. Let us help you build a safer foundation for your business in 2025.

Schedule a risk assessment with Powerhouse Insurance Consultants to uncover and address potential gaps in your coverage.

📞 719-201-6928🌐 www.phicco.net