Utah Contractor Practice Exam

What is the best strategy for reducing insurance costs without reducing risk?

1. Compare premiums and coverage yearly

2. Decrease the coverage

3. Increase the deductible

4. Get a policy for overlapping coverage

The correct answer is: Compare premiums and coverage yearly

Comparing premiums and coverage yearly is an effective strategy to reduce insurance costs while still maintaining adequate risk protection. Conducting an annual review allows contractors to examine the different insurance providers, their offerings, and the market trends. During this process, they may find better rates for similar coverage or identify changes in their risk profile that could influence premium costs. Moreover, this strategy helps ensure that the coverage aligns with their current business needs and financial circumstances. In this context, options that suggest decreasing coverage or opting for overlapping coverage might compromise the level of protection needed, exposing the contractor to greater financial risk in the event of a claim. On the other hand, increasing the deductible can lower premiums but may result in higher out-of-pocket expenses when a claim occurs, which does not directly address the goal of maintaining a balance between cost and risk. Thus, comparing premiums and coverage yearly stands out as the best approach to manage insurance costs effectively while keeping the necessary risk management measures intact.