Utah Contractor Practice Exam

What is the most effective way for a contractor to reduce insurance costs without increasing 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

Choosing to compare premiums and coverage yearly is the most effective method for a contractor to reduce insurance costs while maintaining their current level of risk. Regularly reviewing and comparing insurance policies allows contractors to identify potential savings by finding more cost-effective options with similar coverage, enabling them to maintain their protection while ensuring that they are not overpaying for their insurance. This strategy also enables contractors to stay informed about changes in the market, including the introduction of new providers or different policy offerings that could provide better value. By evaluating premiums and coverage on a yearly basis, contractors can make informed decisions that balance cost-efficiency with the adequacy of protection, which is essential for managing their business effectively. Decreasing coverage may seem like a way to reduce costs, but it inherently increases risk, which is counterproductive. Similarly, increasing the deductible might lower premiums temporarily, but it can expose the contractor to more financial risk in the event of a claim. Obtaining overlapping coverage might also complicate the insurance situation and could lead to increased costs without added benefit. Thus, comparing premiums and coverage offers a balanced approach to cost reduction without compromising risk management.