5 Costly Insurance Mistakes Bergen County Contractors Make
After 6 years of protecting Bergen County contractors, we've seen the same costly insurance mistakes repeated countless times. These errors have cost local contractors millions in out-of-pocket expenses, lost contracts, and even bankruptcy. The good news? Every one of these mistakes is preventable with the right knowledge and guidance.
The Real Cost of Insurance Mistakes
Last year alone, Bergen County contractors faced over $3.2 million in uncovered claims due to insurance gaps. Don't become another statistic.
Mistake #1: Underinsuring to Save Money
It's tempting to choose minimum coverage limits to reduce premiums, but this false economy can destroy your business. Bergen County's construction market demands higher coverage due to property values and lawsuit trends.
The Hidden Costs of Underinsurance
- Lost Contracts: Major projects in Hackensack, Fort Lee, and Paramus typically require $2-5 million in general liability. Minimum coverage eliminates you from 60% of commercial opportunities.
- Personal Assets at Risk: Claims exceeding your coverage come from personal assets. A $1 million policy won't protect you from a $2 million judgment.
- Reputation Damage: Underinsured contractors who can't pay claims develop bad reputations quickly in Bergen County's tight-knit construction community.
Real Example: Paramus Shopping Center Claim
Scenario: Electrical contractor with $1M coverage caused fire during renovation
Total Damages: $2.8 million
Insurance Paid: $1 million
Contractor's Cost: $1.8 million (business assets liquidated, personal bankruptcy)
Proper Coverage Would Have Cost: Extra $1,200/year
Mistake #2: Using Wrong Classification Codes
Workers' compensation class codes determine your premium rates. Using incorrect codes doesn't just cost money—it can void your coverage entirely when you need it most.
Common Classification Errors in Bergen County
| Wrong Classification | Correct Classification | Premium Difference |
|---|---|---|
| Carpentry (5403) | Roofing (5551) | +142% higher |
| Janitorial (9014) | Window Cleaning - High Rise (5020) | +385% higher |
| Handyman (9015) | Electrical Wiring (5190) | +78% higher |
Audit Warning:
Using incorrect class codes triggers premium audits with back-charges plus penalties. One Teaneck contractor faced a $47,000 audit bill for misclassifying employees over three years.
Mistake #3: Missing Additional Insured Requirements
Every general contractor and property owner in Bergen County requires additional insured status. Missing this requirement can cost you contracts and create massive liability gaps.
What Happens When You Forget
- Contract Breach: You're technically in breach the moment work begins without proper additional insured coverage
- Personal Liability: Property owners can sue you directly for defense costs if not properly named
- No Payment Protection: GCs can legally withhold payment until coverage is corrected
- Blacklisting: Word spreads fast—one mistake can lock you out of future projects
Pro Tip: Automate Additional Insureds
Ask for blanket additional insured endorsements. For about $250/year, anyone requiring it in a written contract is automatically covered. This eliminates 90% of certificate delays.
Mistake #4: No Completed Operations Coverage
Your liability doesn't end when you leave the job site. Without completed operations coverage, you're exposed to claims months or even years after project completion.
Bergen County Completed Ops Claims
Water Damage - Fort Lee Condo
Plumbing failure 8 months after completion caused $450,000 in damage to 6 units. Contractor without completed ops coverage paid entire amount personally.
Deck Collapse - Ridgewood Home
Improperly secured deck collapsed 2 years after construction, injuring 4 people. $1.2 million settlement would have been covered with completed operations.
Roof Leak - Englewood Office
Faulty flashing caused interior damage 18 months post-completion. $280,000 claim denied due to no completed operations coverage.
Completed operations typically adds only 10-15% to your general liability premium but protects against claims that can arise years after project completion.
Mistake #5: Using Personal Vehicles for Business
Your personal auto policy excludes business use. One accident while driving to a Bergen County job site can leave you personally liable for damages your insurance won't cover.
What Counts as Business Use?
- Driving to job sites (even without tools)
- Meeting clients or suppliers
- Getting permits or inspections
- Hauling any materials or equipment
- Displaying company signs or wraps
- Employees using personal vehicles for work
Denial Example: Route 17 Accident
Contractor driving personal truck to Paramus job site rear-ended vehicle on Route 17. Personal auto carrier denied $85,000 claim due to business use. Contractor personally liable for:
- $85,000 in damages
- $15,000 in legal fees
- $12,000 in lost wages during litigation
Commercial auto policy would have cost: $1,800/year
How to Fix These Mistakes Today
The good news is that every one of these mistakes can be corrected quickly with the right insurance partner. Here's your action plan:
- 1. Schedule a Coverage Review
Have an expert analyze your current policies for gaps. This should be free and take less than an hour.
- 2. Verify Classification Codes
Ensure every employee is properly classified. If you do multiple trades, you may need multiple codes.
- 3. Implement Certificate Procedures
Create a system for managing additional insured requests. Consider blanket coverage for efficiency.
- 4. Review All Vehicles
Any vehicle used even occasionally for business needs commercial coverage. Don't forget hired and non-owned auto.
- 5. Calculate True Coverage Needs
Consider your largest potential project, not your average. Coverage should protect your worst-case scenario.
The Real Cost of Proper Coverage
Many Bergen County contractors avoid fixing these mistakes thinking it's too expensive. Let's look at the real numbers:
Average Annual Cost to Fix All 5 Mistakes:
- • Increase liability limits to $2M/$4M: +$1,500
- • Correct classification codes: May actually save money
- • Blanket additional insured: +$250
- • Add completed operations: +$800
- • Commercial auto (1 vehicle): +$1,800
Total Additional Cost:$4,350/year
That's less than one small claim deductible
Don't Wait for a Claim to Find Out
Every day you operate with these coverage gaps is another day you risk everything you've built. The contractors who learned these lessons the hard way paid far more than any insurance premium.
Bergen County's construction market is too competitive and litigious to operate without proper protection. One claim from any of these gaps can end your business and impact your personal life for years.
Get a Free Coverage Gap Analysis
Our construction insurance experts will review your current coverage and identify any costly gaps. No obligation, no sales pressure—just honest advice to protect your business.
Average time to identify and fix all gaps: 48 hours
About the Author
Midland Associates Insurance Team
President, Midland Associates
With over 6 years protecting Bergen County contractors, our team has seen every insurance mistake possible—and helped hundreds of contractors fix them before disaster strikes.