Utah Contractor Practice Exam

What is the best way 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

Comparing premiums and coverage yearly is the most effective strategy for reducing insurance costs without increasing risk. This proactive approach allows a contractor to assess different insurance options available in the market, which can lead to finding better rates or more suitable coverage that fits the current needs of the business. By regularly evaluating the coverage, a contractor can identify potential savings and ensure they are not over-insured or under-insured, maintaining a balance that protects against risk adequately. This comparison process also helps a contractor stay informed about changes in the insurance marketplace, including discounts or new policies that could offer better protection at lower costs. Mining these details yearly ensures that the contractor is not locked into a policy that may no longer be the best option for their current operations. While decreasing coverage could lower insurance costs, it can dangerously expose the contractor to higher risk, compromising essential protections needed for the business. Increasing the deductible can reduce premium costs but also poses a risk of higher out-of-pocket expenses during a claim. Getting a policy for overlapping coverage may lead to redundancy and unnecessary costs without providing added security. Hence, the most strategic move is to conduct a thorough comparison annually.