Read about differentiating between contractor corner-cutting and responsible cost evaluation.

Box ‘Em Up or Box It In

Learn why corner-cutting may negatively impact your contracting business and its insurance.

Cutting corners is a well-known practice throughout the construction industry. Not every construction contractor engages in cutting corners, but enough do that their reputation precedes them. With the introduction of widespread on-and-off tariffs in 2025, the potential for cutting corners in the building and trades sectors is likely to spike upward. Contractors beware. Corner-cutting has significant potential to box your contracting business into an unsustainable position.

The usual reason some contractors cut corners is to save money by lowering costs or time spent on the job. All businesses need to be mindful of costs. Before taking any action involving cost cuts, consider placing your costs in three main boxes. Sort through each box individually and then strategize how your contracting business might make adjustments. Chart out scenarios ranging from predictable to worst-case. For example:

BOX 1: What costs are reasonable and what costs are not
BOX 2: What costs can be controlled, and what costs are necessary to responsibly and/or legally operate
BOX 3: What costs can customers and suppliers absorb, and what costs will your contracting business have to absorb

Determine what your options are and be open-minded. Being straightforward with customers about the quality of service and product you provide is much preferred to corner-cutting. Evaluate the possibility of buying in bulk with other contractors you know and trust and negotiating with suppliers.

Insurance is a need, and some reasonable savings may be achieved, depending on your particular circumstances. However, cutting corners on your contracting business with the belief that insurance will take care of it is both foolish and unnecessarily risky. As an instructional exercise only, review the chart below to familiarize yourself with three examples of corner-cutting mindsets or activities likely to negatively affect your contracting business and its insurance:

CORNER-CUTTING MINDSET OR ACTIVITY POTENTIAL NEGATIVE IMPACT ON YOUR CONTRACTING BUSINESS AND ITS INSURANCE
Failure to report purchase of new vehicle used in contracting business (You were going to get to it, but figured you have insurance, so no worries.) Vehicle involved in accident. Auto insurance company may deny claim, as vehicle never added to policy. Insured has duty to report material changes in a timely manner. Failure to do so may void coverage.
You switch suppliers to obtain cheaper product, and you do not inform customer in writing that you are using lower grade material than expected. You install pipes in March; in August a pipe bursts, causing extensive water damage in a new home. Customer sues your contracting business, and your insurance company becomes involved.
At a minimum, a loss history now exists that could have been avoided or diminished had corner-cutting not been engaged.
You hire a subcontractor to perform electrical work without requiring the sub to show proof of insurance or sign hold harmless agreement. Electrical subcontractor accidentally starts a fire that results in costly damage to building being renovated.

  1. You find out after the loss that the sub let his insurance lapse; and/or
  2. Your own insurance company honors the claim against you, but issues notice of non-renewal when your policy comes up for renewal. Your loss history and corner-cutting activity result in difficulty obtaining coverage elsewhere, or at a much higher premium elsewhere.

Richey-Barrett Insurance is a Trusted Choice Independent Insurance Agency experienced in business insurance for a variety of contractors.

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