Here’s a fact: When you own a snow removal business, at some point you need to hire employees. And that means you must carry both workers’ compensation and liability insurance.

To many snow removal business owners, insurance is just another one of those necessary evils. Here’s why: Not only can it be one of the highest overhead costs, but it’s not always easy to get a good policy because insurance companies are aware that the inherent nature of the industry — dealing with ice and snow — places these businesses at a greater risk for claims and is a high-loss group.

Workers’ compensation provides coverage for an employee in the event of injury on the job site, provides temporary and permanent disability for employees whose injuries prevent them from working again and provides benefits to a widowed spouse if the employee is killed in a work-related accident.

Liability insurance covers people who may be found liable for negligence. For example, if someone slips, falls and breaks a leg in a parking lot that your company just plowed and deiced, the injured may then sue your company for damages.

A common mistake is to assume that your landscaping or other core business liability insurance covers losses for snow removal. It’s up to you to make sure that liability policies cover snow removal with many major commercial properties requiring coverage of up to $2 million or more.

With the insurance market trending toward increasing rates and tightening underwriting guidelines, insurance carriers are seeking to limit exposure to claims, which makes safety and risk management practices paramount. Experience modification (mod) factors are calculated using loss and payroll data. Typically, the data used is the previous three policy years, excluding the most recent completed year. The experience modification factor is influenced more by small, frequent losses than large, infrequent ones.

The Snow and Ice Management Association identifies steps to lower your mod rate, including: providing employees with safe equipment, reporting all claims, avoiding hiring and firing accident-prone employees, developing and implementing a safety training program for all new hires, scheduling regular meetings with employees to discuss safety and staging safety performance trainings on-site at actual properties.

By far the most important step you can take is to identify and address the riskiest areas of your operations. Reducing the number of accidents in your workplace will directly affect your expenses for replacement labor while reducing your risk of getting hit with higher insurance rates as a result of poor workplace conditions.

The Insurance Information Institute emphasizes how important it is to not only keep up a good track record when it comes to handling snow-related employee accidents at your business, but also how well you provide safety training to your employees. Insurance providers want to see proof that you are taking control of your costs by getting workers the care they need and getting them back on the job quickly. Also, they want to see proof of the quality and frequency of training programs you provide that emphasize safe workplace procedures to reduce the risk of accidents.

It’s highly recommended that you designate a responsible employee to be the safety guru for your company. This will be the point person for insurance carrier loss control representatives, claims reporting and first contact for the insurance agent when issues arise.

Don’t forget about your subcontractors (other people out plowing for you on your behalf using their own trucks). You are responsible for ensuring they have the right coverage whenever hiring them as your temp employees.

Subcontractors need a general liability policy of their own so you aren’t fully responsible for their errors. Make sure they have proof they are insured by giving you a certificate of insurance. Dan Ellington of Chicago-based Central Parts Warehouse Snow and Ice Equipment recommends special coverage called “hired and non-owned.” This covers commercial vehicles hired and non-owned vehicles used so that the liability from your policy extends to the operations for people that you hire to plow for your business.

Case Study: Subcontractor Safety Impresses Insurance Providers

Tom Canete, president and CEO of Canete Snow Management, Wayne, New Jersey, keeps a tight reign on all the hundreds of subcontractors he needs each snow season in central Jersey for a multitude of HOAs, megamalls and MetLife Stadium. And what he does impresses his insurance providers.

“We visit their sites and look at every truck they own,” he says. “We know their safety records and check their backgrounds thoroughly. We even ask for a multitude of references on them. They must attend mandatory training where we emphasize safety regulations. We’ve already had up to four trainings this season alone.”