It’s a feeling all too familiar to snow contractors, particularly in the northeastern U.S.: What if this next blizzard causes us to go revenue-negative? You know your crew will eventually get the job done, but after all those overtime hours, will your costs surpass your profit?
Since seasonal snow and ice removal contracts are typically agreed upon well in advance, you’re thinking of winter in its entirety, not on a storm-by-storm basis. You also don’t have all of the data you need to more intelligently forecast what kind of winter you’ll have. Even so, Mother Nature doesn’t follow a formula and she’s more than capable of throwing a few curveballs your way throughout the winter.
Rather than driving yourself mad trying to crack an uncrackable code, you should insure your snow and ice removal contracts to guarantee your business won’t take a huge hit when either a heavy snowfall season or a big snow storm causes your expenses to skyrocket past your revenue. Here’s how snowfall insurance works to help protect a snowfall removal contractor:
Snowfall insurance is a class of weather insurance that pays a claim if certain snow characteristics are met. Policies that are designed to address excessive snowfall pay when there is more snowfall than is defined under a policy. Snowfall insurance is purchased with a coverage period that mirrors the snowfall season in the insured’s geographic area of interest and has a claim amount that is determined by the occurrence and/or magnitude of natural snowfall.
Snow and ice removal contractors in the northeast who are typically heavy with seasonal contracts may be exposed to a winter with excessively large amounts of natural snowfall, which may cause those contracts to become revenue-negative. This happens when the expense to provide the contracted services begins to exceed the payment received when the contract was placed. For such an exposure, an excess seasonal snowfall insurance policy can be used to address that risk.
Snowfall insurance policies can also be designed to provide coverage in the event of a big storm. Such a policy would provide for a predetermined fixed sum to be paid if a single day’s snowfall exceeds the defined amount. The lump sum amount will help to protect against the excessive costs, such as overtime, equipment rental, fuel, salt and other costs that are accompanied by such large snowfall events.
While excess snowfall insurance protects your company from taking a big loss after a heavy snowfall season, it’s also important to consider how having a big storm policy benefits your clients. In areas where it’s not unusual for several inches of snow to accumulate within hours, business owners and commercial and residential management companies expect a certain level of service from their snow and ice removal service providers. Yet it’s not uncommon for some clients to experience a delay in service because of the herculean efforts required to remove all of that snow from a wide variety of properties in a contractor’s portfolio.
In addition to losing a customer and creating a potential legal issue, a significant delay in service creates an unsafe situation for the people who drive, park and walk on that property. With a big storm policy in place, the contractor has something that will help to protect against the additional expenditures required to clean up the property and keep the client happy.
With snowfall insurance, your clients can feel confident in their decision to hire you because they know you can handle the job, regardless of how much snow they get. Informing your current and potential clients that you insure your contracts lets them know that you take your business seriously and helps them rest assured that your company will deliver on your promise.
Snowfall insurance provides you with an additional tool to help address the financial risk that is associated with variances in natural snowfall. Proper planning is a necessity, and an attempt to balance between seasonal and per-event contracts can provide a layer of protection. Because after all of the preseason planning is done and the service contracts are in place, you don’t want to leave the fate of your business in Mother Nature’s hands.