The challenge is not unfamiliar to snow removal contractors across the nation: how can a business whose income relies on a completely unpredictable variable manage to generate enough revenue to cover costs and, hopefully, be profitable? With the volatility of natural snowfall, surviving an extreme winter, either one with very little snowfall or incredibly large snowfall totals, can be at best, a difficult and arduous task or, at worst, cause financial hardship or ruin. However, there exists a tool to help contractors overcome this challenge: snowfall insurance.
Snowfall insurance is a class of weather insurance that pays a claim if certain snow characteristics are met. Snow 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. While the details of a snow insurance policy can vary, and are tailored to the needs of each individual insured, snow insurance can be broken down into two basic categories: a policy that pays a claim for excessive snow and a policy that pays a claim for a lack of snow.
In the case of excessive snow, when the amount of snowfall exceeds what is covered by a contract, your entire crew may need to work around the clock to clear all of the snow. All of those overtime hours and extra pounds of deicer would add up and you could end up losing money on the job.
On the opposite side of the scale is a winter with a lack of snow. Without snow to remove, it can be difficult for a snow removal business to remain profitable. You can make your season revenue more predictable by purchasing snowfall coverage to compensate for the decline in jobs. This is particularly useful if you have clients who want to pay per push because you can buy insurance to cover your losses if it doesn’t snow enough for you to break even on the contract.
Snow insurance continues to grow as a risk management tool for contractors across the country. This continued growth could be attributed to a number of things: an increased awareness and understanding of snow insurance and its availability, greater pressure to provide one type of contract versus another (seasonal vs. per-occurrence), financial stress caused by snow conditions experienced in previous year(s), or a decision based on seasonal snowfall predictions.
Snow insurance provides a snow removal contractor with an additional tool that helps to address the financial risk 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. But a financial product that has, at its core, a potential payment structure based solely on snowfall is a powerful tool indeed. If you would like to discuss your own unique needs, please feel free to contact us. At Spectrum, we are here to help find your snow insurance solution, so always feel free to give us a call should you have any questions or concerns. Because after all of the preseason planning is done and the service contracts are in place, one thing is for certain: Mother Nature always bats last.
