How do you avoid paying too much for insurance?
The best approach is to find a broker who knows and is familiar with the type of work you perform and who understands the underwriting process and how policies are rated. Then, provide your broker with an accurate survey of your exposures; gross receipts, payroll, number of full time and part time employees and sub-cost. As well as all of the other details asked for about your company. Keep in mind that your policy will run 12 months into the future and your estimates are for future work (you will also be asked about past amounts as well). You should also be alert to any offer that seems too good when compared to other quotes that are available. The most expensive insurance there can be is one that provides no coverage when there is a claim regardless of how cheap it was when you bought it.
Things to watch out for:
- Are are all of the fees disclosed?
- Typical fees are, Policy Fee, Inspection Fee and Broker Fees.
- For non-admitted carriers there will also be a tax.
- Does the payroll include any owner that is active in the field?
- Are the Gross Receipts and Subcost correct?
- Is the name of the carrier disclosed?
- Does the policy have a Sunset Clause?
- Is it a Manifestation Form policy?
- Is it a Claims Made policy?
- Look at these actual proposal samples for examples of what to look out for.
Be careful of an insurance proposal that does not disclose all of the fees. Insurance brokers are expected to make full disclosures of premiums and fees but some still do not do this. Watch out for a proposal that is based on less exposure than what you have. We have seen some quotes where the broker took the gross receipts or payroll estimates and cut them in half. This can be very expense as the resultant rate is often higher based on the lower estimated annual gross receipts or payroll. If the policy is audited the you can end up paying an inflated rate for the coverage. Remember that just about every policy you will be offered is subject to audit at the company's discretion. Audit premiums can be quite a shock if the original policy was based on inaccurate figures.
This brings up the point of the estimated figures to base the rating on. The best approach is to be as accurate as possible, being careful not to be over optimistic about the estimated numbers. If you do less than you project you will have paid more than you should have. Many policies are only upward on audit. At the same time, if you low ball the numbers you will most likely be given a higher rate and when you have your audit you will be paying more than you would have if your estimates were accurate. And, if the figures are very far off you run the risk of being accused of misrepresentation and no coverage in the event of a claim.
The proposal that you are given should disclose the rating basis and the carrier that is being offered. We have seen contractors spend thousands of dollars on down payments without even knowing who the carrier was. You would never buy a car without knowing the make, why buy insurance without knowing the carrier?
Finally the type of policy will affect the price. Traditionally coverage for contractors is on an Occurrence Form. In recent years a Modified Occurrence form has appeared. Be sure you understand the implications of this type of policy form. There is also a Claims Made form and policies with Sunset Clauses. If your broker cannot easily explain the differences to you consider a broker who understands the differences.
Venture Insurance Services
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