Saving a TON of Money On Your Business Insurance

Generally speaking, agents who classify and rate their clients incorrectly cause those same clients to pay more than they should for insurance.

This comes up often for discussion in our office when we see some of the atrocities that "general" agents/brokers cause for their clients.

I called and spoke with one of the best insurance agents in the country, one that I am still continually learning from, Bill Reynolds, and asked him about this. Now, I have to admit, I'm glad Bill and I aren't competitors because he could run circles around me when it comes to insurance.

However, he mentioned a few things that he also runs into and we composed a list....here are 12 things that you need to be aware of...AND, if your current agent doesn't understand the terminology listed, consider another one IMMEDIATELY!

1. Use proper classifications. The first step in rating a commercial general liability insurance policy is to determine the classification which best describes the business operation. You should study the classification code(s) and make sure that the correct code(s) are being used. An incorrect classification code alone can cost you customers and prospects thousands of dollars at renewal.

2. Delete clerical office employee's payrolls. If you use "payroll" as the exposure basis (normally contractors and other service providers do), be sure to delete any overtime surcharges from reported payroll. This rule applies only if these affected employees are physically separated from other work areas and if their duties are strictly clerical in nature.

3. Delete overtime surcharges. Extra pay for overtime is also not included in the payroll of contractors and other service providers when "payrolls" is used as the exposure base. In other words, the extra 50% of the hourly wage paid to an employee who works overtime is not included in the payroll exposure. While this may require extra recordkeeping, the additional savings will more than be justified by the premium dollar savings.

4. Use executive officer payroll limitations. Again, for contractors and other service providers using "payroll" as their exposure base, the payroll of executive officers, individual owners, and partners is included in the exposure base. However, most states limit the amount of payroll that is included for these individuals.

5. Consider excluding inter-company sales. The commercial general liability policy will cover a suit against one insured brought against another insured. For this reason, the money paid to one company by a sister company for goods or products is included in the "gross sales" exposure base of companies in the manufacturing, processing or mercantile businesses. This coverage for inter-company suits can be excluded by endorsement. When this is done, inter-company sales would be deleted from the applicable exposure base. The endorsement is free by the way.

6. Delete sales taxes and excise taxes. For companies using a "gross sales" exposure base, sales and excise taxes paid to governmental entities should not be included in the exposure base. Also, finance charges for items sold on an installment basis are also included in the exposure base.

7. Where possible, make sure the underwriter uses experience rating. Experience rating of general liability policies is optional in all states except Texas and Louisiana. It involves a formula that compares past loss experience to that of similar companies to calculate an "experience modifier." Generally an annual premium of $3,000 or more is necessary to be eligible for experience rating. Because experience rating tends to be more sensitive to loss frequency that to loss severity, a firm with loss frequency may be able to reduce its general liability insurance costs by this method.

8. Obtain schedule credits. Your customer or prospect may be able to qualify for a schedule credit, which has the affect of directly reducing your general liability rates. Generally the characteristics that are considered by the underwriter are care and condition of the premises, geographic location, type of equipment used in operations (including maintenance), selection and training of employees, and the product quality control program.

9. Consider using deductibles. As with other lines of insurance, the use of deductibles can significantly reduce insurance premiums. Commercial general liability insurance can be written subject to a bodily injury deductible, a property damage liability deductible, or a combined bodily injury and property damage deductible.

10.Negotiate premium credits for coverage limitations. In this difficult insurance market condition it is absolutely critical that you carefully evaluate corporate exposures and consider eliminating unnecessary coverage, or coverage that can be reasonably self-insured. There are a number of general liability coverage components that can be eliminated or limited by endorsement, thereby reducing insurance premium.

11.Consider dropping medical payments coverage. A "fringe" coverage automatically provided under a general liability policy that should possibly be eliminated is "medical payments" coverage. This coverage reimburses for money expended in arranging for first aid or other medical treatment of third parties injured on your premises. In effect, this is goodwill insurance.

12.Obtain certificates of insurance for contractors. The general liability policy automatically covers suits brought against the insured company because of the operations of its independent contractors.. This is called "independent contractor's coverage." A fairly low rate applies to the coverage, but only if your customer or prospect obtains proof that their independent contractors are carrying "adequate insurance." This is done by obtaining certificates of insurance and keeping them on file. If this is not done there is a much higher rate for the exposure, which would have the affect if increasing insurance premium.


Now, granted the above list is pretty broad; IF you want your policy reviewed, call my office and we'll be more than happy to help you .

Take Care,

Orlando Frasca
www.risdirect.com
www.mytowtruck.com
www.mybigrig.com
www.onlycontractors.com

925-365-200