At Rue Insurance, we review many different contractor insurance programs each day. Over the course of time, we have identified 5 recurring mistakes that are often missed. They are:
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- Misclassified Employees
- Inaccurate Payroll Audit Errors
- Improper Equipment Values
- Missed Payroll Credits
- Incomplete Presentations to Carrier
Misclassified Employees
As you know, with Workers Compensation and General Liability Insurance, your annual premium is determined largely by the amount of annual payroll your company has in each of your “Classifications.” Depending on the size of your contracting business and the primary duties of certain employees, you may be missing out on classifications that charge lower rates for duties that some of your employees have been performing for you for many years! Many insurance agents do not specialize in construction insurance, and therefore, may not be familiar with all of the classifications that are available to you. If your agent hasn’t already been reviewing the duties that each of your employees perform, your policy may be using more expensive classifications!
Inaccurate Payroll Audit Errors
Seems easy enough to prepare your payroll figures for the past year and hope that you’ll be getting money back from the insurance carrier, right? What you may not know is that even though you have your company payroll records ready, some of those payroll dollars may not be required to be included in the audit calculation. In fact, for construction accounts, there are certain employees’ payroll that should NOT be charged for on your general liability audit (and we’re not just talking clerical and outside sales employees). Truth is, there are many rating rules that work in the policyholder’s favor during audit time. As you may suspect, your insurance carrier will not be eager to tell you about them. Make sure your agent schedules time to sit with you during your audit and review your payroll records beforehand. Don’t get caught paying more premium dollars than you need to.
Improper Equipment Values
As a contractor, you have many pieces of heavy equipment that you use in everyday business. When was the last time you updated the insurance limits on your Equipment Schedule with your agent? In a claim situation, if a piece of your equipment is damaged by a covered loss and it’s a “total” loss, your insurance carrier will only pay you the depreciated value of that machine and NOT necessarily the dollar limit that you have listed on your policy.
- If your agent doesn’t already review these insurance limits with you each and every year, you may be paying for insurance that you won’t be able to collect at the time of a claim.
- Depending on how your policy is written. Some insurance carriers allow you to purchase “Replacement Cost” Coverage for your equipment in exchange for more premium dollars.
Next time we will review the last 2 recurring mistakes: Missed Payroll Credits and Incomplete Presentations to Carrier. Remember, a good agent can help identify these errors (Misclassified Employees, Inaccurate Payroll Classifications, and Improper Equipment Values) and help with the paperwork required to set the costs in your favor. Stay tuned for Part II: Top 5 Mistakes in Contractor Insurance Programs.
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