NC building and construction contractors – Here’s just what those uninsured subcontractors will do to you and how you can prepare yourself to minimize

It is a fact of life in the construction business. Almost all construction contractors, from the general contractor all the way to the landscape contractor will occasionally have to hire an uninsured subcontractor. There are hidden costs to this arrangement but knowing them in advance can help you prepare for the costs and minimize the damages to your insurance program.

It’s helpful to understand, from the beginning, that insurance companies don’t like for their clients to hire uninsured subcontractors. The reason is that they feel that your control over a subcontractor is much reduced and therefore losses are more likely. If they are uninsured, then the exposure for those losses is pushed on to your insurance company. And that makes you a less attractive risk for your insurance company.

So hiring uninsured subs causes two big problems that can generate increased insurance costs for you. Both are things you can prepare for if you do your homework in advance. And by taking the steps I will outline below, you can possibly reduce the cost to zero for each of these problems. And remember, if you use a subcontractor that is insured, be sure to take the appropriate steps to obtain a valid certificate of insurance. To read more about what you need to know about insurance certificates, please click here.

The first problem that uninsured subs will cause for you is increased insurance premiums on your general liability insurance policy and your workers compensation insurance policy. This is a stealth increase because if you don’t take steps in advance to protect yourself, then by the time you find out how much your subcontractor costs you, the sub may be long gone and your chances or wringing it out of the him or her will be nil. If you are unable to produce a valid certificate of insurance on a subcontractor, then when your policy is audited by the insurance company at the end of the policy term, they will include as payroll, the full amount of cost that you paid to the uninsured subcontractor.

You can defend against this problem by withholding from the amount you pay the uninsured subcontractor an amount equal to or greater than the amount you will be charged by the insurance company at audit. To understand how much to charge, you should contact your agent and find out the rate per $1000 of payroll for the subcontractor’s classification on both workers compensation and general liability insurance. I would suggest that you add an amount over the rates you face to cover your administrative expenses of handling this transaction.

The second problem caused by uninsured contractors has to do with the insurance company’s reaction to finding out you have used them. As I mentioned earlier, insurance companies do not like for their clients to utilize uninsured contractors but their appetite for them will vary. Check with your agent first and find out just what percent of payroll or gross sales paid out to uninsured subs will be tolerated by your insurance company. Some may not tolerate any and still others may be willing to let you go as high as 50%.

It is important to know in advance how high you can go so that you don’t break your insurance company’s rules unknowingly. If they find out on audit that you have been using more uninsured subs than their underwriting guides allow, they may cancel your policy or take away discounts that will result in much higher rates for you. In this case it is better to ask permission first then to ask for forgiveness later.

Remember, when you deal with an uninsured subcontractor you are now allowing them to use your insurance for their risks. Over the long term this is not advisable because they could cause a loss that is so catastrophic it might destroy your ability to get insurance at all, or it may create a high experience modification factor on your workers compensation policy that might cost you a lot of money for the next 3 years. It is always best to deal with subcontractors that have their own insurance.

Clinard Insurance Group, in Winston Salem, NC specializes in helping small contractors of all types all across North Carolina. If you would like a second opinion on your business insurance or if you need help with your general liability policy or your North Carolina workers compensation policy, please feel free to call us, toll free at 877-687-7557 or visit us on the web at http://www.thecontractorshelper.com/.

Contractors – 5 Tips For Getting The Best Audit Outcome On Your General Liability And Workers Compensation Insurance Policies

All building contractors working in North Carolina who carry either a NC general liability insurance policy or a NC workers compensation insurance policy, or both, probably know that these insurance policies are subject to an annual audit. What few contractors understand is that they have the power to stack the deck in their favor when it comes to that audit. And since some of the audit process is subjective, this can mean money in your pocket if you are a building contractor. Here are 5 tips that will put you on the road to more successful insurance audits.

Let me start by emphasizing that insurance auditors are people just like any other. If you grease the path for them and make their job easier, then they are much more likely to cut you some slack in the audit process and this can end up saving you a lot of money. So, what are those 5 tips?

Tip # 1 – Have Those Insurance Certificates Ready. I just can’t preach this enough. Do not allow any subcontractors on to your job site until they have provided you with a current certificate of insurance. And more than that, be sure that the limits on their general liability insurance policy are at least equal to your own policy limits. And if you have a workers compensation policy, make sure that their certificate shows that they have one as well. Last of all, check the policy dates on the certificate to be sure that they are current and active. If any policies will run out while these subs are still on the job, make sure that you also obtain an updated certificate. Put copies of all of these certs in your audit file. If the auditor shows up at your office and you don’t have your certs ready, he will charge you for the subcontractor payroll and leave it up to you to fix it later. And usually, fixing it later takes a lot more of your time.

Tip #2 – Take Some Time To Study Your Classifications. First of all, take the time with your agent to understand all of the classifications on your general liability insurance policy and your workers compensation insurance policy. Make sure that you understand the nuances of each class code and that your policy is set up accurately. If you are going to fudge the gray area between two similar classifications, understand that you might not get it past the auditor and you should have funds ready should you fail.

Tip #3 - Have The Audit Done and Ready To Hand Over. Once you have done your homework on your classifications, set up a spreadsheet to dump the payroll for each employee each week into the correct classification. You will want to keep a spreadsheet for both the workers compensation and the general liability policies. If you have done this correctly, you will be able to hand that spreadsheet over to the auditor and essentially all of the auditor’s work is done. This is more likely to keep them from digging around in your books to find new problems to share with the underwriters that can cost you in increased premiums.

Tip #4 - Keep The Overtime Payroll Separate. The NC workers compensation insurance policy allows you to avoid paying premiums on the extra overtime pay. But, to keep from paying work comp rates on this payroll, you must have it segregated. I suggest that you add a column on the work comp spreadsheet that you are keeping to show the amount of payroll that is overtime bonus and deduct it from the total payroll for each classification.

Tip #5 - Always Schedule the Audit for Friday Afternoons. This one may sound a little goofy but it works. If the auditor shows up at your office on Friday afternoon, and you can put all the information in his hands with up to date spreadsheets and copies of all subcontractor certificates, then he is more likely to accept your figures and get on home for the weekend. The less time he spends digging around in your books and your operations, the less likely he is to find a surprise that the underwriter doesn’t like which means higher insurance costs for you.

At Clinard Insurance Group, in Winston Salem, NC, we specialize in helping all kinds of contractors with their insurance needs, from general liability insurance and workers compensation insurance to commercial auto insurance and equipment insurance. If you would like help with your commercial insurance program, please feel free to call us, toll free at 877-687-7557 or visit us on the web at www.thecontractorshelper.com.

The information for this article was pulled from source information found at www.insuranceanswerguy.com.

Contractors: Your General Liability Policy Might Be A Source of Funds For You

Recently, times have been hard for many different types of building contractors. With jobs more scarce, many have had to lay off workers or they simply haven’t been able to keep people on full time. At Clinard Insurance Group, in Winston Salem, NC, we have seen our contractor clients’ payrolls shrink dramatically and while that indicates hard times, it also presents an opportunity for these businesses. If you are a contractor in the building industry with shrinking payrolls, then your general liability and workers compensation insurance policies could now be a source of ready cash for you.

To understand just how this works, remember that both the North Carolina general liability policy and the NC workers compensation policy are rated based on payroll. What this means is that the building contractor estimates his payroll for the coming policy year at the beginning of the policy term. Many of these estimates are based on the actual amounts of payroll found on the previous year’s audit. With that in mind, many construction contractors are carrying payroll levels on their policy many times greater than the actual payrolls they are running in this down cycle of our economy.

If you are a business owner in this situation, you can wait until the final audit of this policy term and receive your refund then. The problem with this approach is that you will have to wait for the policy term to end, and then you will have to wait several more months for the final audit to be completed. In addition, you might have to continue to make monthly or quarterly payments on your policies that are overcharging you now because your payrolls are overstated.

But there is a better way. Take a look at your general liability policy and your workers compensation policy and look up the payrolls that you are being charged for on each policy. Now estimate what your total payroll will be for the full policy term. You can request that the insurance company reduce your payrolls on your policy to this new level and that will generate an instant refund check to you, or it will reduce the amounts of your remaining installments. Voila, instant cash flow.

One word of warning here. Be sure that you leave enough payroll on your policy so that you don’t generate an additional premium due after the final audit. Doing that can put a huge crimp on your cash flow as I explained in an earlier blog. I call that problem “the audit trap” and you can read that entire blog by clicking here.

At Clinard Insurance Group in Winston Salem, NC, we specialize in helping all types of North Carolina based building contractors from Graders to Painters and everyone in between with their general liability and workers compensation insurance needs. If you would like help with your construction related insurance policies, please call us, toll free at 877-687-7557 or visit our contractors helper site at http://www.thecontractorshelper.com.

The source material for this article was pulled from http://www.insuranceanswerguy.com