Contractors - Your General Liability Policy Might Be A Source Of Cash For You

Contractors - Your General Liability Policy Might Be A Source Of
Cash 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 my insurance agency, 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 on each policy. Now estimate what your total payroll will be for
the full policy term. If your anticipated payrolls are much lower than those shown on your current
policy, then 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 an entire article about the audit trap by clicking here.

Contractor Insurance Prices

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