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Here is a question for all of the business owners watching this video. What is more important when reviewing your business insurance costs?
1) The insurance PREMIUM, or
2) The insurance RATE
If you answered 2), the insurance RATE, you are correct (in our opinion, at least).
Watch our video and visit our blog to learn more about your business insurance and the difference between rate and premium.
THE PREMIUM DOESN’T MATTER!
Well, we won’t take that too far.
We understand all business owners must keep their costs down and expenses in check.
But, a more informed business owner makes a more effective business owner.
And understanding your RATES and how they factor into your PREMIUM is essential for all business owners.
You will gain more insight into your insurance COSTS by focusing on the rates, such as your workers’ compensation rates and your general liability rates.
DON’T LET YOUR WORKERS’ COMPENSATION PREMIUM FOOL YOU
Most business owners focus on the policy premium and don’t understand the basis to generate the premium.
Workers’ compensation is a crystal clear formula.
The insurer assigns a rate to every $100 of payroll, and the insurance company generates the total premium based on the rate and total payrolls.
Let’s say you have two work comp proposals waiting for your review.
One of the policies is $6,000 per year, and the other is $5,000.
Upon initial review, you lean towards accepting the $5,000 policy, Because saving money is great.
You’re about to sign and receive a phone call from Fusco Orsini & Associates agent.
The agent advises you that although the $5,000 policy is less expensive, the policy lists $50,000 of payroll for the rating basis versus $100,000 of payroll on the more expensive policy.
Here is the breakdown:
$50,000 of payroll at a net rate of $10.00 per $100
$100,000 of payroll at a net rate of $6.00 per $100
So which is better for your business?
Is it advisable to spend 67% more on the policy RATE to save on the policy PREMIUM?
We don’t believe so, and you shouldn’t either.
You should also consider the repercussions of the final audit in our example above.
Once the carrier performs the final audit and finds your payroll was $100,000, the $5,000 policy now costs you $10,000, or 67% more than your other option!
THE SAME HOLDS FOR GENERAL LIABILITY
Like workers’ compensation premiums, general liability premiums generate from the rating basis.
Rating basis may include gross sales, gross payroll, sub-contractor costs, area, or other measures.
We believe it’s vital for business owners to know and understand their rating basis.
At the end of the day, the rating basis determines their actual costs and can help budgeting, planning, and making critical financial decisions.
MY INSURANCE ADVISOR ISN’T TRULY AN ADVISOR.
You visited the right place! At FOA, we believe that your insurance representative should behave as a business advisor and help you make sound financial and protection decisions. Please fill out the form below to connect with one of our agents today! Thanks again for visiting!