Insurance Question

Discussion in 'Business Operations' started by StBalor, Dec 2, 2006.

  1. StBalor

    StBalor LawnSite Senior Member
    Posts: 798

    I have recieved my Last bill for my insurance and it is due Dec, 20. And will cover January, Feb And march. I am thinking since i do not work during these months just going ahead and cancelling it and saving the 260.00. Money is tight this time of year and i could use it, then i would just get new insurance come March.
    Is there any problems with doing this. I am licensed and am just curious. Will it effect me in any way?
     
  2. grandview (2006)

    grandview (2006) LawnSite Gold Member
    Posts: 3,465

    It's a year round business expense. They might not take you back and then your scrambling in the spring again.
     
  3. FATWEASEL

    FATWEASEL LawnSite Senior Member
    from NC
    Posts: 326

    Yeah, it is a tempting idea and you may be able to do it once without looking elsewhere but your agent will want to kick you in the nads and DEFINITELY won't give you any breaks to get your business. The insurance company will also look at your history and probably decline your policy due risk factors.
     
  4. VBsnow

    VBsnow LawnSite Member
    Posts: 241

    If you do it they will notice. It will make you appear irresponsible. Your history accumulates and allows you to get the breaks you need in the future. I think you should listen to Grandview. If you did this in my agency I would make you pay when we met again. Literally. The view w/ commercial accounts is that you need them on the books at the agency for three years to make money. The commision is low and so is the cost for most LCO's. Why would I want to help you if I make no money? This goes for those who constantly cancel and re-write for non-pay as well. These customers cost us money and we cut them loose. Generally they hop around town for a few years before it haunts them. Not the best business plan, really. Also, many policies have a fully earned clause and there is no money to get back. You need to account for your audit as well. Remember, your cost is based on payroll, not a monthly pro-rata cost. You may not like my answer but it is an honest one.
     
  5. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    The way I understand it .... when you get your policy premium .... say it's $2600 fore the year .... they break it down into 12 payments or say 4 payments or such

    In other words you would still be responsible fore the payments upto the end of your policy date ==> so unless you are at the end of your policy date they'd send you a final bill ....n yes getting a new policy would be impossible untill you clear up that final payment

    Hope that makes sense ...kinda like a cell phone contract
     
  6. GarPA

    GarPA LawnSite Silver Member
    from PA
    Posts: 2,585

    The guys above all gave you good advice. I was in the insurance industry for 20 years and I can gurantee that if you cancel this coverage within the policy effective dates, you will likely be heading for a major problem when when applying for a new policy. Remember, one of the ?'s on an ins application is have you had coverage and with whom. The underwriters do check this and dont even think about trying to omit this info from the new ins app you would have to complete.

    Best if you pay the premium and forget about it.
     
  7. VBsnow

    VBsnow LawnSite Member
    Posts: 241

    Not exactly. There are three ways cancellations are done: FLAT, PRO-RATA, and SHORT. There are also minimum premiums and fully earned clauses that may have been added to the contract. Flat and pro-rata are the best. Short is usually a penalty(money, not yards). In this case flat would be best. Let's assume it is not fully earned and the min. prem. has been met. You cancel at 9 months. An audit is ordered. You reported 40k of payroll but actually only paid out 5k. You would get money back as long as it was not under the min. prem. If you used 50k in those 9 months you would owe the entire years premium plus the amount you exceeded(10k of payroll divided by 1000 X rate).

    Many of these small LCO's do not respond to the audits when they are requested thus some companies estimate an audit. This is basically guessing. It up to you to respond to any wrong numbers. Also, many companies just do not ask for audits from small LCO's because if there have been no claims, it is not worth the expense to pay the auditor. **NOTE** this does not apply to workers compensation. You will most likely be audited for WC.

    Back to fully earned. This is where you owe the entire face value of the policy even if you do not use it all. Let's say you report 40K. The company charges you based on 40k. You actually only paid out 10K to employees. You get nothing back on a fully earned policy premium.

    In conclusion, they are all different. I have given you the questions to ask when buying insurance. It's up to you all to ask them of the agent. I had a client who moved their insurance 4 months into the policy. The company penalized them 50% of the return on a short rate. You have to read the policy and ask questions. I know it sucks but thus the life of the self employed.
     

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