My Insurance Policy Quote Seems Off
My Insurance Policy quote does not seem right. Workers Comp insurance quotes can cause a few sleepless nights. We usually get emails and calls right after an employer receives their quote for the next years’ WC coverage. This emailed question seemed to be different as the Workers Comp insurance quote seemed too low as compared to the previous year.
One would think the employer would be glad that their initial policy quote was too low. Carriers do have a limited amount of leeway in their WC insurance policy quotes. If an employer is not prepared budget-wise, a cash flow crisis can easily occur at the end of the policy year. Follow along with me on how this may occur in your company.
- Your company receives a heavily discounted quote for Workers Comp coverage for the next year.
- You write the check for the quote thinking your company has landed a bargain.
- The Workers Comp premium audit occurs after policy expiry.
- The premium audit bill is much higher than anticipated – however, the total bill (policy + premium audit) was not that different from the previous year.
- Your company has 10 business days to pay off your audit bill.
- You are unable to pay the large premium audit bill.
- Your carrier decides to cancel you in the first few months of your next policy. Non-payment of premium often requires a grace period of no or a very few days.
- You have to look for WC coverage in desperation mode.
- One of the questions asked on your desperation mode policy application is have you been cancelled for non-payment of premium? Well, that just happened.
- Carriers are very hesitant to underwrite your company as you do not pay your bills on time – see #9.
- Some states will not allow you to enter their risk pool if you have unpaid premiums.
- Your company faces massive fines for no WC coverage.
This happens more than one might think in the WC policy quote process. How does an employer avoid this situation?
The methods to avoid the situation are:
- If it looks too good to be true, it probably is.
- Look at your old policies – are there any major changes from the last three years such as a payroll reduction due to the economy, change of business practices, etc.?
- Budget for the premium audit if you think a large bill is coming after the policy expires.
- Make sure that you agree with the premium audit to the penny.
- You can dispute the premium audit and bill. NEVER use disputes as a way to delay bill payment. There has to be a good justification for the dispute.
- Look at alternative WC coverages that charge your company each pay period.
There are other methods to avoiding this situation. The main one is #1.
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