KEY ITEMS YOU SHOULD LOOK FOR IN A COMMERCIAL INSURANCE PROPOSAL – and if not you could find yourself not getting what you paid for.

Every so often I’ll have a prospect or current client send a proposal from a competitor and upon looking at it there are some things right off the bat that I notice that is not included that should be. At first, it may not seem important. You get the quote with the limits, insurance verbiage or items being covered and the pricing with some terms and a few other variables and you’re good to go, right? Not so fast.

Just as a proposal to get, let’s say, your kitchen remodeled there are a few details that should be included in that proposal that outline EXACTLY it is you are getting.  It’s not enough to say that you are getting custom oak cabinets with some dimensions or a certain type of tile for the floor or type of appliances.  You need to know what color, hardware, size or brand being used, etc.  The details make all the difference.

Same goes with a commercial / business insurance proposal.   What does it all include? What is the quote based on?  For General Liability insurance is the policy price based on your gross sales or employee payroll?  What classification is being used?  What is the insurance company’s rating?  What are the terms and conditions?  Is there is a Sunset Clause or Manifestation Clause that can significantly reduce coverage to make the price look attractive?  Are defense costs inside or outside the limits of your liability that affect the payout on a potential claim if you’re named in a lawsuit?  If these aren’t included in your proposal then you could be at risk for a large premium audit or no coverage when you think you do.

These are important questions regardless of its General Liability policy, Workers Comp policy or Commercial Auto insurance policy. They are all based on certain criteria and exposures.  Does your Commercial Auto quote tell you if others can drive your company vehicle?  Some policies have restrictions on this.  Does the proposal state a mileage radius or what the vehicle value is? This makes the policy costs less however, if your vehicle stated amount is lower than the actual cash value, you could be left paying more out of pocket after you get finished paying the deductible to make up the difference.

I have a client in the construction business that showed me a competitor’s proposal for his General Liability insurance and although it did include some important factors like being rated on gross sales, the classification and some miscellaneous terms it was missing some crucial details like the exclusions in the policy, any type of mandatory phone inspection, year-end audit, information regarding the sub contractors carrying the same limits of insurance as the one he is purchasing and obtaining a contract that contains a hold harmless agreement.  Or more importantly, what the broker fee is being charged.

So, when the time comes to purchase or renew your insurance make sure these important elements and disclosures are included in your proposal. If not then your agent is not giving you proper disclosure and you should ask them about it.