10/02/2024
I highly recommend not cutting corners on a business insurance application. If questions are answered incorrectly on the application, in order to generate a lower rate - it just gives the insurance company a reason to deny your claim in the future. I consider it one of the most important things I can do to make sure that does not happen. The purpose of insurance is to indemnify you from a specific risk. Don't let an agent place a policy like that, unknowingly or otherwise. What happens if that million dollar liability policy carrier denies a big claim?
The insurance carriers will definitely audit GL and Work Comp accounts from time to time. Subcontractor pay is something I see people take a hit on pretty frequently. If you have questions about what the State considers a subcontractor, we can provide documentation and advice to help you.
The potential negative consequence that can happen from one of those audits is that they find out that subcontractor pay was, for instance, actually over 300k, instead of ZERO - it can generate a back billing situation that has the potential to become quite large. The insurance company can then go back and charge premium for what they had been covering on that subcontracting back to Day 1. The policy can get suspended until payment is made, and that prevents the business from taking new jobs or entering contracts that require a proof of coverage. Since the tax ID is what they use to bind coverage, it makes it hard to just go get new coverage from another carrier.
If you have questions about any of this, we can help.
Stonebridge Insurance Services
