Insurance Premiums & Rates

Besides the coverages on your insurance policy the premiums and rates are usually the next most important item for an insured to consider. Because the insurance marketplace is competitive and there are many players in the marketplace, most of the players tend to disguise their rates and premiums, especially in the proposals. If you as the insured do not understand how your premium is promulgated you could likely be held hostage to a very large insurance premium audit at the end of your policy year.

Some insurance brokers have a lack of integrity and play the game of disguising the premium and rates in their proposals in order to obtain a sale. While other brokers and agents sometimes just don’t have the education, experience, or expertise as to how the premiums are promulgated for your particular risk. The last category of brokers and agents are those who are very transparent and upfront with the premiums and rates and how they are promulgated so that there is clarity for you the insured.

If you currently have an insurance policy and are looking to make a change it would be prudent to understand clearly what you are paying and how the rates and premiums are determined on your current portfolio. If you do not understand what you currently have with regards to your premiums it will be very difficult to make a decision to move to another carrier as you will not know whether you had a good deal or not already.

So for you the client there are three important premium processes that you need to understand fully. As we previously discussed it is important to understand how your current insurance carrier is promulgating the premiums and rates for your current plan. Next, you need to understand the proposal that you’re being presented to entice you to make a change. You need to fully understand within the proposal the rating basis that that final premium is going to be determined upon. Are they using square footage, are they using payroll, number of employees, sales and gross receipts, etc… If it does appear that your proposal is a better deal than your old plan you need to make one more analysis with regards to premiums. Once you receive your insurance policy you need to make sure that the policy is in alignment with the proposal that you were presented by the broker. In the proposal the broker may or may not have been transparent in the rate and premium analysis. You cannot assume that premiums on the proposal will also translate into the insurance policy that you receive.

Yes you can hold the broker accountable via litigation if the policy does not match up to the proposal but waiting for a claim to happen or a large audit invoice at the end of the year is aggravating at best. It is wise and prudent to reconcile the premiums on your current policy, on the proposal that you receive, and finally the policy that you end up purchasing.

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