We have had a lot of questions from our commercial auto drivers regarding the recent ELD mandate for NC truckers so we figured we would do a short article offering an explanation as to what that is and how it may effect you.
A new mandate has been put in place by the US Department of Transportation (DOT) that requires an electronic logging device (ELD) for most motor carriers and drivers that are required to maintain records of duty status (RODS). The deadline for this mandate is December 18, 2017. If you have a grandfathered automatic on board recording devices (AOBRD), then the deadline will extend to 12/16/2019 for these drivers. After this deadline, then all motor carriers and drivers will need to adhere to the ELD rule if they are registered with the Federal Motor Carrier Safety Administration (FMCSA).
Drivers who don’t use paper logs more than 8 times during a 30 day period
Driveaway or towaway drivers
Drivers who drive vehicles manufactured before 2000
Aside for the ELD mandate for NC truckers requirement, there are many reasons that an ELD will be beneficial to you.
Some of the benefits of having an ELD are shown below.
They make logging easier and quicker.
You can qualify for a discount from your insurance company.
They lower the likelihood of driver mistakes.
Helps losses due to employee fatigue.
Lets you better track driver location.
If you have any questions on this new ELD mandate for NC truckers or need to know where to get one. Please reach out to us at 704-494-9495 and we will be happy to go into more detail with you. Please remember to let us know if you have an ELD that you are currently using, because the discount on your insurance can be significant and we want to make sure you are receiving the proper premium credits on your insurance policy.
Cargo insurance is rapidly growing in the trucking industry in NC. Due to the increased popularity of Amazon delivery, package delivery has increased by quite a bit in the last couple of years. This coupled with freight delivery of all kinds, has increased a need for more cargo insurance companies.
We have an expertise on trucking insurance of all kinds. There are several factors that you should focus on when choosing the correct insurance coverage and commercial trucking insurance company.
You will want to make sure the insurance company that you go with can offer you your required limits at competitive premiums.
The limits you choose for each commercial auto liability coverage should be sufficient to the following parties:
Auto liability will cover anyone that you hit while driving your commercial truck.
The weight of your truck, the radius that you are traveling, and the type of goods you are hauling will all impact the minimum insurance requirement for auto liability. The most common limit though when crossing state lines, is $750,000 per the Federal Motor Carrier Safety Administration (FMCSA).
Keep in mind that your contract may require higher limits than the minimum FMCSA limits. Even if your contract doesn’t require it, you may want to consider higher limits to protect yourself further.
CARGO LIABILITY INSURANCE
Cargo liability will cover damages to the goods you are hauling due to your negligence.
The FMCSA also has cargo liability requirements for certain trucking risks. If you aren’t required to have this per the FMCSA, you likely will with any contract you enter into. We typically see a minimum cargo liability requirement of $100,000.
A similar coverage type is On Hook Liability which is more common on towing and auto hauler risks. If requesting On Hook Liability coverage on auto haulers, be careful, as there are certain coverage gaps when choosing this policy type. The premiums are usually less expensive, but you don’t want to be caught without the correct coverage.
MOTOR TRUCK GENERAL LIABILITY INSURANCE
A lot of contracts will require you to have a General Liability policy in force. This will cover claims outside of anyone you hit or damages to the freight you are hauling. Claims on these policy types are less common but they still can occur.
Losses for general liability can occur for delivery errors, driver negligence while loading or unloading, libel, and slander. A typical required limit of liability on this coverage is $1,000,000. Premiums for this coverage type are generally the lowest of the commercial cargo trucking polices.
For questions of any kind on commercial cargo insurance, please feel free to give us a call at 704-494-9495. We can also offer free quotes with all of our various commercial trucking insurance carriers.
We will discuss policies for short term rental insurance or seasonal homes. This can commonly be referred to as Airbnb insurance, VRBO insurance, or vacation rental insurance. The policy is similar to a personal home insurance policy with slight variations.
Short term rental insurance is not a new phenomenon, but there has been a large increase in these as of late. This is due largely to the advent of companies like Airbnb and VRBO. These companies make the job of leasing your home out a breeze. A lot of people don’t want to turn down the opportunity to make the extra income on their seasonal or secondary homes. If you own a home that you use as a seasonal or vacation home and also rent out, then you should make sure that your insurance policy covers you accordingly.
A lot of people don’t understand that you need to have a specific policy in place to make sure short term rental properties are covered. You need to notify your home insurance company if you move out of your home and lease it to a tenant or have it unoccupied or coverage can be denied. You also need to notify your insurance company of any changes in usage of your secondary home as well.
Most home insurance policies will exclude coverage for business pursuits on your home. This makes your standard home insurance policy inadequate for covering such losses on short term rental properties. Further, if you have a commercial policy in force, but you also use your home as secondary residence for yourself, a commercial policy won’t be sufficient coverage either. This is why you need a specialized policy that acts as sort of a personal and commercial policy hybrid.
Quite frankly, most insurance companies have yet to offer coverage for such a risk. That is just one of the reasons that a large percentage of people do not have proper insurance on their short term rental properties. Another reason is consumer education. Don’t fret though. We have multiple markets that will take on this risk and we are able to close the knowledge gap on this topic.
There are many properties that can constitute a short-term rental policy. Some of the more common types are listed below.
Common Seasonal Homes and Short Term Rental Types
Beach house or condo
Lake house
Mountain house or cabin
City condo
Golf course house or condo
Most Important Types of Coverage
What coverage types should you focus on when getting a policy? There are several endorsements that should be considered. The 4 most important types of coverage for short term rentals are listed below.
Dwelling
Contents
Liability
Business Income
DWELLING
The dwelling is the structure you want to cover. For your home or condo to be covered it is important to make known the use of the building. Like your primary home insurance, this will cover things like fire, water losses, falling objects, lightening, wind, etc. If you use it as a vacation home and a temporary rental, this should be disclosed to your agent. Insurance companies may deny coverage even on these losses if they discover you are renting your house out, even on a short-term basis.
In many cases you can also cover detached structures such as sheds, barns, guest houses, and garages. You want to make sure to tell your agent about these to make sure they are listed on your policy. Some policies will cover up to 10% of the primary dwelling amount. Some, but not all. You may also find that these detached structures need to be covered for more than this amount.
CONTENTS OR PERSONAL PROPERTY
These items include clothing, appliances, furniture, lawn care items, etc. It is highly recommended that you add a replacement cost endorsement to your policy so these items can be replaced instead of just receiving the depreciated actual value of them today if there is a claim. That way if you had a fire loss, you could truly replace everything with like items that are brand new.
LIABILITY
This might be the most important coverage type. If you are leasing out your home and you are sued for negligence of any kind, your liability coverage will protect you. Keep in mind you don’t even have to be at fault to get sued. Lengthy court battles can get expensive and your liability will cover these expenses. They will also cover settlements if the courts rule in favor of the plaintiff.
Do yourself a favor and choose the highest liability limit the company will offer. The cost differential is not that much and the reward for having the higher limits can be huge. Many companies will offer a limit up to $1,000,000 for liability.
BUSINESS INCOME
Sometimes referred to as loss of use coverage, business income covers expenses you would incur by not being able to rent a property due to a covered loss. For example, if you had a fire and the home had to be renovated or replaced, your business income coverage would pay for loss of rental income during this time of reconstruction. This is not always standard so be sure to ask for this if you want the coverage.
Two final recommendations.
If you plan to rent out a property of any kind, you may want to consider transferring that property into a business name or LLC. This will further protect you from anyone being able to access any of your assets in your personal name. Just make certain your insurance policy is in the same name as the property owner.
Consider an umbrella policy that will pick up where your underlying property policy leaves off. Again, make sure you have the correct name listed as named insured on this policy as well.
For any questions on anything discussed please feel free to give us a call at 704-494-9495. Our agents can help explain these matters to you and get you a free quote on this coverage.
Amazon has recently introduced Prime Now to the Charlotte, NC region. This has opened up a need for more drivers and an important insurance implication that should be carefully considered. We will focus on Amazon delivery insurance in this article. We will discuss what you need to know when securing this business auto insurance policy.
Amazon employs independent contractors to help assist the US Postal Service and other large package delivery services like Fed Ex and UPS. Independent contractor drivers are commonly referred to as Amazon flex drivers. Amazon also uses delivery providers.
Amazon has certain requirements to become a driver that vary depending on if you are considered a subcontractor or a direct employee of a delivery provider. Some of the main requirements are shown below for each.
Delivery Provider
A cargo van with at least 300 cubic feet of cargo space
Complete a safety and driver training course
Wear a uniform
Have minimum insurance requirements
Flex Driver
Have a smart phone and be able to download the app
Be able to complete a background check
Have the minimum required vehicle such as a mid-sized 4 door sedan, SUV, mini-van, or pickup truck with an enclosed bed
Have the required license to drive and minimum insurance requirements
For a list of frequently asked questions on becoming a driver you can clickhere.
With all those requirements in place, there currently appears to be a coverage gap on being properly insured though. Delivery providers typically have minimum requirements for having commercial insurance. Flex drivers, not so much. Proof of a personal insurance policy may be sufficient for Amazon, but it is not for you and your insurance company.
One of the main exclusions on your personal auto policy is any kind of business use with your vehicle. A personal auto policy will allow a business use class endorsement for certain business uses, but package delivery is not one of them. To be adequately covered to use your vehicle for any kind of package delivery, you would need to have a commercial auto policy in force. Some commercial auto policies will also cover you for personal use if that is requested on the policy. That way you are covered for business and personal use under one insurance policy.
Just as transportation network companies such as Uber and Lyft have recently arrived and created a new era of insurance concerns, Amazon’s changes to package delivery has also opened up these same concerns. Just because you are fine in the eyes of Amazon, doesn’t mean you are fine if you have a claim.
For example, if you back up your vehicle after delivering a package and run over someone or something, your insurance company will want to make sure that you are covered under a commercial policy before paying out on such a claim. This would effect not only damages to your vehicle, but also the liability for the damage you did. Don’t expect Amazon, Uber Eats, or any other company you are delivering for to pay for your loss.
With the recent purchase by Amazon of Whole Foods, this will also create even more opportunities for more drivers, which in turn brings more insurance questions. We mention Amazon when referring to these package delivery opportunities because of their relative market share for home delivery. They are absolutely not alone though. Virtually every large retailer has plans implemented, if they haven’t already begun to deliver items. Whether it is restaurant food, groceries, general merchandise, or any other items, a personal auto policy will not cover you for delivery of any kind.
It is very important to make sure you are adequately covered before starting to work for any company doing delivery of any kind. Many people hear commercial insurance and get scared thinking your premiums won’t be affordable. That isn’t really the case at all. Many commercial policies can be quite similar in premium to your personal auto policies. Don’t wait until you have a claim denied before looking into this. Call us at 704-494-9495 if you have any questions and one of our friendly and knowledgeable agents will be happy to discuss options with you.
If you are a contractor in NC using your personal auto insurance policy for business use, then you may not be adequately covered if you are using that vehicle for business use when a claim occurs. Most insurance companies will deny coverage on your personal auto policy if you have a loss while using your vehicle for business use. Be sure that you are writing your NC contractor auto insurance policy the correct way.
We will discuss some of the more common types of contractors in NC that may need a commercial auto insurance policy. We will also help dispel some of the common myths regarding commercial auto insurance for these contractors.
Types of Contractors Needing Auto Insurance
Painters
Carpenters
General Contractors
Roofers
Plumbers
Electricians
HVAC Repair
Handypersons
Janitorial Services
Concrete Contractors
Common NC Contractor Auto Policy Myths
MYTH 1
A COMMERCIAL AUTO POLICY IS EXPENSIVE
Many people are afraid that if you purchase a commercial auto policy, that you will pay more for auto insurance. This is a myth. In fact, in many cases a commercial auto policy may actually be less expensive.
If you have points on your license from tickets or accidents, then certain commercial policies actually weigh less heavily on rates on a commercial auto policy then on a personal auto policy.
Contractor auto insurance is one of the more competitive industries. Right now, this is a target market for many of the larger companies. This in turn makes the rates much more competitive. Most of our customers are pleasantly surprised when we give them the rates for commercial auto insurance.
MYTH 2
MY PERSONAL AUTO POLICY WILL PAY OUT IF I AM USING MY POLICY FOR WORK
Depending on the type of loss that occurs, many companies will deny your claim if the policy is not written correctly. Even if you are a painter, and you back your pickup truck into property of any kind at a job site, your claim can be denied.
MYTH 3
THERE IS NOT A POLICY THAT COVERS ME FOR BOTH PERSONAL AND COMMERCIAL USE
Many companies offer hybrid policies that will cover you if you are using your vehicle for personal or business use. This is true for most business types. You just need to disclose the use of the vehicle to your agent so that you will be covered in any possible claim. We have a company that has actually recently instituted this for ride share companies such as Uber and Lyft.
There is a coverage gap that will not cover you unless you add this endorsement to your personal policy. Without this policy, you are exposing yourself to one of the more recent causes of denied claims. You don’t have to purchase an expensive taxi cab policy if you are using your car sporadically for this purpose. Just add this endorsement to your personal auto policy. Use caution though, as this is so new that many companies do not offer this endorsement yet.
Contractors using their trucks or vans for personal and business use can also be picked up under one policy. In some cases this can be done by listing business use on your personal auto policy. In other times you can add personal usage to your business auto policy. It is important to explain exactly how you will be using the vehicle to your insurance agent so they can adequately assess the best policy to cover you at all times.
MYTH 4
MY CAR IS NOT IN A BUSINESS NAME, SO MY PERSONAL AUTO WILL COVER ME
Your vehicle does not need to be in a business name to require a business auto policy. If you have advertising on your vehicle or if you use your vehicle for business use, then you should contact your agent to see if you should update your policy. In some cases, you can just add business use to your personal auto policy and be adequately covered. In others, you would need to have a business auto policy in place.
MYTH 5
IF I HAVE A COMMERCIAL AUTO POLICY, THEN IT WILL COVER ME FOR PERSONAL USE OF THAT VEHICLE
It is important to disclose to your agent that you use your vehicle for personal use as well. In most cases, the difference in premium could be minimal and it could be the difference in being covered or not.
There are so many reasons to make sure that you have the right policy in place so that you will never have a claim denied. Why pay for insurance if there is a chance they won’t pay out for a claim? Quotes are free and it can’t hurt to educate yourself fully on the matter. If you have any questions on the matter or would like a free quote, please call us at704-494-9495.
Owner operators are individuals who own their own trucking business. They may operate under their own authority under their own MC number or they may lease on to another motor carrier. We will discuss owner operator insurance coverage types.
If you want your own authority, you will need to apply for this through the Federal Motor Carrier Safety Administration (FMCSA). You will need to prove that you have the minimum liability limits as required by FMCSA and pay a $300 filing fee. You can go to their website to see the steps to apply for your own authority.
If you do haul under your own authority, then you will need to have these required limits ofauto liability, including(in some cases) cargo liability, and an active MC number. The proof of insurance, as sent to the FMCSA by your insurance company, are referred to as filings. These filings are delivered to the FMCSA as proof that you have the minimum liability limits.
For those not hauling under their own motor carrier authority, we want to discuss several coverage options for owner operator insurance.
NON-TRUCKING LIABILITY and BOBTAIL LIABILITY
If you decide to lease on to another motor carrier and haul under their authority, then they will carry the primary liability insurance. If this is the case, you still need to have a non-trucking liability insurance policy. This covers you when you are not under dispatch for that motor carrier. Non-trucking liability is also commonly referred to as bobtail liability. This is not accurate. We will discuss the difference later in this article.
The cost is typically much less for this coverage type then truckers liability insurance due to the limited time that coverage come in to play. You do not want to be without this coverage in the event that you are in accident when you are not driving under another carrier’s authority.
PHYSICAL DAMAGE COVERAGE
If you are financing your truck then the lienholder or bank will require you to have physical damage coverage to cover the damage to the vehicle in the event of a claim. This comprehensive and collision coverage will cover those losses.
Even if you are not financing the vehicle, you want to seriously consider this coverage to put you back to where you were before the accident occurred.
CARGO INSURANCE
Cargo insurancecovers the load you are hauling. Depending on several factors, the FMCSA may require you to have a certain amount of cargo insurance. Even if this isn’t required by the FMCSA then you may be required to have it by the contract you are in with the motor carrier. There are various coverage and deductible options for cargo insurance. You will need to explore these options versus the requirements you may have along with what suits your needs.
TRUCKER’S GENERAL LIABILITY
Trucker’s general liability or motor truck general liability covers losses to property damage or bodily injury due to your negligence, not related to operating your truck. This is the least common coverage type of those discussed but you may have a contract requirement that would cause you to purchase this insurance.
The expense of this policy is generally much cheaper than the other coverage types so you should consider purchasing this policy even if it is not required, to protect yourself from any coverage gaps.
WHAT IS THE DIFFERENCE BETWEEN NON-TRUCKING LIABILITY AND BOBTAIL LIABILITY
Non-trucking liability typically comes into play when you are using your truck for any personal use whatsoever. If you are involved in a large accident then it will be up to the insurance carriers, and in some cases, the courts to determine who is responsible for paying for the damages. The motor carrier you are hauling for would be responsible for the liability while you are driving under their authority. It is also in the opinion of the court in many instances that they would also be responsible for liability losses during your drive home.
Bobtail liability will cover you when you not hauling a load or trailer. If you drop off a load for one carrier and you are on your way to pick up a load for another carrier, this is when your bobtail liability would come into play.
The FMCSA will not require you to have non-trucking liability or bobtail liability since you are not under motor trucking authority. Many contracts will also not require this coverage from you since they are only responsible when you are hauling for them. This leaves the choice up to you. Since you own your truck, when there is a loss you will be responsible. When a loss occurs while driving a large truck, the loss amount can be significant and could cripple you and your business financially. Don’t wait until after the loss to consider this very important coverage.
Trucking can be a very lucrative career and the need for this industry doesn’t seem to be going away anytime soon. The start-up of a trucking company can be a daunting task. The insurance part of that start-up is probably one of the most common areas of confusion to new businesses and trucking veterans alike. We realize this and have therefore put a trained staff in place to help you with any questions. Please contact us at 704-494-9495 for any help with these topics.
Bar and night club insurance policies have various coverage types that are exclusive from those of many other kinds of businesses. We will talk about many of those different coverage options that will protect your business from various types of insurance claims.
Many companies shy away from offering coverage for certain types of risks like night clubs, restaurants, wine bars, topless clubs, cigar bars, lounges, hookahs, sports bars, dance halls, comedy clubs, and pool bars just to name a few. You will want to make sure that you do your research and find a company that will not only give you a reasonable premium, but will also offer the coverage you need.
You never know when you will have a claim and you don’t want to be at risk for having certain exclusions on your policy when it is too late. You should at least understand the many different coverages that are available. Once you educate yourself on what these coverages are, you can determine what chance you think that you will incur any of these claims.
Bar and Night Club Coverage Types
General Liability Insurance:
General liabilityinsurance covers losses for your negligence in bodily injury or property damage claims.
Liquor Liability Insurance:
Liquor liability provides coverage for bodily injury or property damage by intoxicated patrons of your establishment. General liability insurance will not cover you for losses pertaining to intoxicated guests.
Bouncer Liability Insurance:
Bouncer liability covers physical harm by employed bouncers to your patrons. Also covers injury to your employed bouncers.
Assault and Battery Liability Insurance:
Assault and battery provides liability if fights occur while on the premises and patrons are injured. This coverage must be in place if you want coverage for these types of losses as a general liability policy will exclude these losses as well.
Workers Compensation Insurance:
Workers compensation covers injuries to your employees while on the job. Working in a fast paced environment with food and beverages can greatly increase the likelihood of an injury to your employees.
Cyber Security:
Insurance coverage on things like the misuse of data or illegally obtained client data. Don’t expose yourself to a claim scenario like your clients credit data being illegally obtained and used.
These are just some of the coverage options that you could choose from. Understand that, as is the case in many commercial policies, there are many endorsements that can be added to your policy that can cover losses like employee dishonesty, damage to outdoor signs or windows, employee discrimination complaints, and many, many others.
Rates can vary greatly depending on several factors.
Insurance Rates for Restaurants and Bars
Common rating factors for insurance premiums will include the some of the following factors.
Hours of operation
Types of entertainment
Capacity of patrons
Location of your establishment
Annual sales
Annual payroll
Types of coverage chosen
Years experience or years in business
Loss history
Every establishment is different and you want to make sure that you discuss your needs with an agent that specializes in these forms of coverage and policy types to make sure that you minimize your losses. Whether you have a quiet lounge or a tavern with a mechanical bull, bad things can happen that can put you out of business unless you are properly insured.
Call and talk with a knowledgeable agent today to see what coverage would be recommended for your establishment. Our agents can be reached at 704-494-9495 or by emailing contact@pegramonline.com.
Commercial auto insurance has several coverage options that you should familiarize yourself with and determine if they are right for your business. We will discuss several of these below.
Hired Auto
Gives Liability coverage for a non-owned or unlisted vehicle that is leased, rented, hired, or borrowed by the insured for incidental operation of the business.
Owned Auto Coverage
Provides Liability coverage for vehicles owned by the named insured and any owned vehicles acquired during the policy period.
Non Owned Auto
Extends Liability coverage to any non-owned vehicle that is used by an employee in the operations of the business.
Any Auto Coverage
Extends Liability coverage to any vehicles acquired or bought during the policy term until the end of the policy term.
Pollution Liability
Covers bodily injury or property damage coverage due to the discharge of pollutants that are being transported or towed.
Trucker’s General Liability
This coverage gives bodily injury or property damage coverage sustained in the course of business while using products or services on premises.
Drive Other Car Coverage
Excess coverage for an executive of a corporation or partnership when driving a non-owned vehicle.
Step Down Liability Coverage
This coverage reduces the liability limits to state minimum requirements for drivers not listed on the policy.
Non-Trucking Liability or Bobtail Liability
This is liability coverage for policyholders who are under lease to a motor carrier which provides the primary liability coverage.
On-Hook
Provides coverage for the vehicle or vehicles being towed or hauled.
Garagekeepers Coverage
Provides Physical Damage coverage for a customer’s vehicle left in the care, custody, and control of the insured while at a covered location or in transit between covered locations.
Cargo Liability
Provides Liability coverage for the covered property in the care and control of the insured and being transported by the insured’s covered vehicle.
Trailer Interchange
Trailer Interchange covers physical damage to any non-owned trailer while in the care, custody, or control of the insured.
These are just some of the various coverage options for commercial auto insurance. Some of these may or not be available for your business type and some may or may not be required. It is important that you speak with your agent on what would be suitable for you. You can also call us at 704-494-9495 with any questions.
The wait is over. Uber insurance is available in Charlotte, NC! Uber and Lyft drivers in Charlotte and other surrounding cities in NC have waited patiently for a solution to the coverage gap for ride sharing insurance, also referred to as transportation network insurance.
We can now offer a personal insurance policy with an endorsement that can be added to it that will cover drivers who sometimes use their own personal vehicles to drive for Uber or Lyft. Insurance carriers on all personal lines auto insurance policies exclude coverage while driving for a transportation network. If you were driving for one of these companies up to this point, you were likely driving around without insurance for part of your trip.
Uber has taken the stance where they would cover a claim only while you had a passenger that you were transporting or when the Uber app matched you with your passenger you were to pick up. Your personal lines insurance policy would cover you only while you were using the vehicle for personal use. This left a gap in coverage while you were sitting with the app on waiting for a fare.
BEFORE:
Not Covered
*The app is turned on and you are waiting to be matched with a passenger.
Covered
*Match is made and you are on the way to pick up the passenger.
*Passenger is in your vehicle.
NOW:
No coverage Gaps on endorsed policies. Uber still covers you during the times stated above. Your endorsed policy will cover you while the app is on and you are waiting to be matched with the passenger.
Transportation networks are brand new, and we will without a doubt see changes in the future as the industry grows and changes. This sort of hybrid policy is a step in the right direction. Up to this point, drivers only had 2 choices.
Purchase a commercial auto policy as a true livery or taxi cab policy that was rated much higher than a personal auto policy due to a much higher exposure. You would also need to find a company that would allow you to add an endorsement to your policy that would allow you to use the policy for personal use as well.
Take a chance and drive uninsured.
With a more affordable policy available in NC, there is no excuse for transportation network drivers driving for Uber, Lyft, or various other companies to drive without the proper coverage.
Anyone who has ridden in a vehicle for one of these ridesourcing companies cannot deny the ease of use of the app and, in most cases, the low fare cost. With so many users opting for Uber and Lyft over taxi cabs these days, we know that this form of transportation is here to stay.
If you have any questions or would like a quote on Uber insurance or Lyft insurance, please give us a call at 704-494-9495. There is no reason to have a gap in insurance coverage any longer. YOU MUST PURCHASE A POLICY WITH THIS ENDORSEMENT ADDED TO BE COVERED.
We will continue to update you on this exciting change with future articles regarding this subject.
If you are a contractor that does not have any employees and you have a contract that requires you to have a workers compensation policy, then you have likely heard of a ghost policy. What does this term mean though? A workers comp ghost policy is an industry term that typically refers to a workers compensation policy that is issued in the residual market through the North Carolina Rate Bureau. The term ghost policy is used as a reference to a workers compensation policy that has no employees. With an increasing number of contractors requiring their independent subcontractors to have a worker compensation policy, there needed to be a policy that these subs could get even if they didn’t have employees themselves. These policies were created to give these independent subs a way to get the needed certificate of insurance.
Why do contractors need you to have a workers compensation policy if you have no employees?
The reason you are being asked to have this policy is because it transfers the liability to you if you are hurt while you are on a job. If you have your own workers compensation policy in place, then it would be your policy to pay out if you are hurt. The main reason you are being asked to have this policy though is because it keeps the general contractor’s workers comp rate down. If they pay you as a 1099 independent sub contractor then your pay from them will not figured into their audited workers comp premium.
What is vital to know with ghost policies?
Do your audit. When asked for information from your workers compensation company it is very important that you respond in a timely manner. The insurance company can increase your rate, withhold a refund, or mark you as non-compliant which hinders your ability to get a policy in the future.
Make sure to 1099 any subcontractors under you AND make sure you get a certificate of insurance for them in order to keep your overall workers compensation rate down. If you have W-2 employees then their pay will count towards your workers comp premium. If you don’t get a certificate of insurance for your independent 1099 subs then their pay will also count towards your workers compensation premiums.
The workers compensation policy will not cover you and your injuries as the owner if you don’t elect coverage for yourself. In an effort to keep the rate down, most owners exclude coverage for themselves. You must remember this if you are ever hurt though as there will be no coverage at all for your injuries if you reject coverage for yourself.
The NC Rate Bureau will assign your policy to a specific company. If you have had a policy in the past then it will likely be the same carrier since they have your policy history.
Workers comp policies are always estimated premiums. We never know what our true payroll will be unless we have 0 employees. It is for this reason that your policy premium is estimated. The true cost of the premium will be settled after the audit.
Why are workers compensation policies so expensive?
These premiums can be expensive depending on what your class code is. Typically exposures such as office work are very inexpensive because the risk value is so low. This is not true for classifications such as carpentry and roofing risks. The reason for the hefty premiums is due to the risk level and the fact that it will not only payout for their medical bills if they are injured, but also to their loss of time at work. When there is a claim, these total payouts can be very significant.
What kind of items are needed for an audit?
Below are a list of some of the more common items that are requested when you are completing a workers compensation audit. It is important that you keep accurate records leading up to the audit.
941 payroll reports
Schedule C of your income tax return for the business
Ledgers and journals for the business
Business check books
List of independent 1099 subcontractors
Bank statements
North Carolina Rate Bureau (NCRB) residual policies, known as workers comp ghost polices, can be a very important part of your business requirements in getting work from other contractors. It is important that you take them seriously and that you arm yourself with all of the information needed to ensure that you don’t see extremely high rates. You also want to protect yourself as an employer from very expensive lawsuits. You should have a lengthy discussion with your agent to see if this policy type is something that will be beneficial to you.
