A workers compensation audit is an inevitable part of all workers compensation policies. While many other commercial insurance policies may require them as well, it is not always done in every case. These policy types can include commercial general liability, commercial property, commercial auto, professional liability, etc. With a workers compensation policy, you can count on an audit being done for each policy term.
A lot of our clients may feel overwhelmed by these audits at first. However, after completing their first audit, they become less daunting in the future. The purpose of these audits is to accurately assess the correct premium based on the actual payroll versus the payroll that was estimated at the beginning of the policy term.
Quite simply, if you overestimate your payroll, then you will receive a refund. If you underestimate your payroll, then you will receive an additional premium bill. Coming up with an estimated payroll, in almost every industry, is really just a best guess. There are several factors that may cause your payroll to go up or down.
Some of the factors that may cause payroll to change are:
Terminating an employee
Hiring an employee
A rise or fall in business causing payroll to change
Hiring an uninsured subcontractor
Hiring an employee or sub outside of your normal class code
Work that changes depending on the season or the weather
In addition to assessing the correct payroll, the workers compensation company will want to confirm that the correct class code is chosen for that business. Class codes are the best description given to the actual work being done by that business. For some businesses, the actual class code is easy to determine. For others, it can be a little more tricky and the insurance company will have to accurately assess the risk based on the day to day work being done.
In some cases, one business may have several class codes. This is seen very often with construction companies where they may have painters, electricians, concrete construction, tiling, plumbing, HVAC, roofing,etc. Businesses with multiple class codes will want to separate their payroll based on these different classes or they will likely face their total payroll being lumped into the most expensive classification.
Class codes can range in scope from very expensive to extremely inexpensive. One of the lowest and most inexpensive class codes is clerical office employees. One of the most expensive classes is for roofers. The reason for this discrepancy is due to the risk level involved in each line of work. Not only will these rates be determined due to the chances of an accident, but also the severity of the accident. The more severe the accident, the more that worker will need more money to pay for medical bills and the longer he/she will be out of work.
Their are certain records will you need to produce to show the proper documentation in completing your audit.
Some of the items you will be asked to present to complete an audit may include the following:
Form 1040 Tax Return(this is for sole proprietorships)
Schedule C (this shows the profit or loss breakdown of expenses on your tax return)
Schedule SE (Self Employment Tax)
Schedule K1 (Shareholder’s Share of Income)
Form 1120 (US Corporate Income Tax Return)
941 Reports (Quarterly Federal Payroll Tax Reports)
You should know what payroll will be picked up on your premium audit.
Who will be included in my payroll?
1. Anyone that you paid as a W2 employee will be counted as payroll.
2. Any 1099 subcontractor that your business paid that you did not receive their workers comp certificate of insurance from.
3. Owners that have not rejected coverage as either owners, officers, members, etc where allowed by law.
Every state has different workers compensation laws and you will need to discuss with an insurance professional the laws within your state. You will also need to confirm if your workers compensation policy in the state where your business resides will cover you while doing work in another state. For instance, in NC, a policy purchased here will not cover even 1 employee that would be doing work in FL. Not even temporarily. It is very important that you discuss this with an agent before beginning work in another state. The penalty for not doing so can result in large fines from the state or you being responsible for paying out in the event of a claim if it is denied by your insurance company.
In closing, don’t let the workers comp audit scare you. As long as you maintain accurate records, you will be fine. We strongly urge our clients to not let any 1099 subcontractors do any work for you, without first getting a copy of their own workers compensation certificate. An audit can actually be a good thing. For a lot of our clients, they see a refund at the end of their audit term. This is a welcome surprise and it is a much better feeling then being hit with a large additional premium because you didn’t adequately plan or keep accurate and ongoing records.
If you have any further questions on this subject or on workers compensation policies in general, please feel free to give one of our friendly commercial agents a call at 704-494-9495.
We have had a lot of questions from our NC commercial auto drivers regarding the recent ELD mandate 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 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 mandate or 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 a rapidly growing 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:
The companies you are contracting with
AUTO LIABILITY INSURANCE
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 insurance policies for short term rentals or seasonal homes. This can commonly be referred to as Airbnb insurance, VRBO insurance, or vacation rental insurance.
Short term rental homes are 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, (Airbnb.com) and VRBO (vrbo.com). 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
Mountain house or cabin
Golf course house or condo
What coverage types should you focus on when getting a policy? There are several endorsements that should be considered. The 4 most important types coverages for short term rentals are the following:
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 detatched 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.
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.
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.
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. For more information on this you can go to https://logistics.amazon.com/ or https://flex.amazon.com/.
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.
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
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
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.
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 COMMERCIAL AUTO POLICIES
Below are some of the more common contractors that may need to have commercial auto policy.
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.
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.
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.
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.
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 at 704-494-9495.