Posted on May 19, 2014
When applying for general liability insurance, your broker requires specific information to provide you with the best possible coverage and pricing. Insurance companies have their own internal paperwork requirements that brokers must comply with in order to obtain general liability coverage for your company. Generally, most insurers will want to know specifics about your company such as the size, time in business and location. Additionally, all carriers need a company?s business revenue or sales receipts in order to properly price the policy.
Obtaining business revenue information allows insurance companies to assess the sales volume of a company to better understand the size of the company and the risk associated with insuring the business. Usually larger companies have higher risk loss so they want to make sure they charge the appropriate rates for business size and exposure.
Typically, sole proprietorships and partnerships are rated on minimum payroll figures no matter the actual payroll paid and without regard for sales receipts. Often, insurers will review a company?s area rather than just receipts to determine policy pricing. Restaurants, for example, are usually rated on their sales receipts or business revenue because the receipts better reflect the number of customers that frequent the facility. An apartment complex, on the other hand, would be rated on number of units, and an office building on the square footage. These different methods of rating allow an insurance company to accurately evaluate the risk exposure of the particular company seeking general liability coverage.
When submitting your application for general liability, it is important to be as accurate as possible with your business revenue figures. When you apply for coverage, the sales receipt amount you give is used to estimate your deposit and insurance cost for the year. Most policies will require that you report your information such as payroll or sales on a monthly, quarterly or annual basis. When the policy ends, the insurance company will audit the insured to look at actual sales and revenue so they can determine the actual insurance premium earned. At that point after the audit, you will receive a final statement. If sales and payroll exceeded the original estimate, they send a bill for the difference.