Masonry Magazine October 1967 Page. 24
Insurance for Contractors
(Continued from page 21)
Example of Composite Rating
Desired premium quoted: $2,200
Total payroll expected: $200,000
Composite rate = 2,200
$100 of payroll.
Or, alternatively:
200,000 or $1.10 per
Desired premium quoted: $2,200
Total receipts expected: $600,000
Composite rate 2,200 600,000 or $3.66 per
$1000 or receipts.
The policy is then issued without the usual myriad of schedules and rates; the auditor makes a final computation based upon total payroll or total receipts reported for the policy year. Actually, it does not make a great deal of difference what the measure of exposure is, so long as the insurance company ends up with approximately $2,200 for the amount of work contemplated. The intent of composite rating should be to arrive at the same premium level as before.
This procedure can also be followed in insuring a large number of automobiles and trucks; the composite rate can be geared to number of automotive units, payroll, receipts or number of red-headed employees so long as the insurance company collects so many dollars for the exposure.
Obviously, this method will appeal most to larger contractors and those whose exposures are relatively stable or predictable and not to those who report widely fluctuating payrolls or receipts each year. If completely accurate premium allocation between divisions of a company is important for internal reasons, the advantages of composite rating (clarity, elimination of paper work, ease in arriving at insurance costs for bidding purposes) may be offset by new problems.
Because use of a composite rate tends to obliterate the individual charges going into premium calculations, it is absolutely imperative that someone representing your interests participate in the rate-making process each year. We mentioned the foregoing procedure as being theoretical; in practice, it is accompanied by a great deal of horse-trading negotiation.
In short, the idea has obvious advantages when applied (1) where it fits (2) by someone who knows what he is doing.
CERTIFICATES OF INSURANCE
While you are most often in the position of providing someone else with a certificate of insurance as evidence of adequate protection, it is equally important that you be aware of the need for certificates from your subcontractors and suppliers. Most insurance carriers have their own version of the printed form and most require close examination to determine exactly what is provided. Unfortunately, some of these forms raise more questions than they answer.
In general, you should look to your subcontractors and suppliers for some coverage required of you under contract specifications. To give you the greatest degree of protection, the existence of the same Workmen's Compensation, Comprehensive General Liability and Comprehensive Automobile Liability Policy forms should be verified by certificates issued at your request. All should allow for at least ten days advance written notice of any cancellation or material change affecting coverage. Where pertinent, Completed Operations-Products Liability Coverage should be included.
Where you require a Hold-Harmless Agreement from a subcontractor or anyone else, proof of insurance for that contract should be suppied by a certificate. Mere mention of a Comprehensive Policy form is not sufficient, since there is nothing automatic about the Contractual Coverage provided by most such policies. Where any doubt exists about the matter, your insurance representative should be consulted and the certificates sent on to him for examination and comment.
Next month MASONRY will conclude this series of articles on "Insurance For Contractors" prepared by Walter T. Derk, Assistant Vice President, Fred S. James & Company, Chicago, Illinois, MCAA's Insurance Consultants. Next month we will conclude with information on the Payroll Audit Procedures. MCAA Members who have filled out the Profile Study have received copies of this valuable article in book form. Take time today and make sure you have this reference book in your business files for ready use.
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With the recent 17th Annual Convention and Educational Trade Show another record breaker, we're "poppin' our buttons," with pride in all the loyal MCAA Members and Exhibitors and as a personal reminder of our Association, we're making the buttons available to you
*HERE'S HOW YOU CAN HAVE THEM.
These buttons are identical to the one attached to your '67 Identification Badge and are ideal for all your suit coats and sport coats. You snap them easily right over the regular coat buttons. Instantly gives them that "Blazer Look". You can order yours Today, by sending check or money order. Per set of 3, $1.00-or individually priced at 35c. Order Today-We'll Mail Same Day.
MASON CONTRACTORS
ASSOCIATION OF AMERICA
208 SO. LA SALLE STREET CHICAGO, ILLINOIS 60604
masonry • October, 1967