Are You Classified Properly???

Answer yourself one question: What exactly does your business do?  Are you a manufacturer and your insurance policy classifies you as a wholesaler?  Are you a general contractor and your policy is classifying you as a subcontractor?  Are you a retail operation and your insurance policy states you're distributor?  Sadly, companies are classified improperly WAY too often.   


I've been reviewing a plethora of policies for prospects lately.  One common denominator lately is that the current broker has not been classifying the business properly.  There are a few reasons why your business could be mistaken for something else.

1. The current broker sincerely doesn't understand what your company does.  They picked the class code description that they thought best described your operations without checking with you.
2. The class code description your broker is using is associated with a cheaper rate.  No explanation needed here; he or she is just trying to make their quote look better.
3.  Your broker honestly thinks that the class code they chose was the correct class code describing your business.  Mistakes happen.

Not many insured's research their policies with a fine comb.  That's what they hire an insurance broker for!  But, one thing you should and can pay attention to is the initial quote and the operations endorsement once the policy is issued.  A seasoned broker will send over a complete quote which includes the effective dates, limits of insurance and deductible amounts, total premium including any fees and a detailed description of how the business is classified. 

For example, if I am quoting a plumber, it clearly states on my initial quote "Plumbing - residential" and/or "Plumbing - commercial".  There is no doubt in my mind and my clients mind what the operations of the insured are.  Clear and concise is the name of the game.  Below is an example of what a classification and/or exposure should look like.

Now not all insurance carriers quotes will look this pretty.  Some are a bit confusing to read at times especially when there are split rates involved, etc.  If for some reason your broker classifies you improperly, it could possibly lead to issues at the time of a claim and/or an impulsive cancellation notice popping up in your mail from the insurance carrier directly. 

Don't be afraid to ask questions and make sure your business is classified properly!