# General Liability Gripe



## dodgerfan175 (Mar 17, 2010)

I don't think its right that General Liability premiums are based off your payroll. If I pay my guys $30 an hour and the guy down the street pays $15 an hour that means my GL premium will be double the amount for the same amount of exposure. HOW IS THIS RIGHT? A guy that wants to pay higher wages to good employees is rewarded by higher premiums? Unless I'm missing something, if I am someone please enlighten me.


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## JHC (Jun 4, 2010)

Don't you mean workers comp?


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## dodgerfan175 (Mar 17, 2010)

JHC said:


> Don't you mean workers comp?


No, at least WC has different rates for higher hourly wages. But GL premiums are based on your total payroll for the year without taking into account the number of employees you have.


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## Mike Finley (Apr 28, 2004)

dodgerfan175 said:


> I don't think its right that General Liability premiums are based off your payroll. If I pay my guys $30 an hour and the guy down the street pays $15 an hour that means my GL premium will be double the amount for the same amount of exposure. HOW IS THIS RIGHT? A guy that wants to pay higher wages to good employees is rewarded by higher premiums? Unless I'm missing something, if I am someone please enlighten me.


There is usually more than just payroll effecting your rates, but payroll is usually a part of it.

There is also the use of gross sales, and the use of sub-contractor payments, and most importantly your risk classifications based on the jobs you do.

It's a combined formula.

Contractor A 

300K in sales
10K in subs
25 K in employee payroll
And he's a hardwood floor guy
$1000 a year in premiums for GL



Contractor B
1,000,000 in sales
250,000 in subs
100,000 in employee payroll
He's a roofer
$20,000 a year in premiums for GL


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## dodgerfan175 (Mar 17, 2010)

Mike Finley said:


> There is usually more than just payroll effecting your rates, but payroll is usually a part of it.
> 
> There is also the use of gross sales, and the use of sub-contractor payments, and most importantly your risk classifications based on the jobs you do.
> 
> ...




But if you have:

Contractor C
1,000,000 in sales
250,000 in subs
175,000 in employee payroll
He's a roofer
He will have a higher premium than Contractor B with the same amount of exposure.


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## Mike Finley (Apr 28, 2004)

Change contractor B's employee salaries to 25K just like contractor A and it might only reduce his premiums to 18K a year.

And focus on this --



> There is also the use of gross sales, and the use of sub-contractor payments, and most importantly your risk classifications based on the jobs you do.
> 
> It's a combined formula.


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## dodgerfan175 (Mar 17, 2010)

Mike Finley said:


> Change contractor B's employee salaries to 25K just like contractor A and it might only reduce his premiums to 18K a year.
> 
> And focus on this --


But contractor B & A are different trades. I'm talking about comparing two contractors with the same risks working in the same trade. The sales and subs being similar the one with the higher payroll will always pay more for premiums.

Another thing, every time I get audited for my GL policy they only look at payroll every year.


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## W-Tinc (Feb 15, 2008)

What Mike said. Its kinda like shopping for auto insurance, different companies look at different things so you have to shop around and find the one thats the best fit for your business.

I always got radically different quotes from different carriers. In replacement windows I can be completely honest about exactly what I do and some insurance guys say its general carpentry, some say its glass work, think one guy said it was aluminum window repair of all things once.:blink:


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## Mike Finley (Apr 28, 2004)

I guarantee you and noone else takes a guy and simply doubles his pay. 

A 10 guy is a laborer and a 20 guy is skilled, so the thought that somebody wants to pay more then somebody else isn't relevant. You're not going to have a guy you pay 20 and another company pays the same guy 40. The market doesn't work that way.

And it's not an hourly issue it's gross payroll.

The logic being the more payroll the more work, the more liability. 

It's about having 2 guys you pay 40K a year for a total of 80K in gross payroll. You're acting like this is keeping you from paying one guy 80K a year? That's not how it works.

You may not like the system, but that's the way they do it, and as I said it's not just gross payroll. There is more than that that goes into it. Every GL insurer I have had, asks me for gross payroll, gross pay to subs, gross sales and most importantly its the worker classification. And the arguement that it keeps you from pay X an hour versus another GC doesn't make any sense at all.

You can read through this, it basically says what I've been telling you but maybe explains it better for you




> What is general liability coverage and what does it provide? In simple terms, general liability insurance covers you for damages or injuries for which you are legally obligated to pay. Liability insurance also covers the cost of your legal fees if you are wrongfully sued.
> General liability typically covers five basic categories of business liability:
> 
> Bodily Injury – physical harm to a person at you place of business, or an injury caused by your employee at a client's site.
> ...


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## TarahGruber (Jan 3, 2012)

dodgerfan175 said:


> I don't think its right that General Liability premiums are based off your payroll. If I pay my guys $30 an hour and the guy down the street pays $15 an hour that means my GL premium will be double the amount for the same amount of exposure. HOW IS THIS RIGHT? A guy that wants to pay higher wages to good employees is rewarded by higher premiums? Unless I'm missing something, if I am someone please enlighten me.


There are a lot of general liability insurance programs that base premiums on either number of employees or gross receipts. Not all insurance carriers use payroll as a rating basis.


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