When it comes to Restaurant Insurance, Watch Out for the Audit Trap

If you are restaurant owner then you probably have some working knowledge of the workers compensation insurance. At Clinard Insurance Group in Winston Salem, NC, we specialize in insuring restaurants and we have found time and again how many restaurant owners are seduced into the cash flow nightmare I call “the audit trap”.

The restaurant owner’s workers compensation insurance policy is rated based on payroll. Since the exact amount of payroll is unknown to the insurance company when the policy is first written, the policy holder has to give the insurance company an estimate of the total payroll for the coming policy year. Many restaurant owners are tempted to “low ball” this estimate to reduce the total premium on their policy. In some cases unscrupulous agents may quote the policy with reduced payrolls in order to make the premium appear smaller. While this strategy could work if the company plans ahead for it, just shooting in the dark with low estimates can create a cash flow disaster.

Here’s why. Let’s say your actual payroll on for your company is $500,000 per year. And let’s also assume your workers compensation rate is $5 per $100 of payroll. This means your policy costs would be $25,000. Now let’s assume you start your policy with a low ball estimate of $250,000. This means your new policy is issued at a cost of $12,500 instead of $25,000. Looks pretty good so far. But now jump ahead 15 months and the insurance company has now performed an audit of your payroll and found that your actual payroll during that policy term was $500,000. So they send you a bill for the additional premium due of $12,500. Now that wasn’t really unexpected, but if you didn’t budget for this, it could put a crimp in your cash flow. But here’s the kicker. The insurance company will now increase the payroll on your renewal policy and send you another bill for $12,500 due right away. Suddenly you have to come up with $25,000 to square yourself with the insurance company. And that can make for a real cash flow problem.

Again, if you plan for the audit and reserve funds to make the payment then you can gain a cash flow “float” advantage by low balling your payroll and gross receipts estimates. But more often than not, the business owner fails to implement a plan to reserve these funds and instead faces a cash flow crunch at audit time.

Restaurant Insurance is confusing at worst and complicated at best. Keeping on top of your payroll estimates and how that relates to your actual payroll is an important part of managing your business insurance policies.

At Clinard Insurance Group in Winston Salem, NC, we specialize in helping restaurant owners with their insurance policies. We have specially designed programs for your restaurant, whether you are casual dining, fine dining, fast food, bar and grill, or even a caterer. We want all of our restaurant clients to be informed insurance consumers. If you want more help with your restaurant insurance, please call us, toll free at 877-687-7557 or visit us online at http://www.TheRestaurantInsuranceStore.com.

Source material for this article was taken from the site: Restaurant Insurance Guy.

The Hidden Trap of Spoilage Coverage on Restaurant Insurance Policies

Spoilage coverage…I’m sure most of you don’t really give it a second thought. Most restaurant insurance policies “throw in” $5,000 or even $10,000 of coverage. Even the policies that don’t automatically include it have a relatively cheap endorsement to add it. But that coverage could disappear just when you need it if you didn’t take notice of the stealth clause that voids your protection. Has your agent explained this little known protection stealer to you?

The first area to take a little time on is to answer the question, how much spoilage coverage do you actually need? Most agents will just ask “how much spoilage coverage do you want?” or some will just throw in an arbitrary number and go with it…but do you know how much is enough?

I’ve developed a pretty straightforward formula that will give you a good indication of how much you need. I invite you to give me a call if you want to find out more and I’ll be more than happy to share this formula with you.

The other BIG issue with spoilage is what I call the “stealth clause”. On the declarations page you’ll see your coverage amount and deductible and you think all is well and good and then a freezer bites the dust on you (of course the day AFTER you get your steak order!) and you call in the claim. The insurance company adjuster shows up and asks you for your written refrigeration contract….What? no one said anything about having a written maintenance agreement. The adjuster then proceeds to show you where, buried on page 127 section C subparagraph 2 that the spoilage coverage only applies if you have a written refrigeration maintenance agreement in place and then he denies your claim.

This “stealth” clause is more common than you think. We have companies that understand that maybe you maintain your refrigeration yourself ( I know I did when I had my restaurants and I still have the Freon gauges and a jug of R12 in the basement.) This is just one of the items on our proprietary checklist that we go through with you to insure you have the protection that you need at the most competitive price.

This blog just points out one of hundreds of reasons why you should only purchase your restaurant insurance policy from an agent who specializes in restaurants insurance. If your agent doesn’t handle at least 25 or more restaurants, then you probably aren’t dealing with a specialist and what your agent doesn’t know could hurt you financially.

At Clinard Insurance Group, in Winston Salem, NC, we specialize in both North Carolina restaurant insurance and South Carolina restaurant insurance. We want all of our clients to be informed insurance buyers and we work hard to help them understand all the ins and outs of the restaurant insurance policy. It doesn’t matter if your establishment is fine dining, casual dining, fast food, bar & grill or even catering, we understand your business and we have a program that can help you. Please call us, toll free at 877-687-7557 or visit our Restaurant Insurance Page.

The source information for this article was pulled from articles found at the restaurant answer guy blog site.

When it comes to restaurant insurance, you need a middleman

The old saying, cut out the middleman, might seem at first blush to apply to shopping for insurance as well… but a second look will prove that you not only need a middleman, you need an independent middleman . This is especially true when it comes to restaurant insurance. The middleman will not cost you money here, he will actually save you money, not only on your restaurant insurance purchase, but even more so if you experience a claim. Read on to find out exactly why.

First of all, let me say that when I discuss the middleman in an insurance policy purchase, I am talking about a truly independent middleman, in this case someone who understands the ins and outs of restaurants, an independent insurance agent who can represent your needs and protect your rights. Direct writer insurance agencies that represent only one company and have only one market to offer you…is like having to depend on one vendor for everything, even if they’re not the absolute best at it. In addition, if you purchase insurance from an 800 phone number or a company that has you quote your own policy online, you are not going to cut out the middleman cost, you will only be cutting out the service. This becomes glaringly obvious when you compare the rates of direct writing insurance companies against those offered by independent insurance agencies. This is true no matter the type of restaurant you have, fine dining, fast food, bar and grill, or even a catering company. Each restaurant is unique and a “one size fits all” mentality just isn’t in your best interest.

There are two ways an independent middleman can help you without raising the cost of the insurance in either case. I will take them one at a time.

First is the purchasing process. Let’s face it, insurance is a complicated legal contract, designed to protect you from certain types of financial ruin. Buying insurance is not like buying a head of cabbage... each restaurant’s situation and insurance needs are different and if you don’t have the help of someone who understands the contract intimately, someone who is there to help you figure out your specific needs, then chances are you will make a mistake somewhere. And the mistake could cost you everything you have worked so hard for. This is a corner you just don’t want to cut.

The second way an independent middleman can protect you is as a buffer between you and the insurance company when it comes to claims questions or claims help. Let me give you an example. I had a prospect (now a client) come to me for help as their Worker’s compensation costs had gotten totally out of control. An in depth review revealed several small claims had been filed which caused a frequency problem on his worker’s compensation and drove his experience modifier through the roof. He never realized that he had an option on how to handle these small claims and that by handling these claims internally he could actually earn a credit on his restaurant workers compensation insurance premium. His previous agent who represented a direct writer gave him an 800 number to call and never offered guidance on how to control his work comp costs.

Remember, with insurance a middleman will not cost you money, an independent middleman will actually save you money. At Clinard Insurance Group, in Winston Salem, NC, we are an independent middleman for our clients and we add value to their insurance buying experiences every day. We specialize in Fine Dining Insurance, Casual Dining Insurance, Fast Food Insurance, Bar & Grill Insurance as well as Catering insurance so call us toll free at 877-687-7557 or visit us online at www.ClinardInsurance.com.


The source information for this article can be found at Restaurant Insurance Blog.