Painters Insurance – Be Sure You Understand The DOC Gap August 1, 2011

If you own a painting company, then you have probably had to purchase trucks and other vehicles to get your jobs done.  Often there are some very nice tax advantages to putting the titles in the company name.  Hopefully you have bought the correct insurance policy for them, using a commercial auto insurance policy.  Relying on a personal auto insurance policy for a truck titled in a business name can create big problems for you inNorth Carolina.  But assuming you have jumped over those hurdles correctly, there may still be one last hole to plug  –   I call it the DOC trap.

 

The DOC trap is caused by the fact that a commercial auto insurance policy is designed to protect the business itself from losses. Again, the business itself, but not necessarily you. Often the business is an LLC, a corporation or even a partnership.  So, if you have a bad accident in your company truck that is your fault,  the insurance protection applies to the corporation, not you.  The most common way to fix this problem is to rely on a personal auto policy that you bought to protect the cars that you own in your own name, or the name of your spouse.   But there are some painting contractors that get into a bit of trouble with their insurance policies when they overreach and title all of the cars that they own in the company name.  Sure, this can generate nice tax breaks, but, without a personal auto policy in place and in your name, when it comes to a claim against you personally, you could be left holding the bag.  This is because your corporation has rights to sue you and the corporation will be giving up those rights to its insurance company after they pay a claim on behalf of your corporation.

 

An example might help to explain just how this can work..  Let’s assume that you are a painting contractor with 4 employees and your painting company is set up as a corporation.  Next assume that you are single and you only need that one work truck that you drive and you have that titled and insured in the corporate name. Pretty sweet deal; with the corporation now paying for the gas, maintenance and insurance on that truck and Uncle Sam not getting a dime of tax on that money.   Now, one day you run a stoplight and you crush a van full of lawyers, (ok, this story has to have some good parts) all on their way to court to take money from a poor widow.  Several of the passengers are badly  injured and the hospital bills alone run up to $235,000.   So you call your insurance company (actually you call your company’s insurance company) to file the claim it all seems great and they pay for the injuries and settle the claim.  But, NC commercial auto insurance policies have a clause that says that the insurance company owns the rights of any claims that they pay.  So now they own the right of your corporation’s claim against you for causing that accident. After all, it was you and your driving that was negligent here and caused the accident.   So now, your own insurance company (well, actually your company’s insurance company) is now suing you for the damages caused in your accident.  Where are you going to get your protection?  This is where DOC protection becomes so important. 

 

DOC stands for drives other car and this coverage allows you to personally stand in the same position on the commercial auto policy as your corporation in the event of a claim.  Remember now,  if you already have a personal auto policy, then your that policy will protect you personally. The problem is we often we see painting contractors whose only vehicle is the work truck that they have titled in the business name.   And this truck is insured by a commercial auto policy not in the painter’s name, but in his or her business name. DOC coverage is an add on endorsement to the commercial policy but it rarely costs more than $200 per year and at that price you usually get to include your spouse.  This is particularly handy for those who title their truck as well as their spouse’s vehicle in the company name.

 

The DOC trap is just one of many examples of why it is so important for you to chose the right agent when you are shopping for your painters business insurance program..  You should choose an insurance agent who understands painting contractors and who insures dozens of them.  Doing business with an insurance agent who is a specialist in your field will almost always cost you less money.  This is because agents who write high volumes of accounts like yours are more likely to be able to get you the lowest rates, and also because their advice and help should be superior to an agent who has only insured a few painters in the past.  Avoiding one $235,000 loss out of your pocket will cover years and years of budget rate insurance savings.

 

Clinard Insurance Group, located in Winston Salem, NC, is an independent insurance agent.  We are a niche player in the business of insuring painting contractors.  We insure dozens of painting companies all over North Carolina and we understand your needs and speak your language.  We would love to help you with your painter’s insurance questions, just give us a call at 877-687-7557 or visit us on the web at www.LowRatesForPainters.com.

Painters Work Comp Insurance – Pay As You Go, Saves The Cash Flow August 3, 2010

Painting Company Insurance plans should all include a workers compensation policy for your employees and subs,  unless of course you work alone and have no employees.  And if handled incorrectly,  work comp policies can tear a huge  hole in your cash flow.  For more information on how this can happen, please  read my blog on the audit trap.  So it is important to understand your cash flow process vis-à-vis your payroll.    What if you could time your workers compensation policy to match the slower cash flow and lower payroll times?

In fact you can.  With a little understood tool called pay as you go.  Now  you need to know that not every insurance company that insures painters can or will offer this feature, but if you can find one that does and their price is right, this can be a nice benefit for painters and painting companies. 

So how does it work?  Well, these plans vary some from company to company,  but the very best of them will send you an email or a mail reminder each month.   You then log on to their web site and enter your payroll totals for the past month.  The web site will then calculate your premium for that month and you can pay your bill on line right then and there with a credit card.  What this means for you is that now your workers compensation expense tracks your payroll with only a 30 day delay.  And since your revenue from jobs is always running just a bit behind your payroll costs, now your workers compensation expenses will more nearly track your revenue and this means you will have less wild swings in your monthly cash flow.

There are a few things to watch out for here.  First of all, there are some payroll service companies out there offering pay as you go workers compensation to go with their payroll service.  On the surface this sounds great but there is a problem with this approach.  One huge factor in your workers compensation insurance costs is your experience modification factor.  And you need to work proactively to protect that mod to keep future costs lower.  Companies that specialize in payroll services and sell work comp as a sideline are rarely as good at keeping claims costs low as companies whose prime mission is workers compensation insurance.  These dedicated work comp insurance companies by contrast, will often have nurses and case managers on staff to help reduce your overall claims costs.  And keeping your claims costs low will keep your rates low over time.  To learn more about this read my blog on protecting your experience mod.  In addition, if you purchase your workers compensation insurance through a payroll processing company, you will usually have only one choice in terms of the insurance company that handles it.  This is stripping you of your free market shopping tool as a way to reduce the overall costs of workers compensation insurance.  Instead, consider finding an independent insurance agent who represents many insurance companies, and more importantly, find one who specializes in insuring painting contractors so that you get the expertise that you need for your business.

One last thing to mention here is that the pay as you go feature offered by some companies is often only available to painters whose premium exceeds a certain level, often as high as $5000.  There are a few companies out there who can offer this feature at a much lower premium level, but you will need to find an agent who specializes in painters insurance to find them.

At Clinard Insurance Group, in Winston Salem, NC, we are the Painting Contractor Insurance Specialists.  We have companies that can write pay as you go workers compensation policies for painters with annual premiums as low as $1000.  If we can help you with any of your painters insurance policy questions, please call us, toll free at 877-687-7557 or visit us on line at our Painting contractors’ insurance program policy page.

Some of the source material for this article was drawn from other blog articles which can be found at www.InsuranceAnswerGuy.com.