Guaranteed Cost vs. Loss Sensitive
Insurance is often thought of as a static line-item cost on your manufacturing company’s balance sheet. But, you can take control with a program that adjusts cost based on your activity. Picking the program that’s right for you can significantly improve the health of your bottom line.
The typical insurance policy is called “guaranteed cost” coverage. This simply means that you pay a flat fee (or rate) up front for a specific amount of coverage. On the contrary, a “loss sensitive” program’s cost self-adjusts based on a variety of factors, primarily the cost of claims.
Flat fee guaranteed cost policies are ideal for small to mid-sized manufacturers because they don’t contain any surprises. While you may still be subject to audit, your claims activity doesn’t have any bearing on the cost of coverage other than what you may put out for deductibles. With guaranteed cost policies you end up paying a little more in premium, but gain a lot of consistency.
Loss sensitive programs are ideal for larger companies that are able to shoulder additional risk. These programs usually have variable rates and large deductibles so that if a claim does come in, the insured participates in a significant portion of payment. This lowers the upfront costs, resulting in significant savings for those with low claims activity.
Before you dismiss the cost of insurance as just another number in your budget, consult with your Assurance advisor. Whether you need to bid your guaranteed cost policy or ensure the success of your loss sensitive program, Assurance can change that line-item cost into a cost-saving strategy.
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