General Liability Insurance Including Products Liability Insurance For Manufacturers, Distributors, Installers, Importers, And Sellers Of Products. Save Up To 38%!

A: Approximately one month after your product liability policy expiration, the auditor from your insurance carrier will either visit you in person or will place a phone call to review your official records for the time period. The records required may include sales journals, profit & loss statements, general ledger and other computer reports. The information gathered will be used to adjust your premium for the prior policy year.

A: When your product liability policy was issued, your premium was based on your projected sales. At the end of your policy period, an audit is performed to determine what your premium should be based on your company’s actual sales. It stands to reason that companies with high sales and thus more products in the market have a higher risk for a product liability claim. Therefore, if your actual sales are higher than the projected sales, the insurance carrier is entitled to make an additional premium charge.

A: Yes. Audits are part of standard insurance practice and it is one of the terms of your product liability contract or policy.

A: Your auditor will assume that you do not want to cooperate because your actual sales were higher than your projected sales and as a result, you are trying to avoid owing an additional premium. It is not uncommon for an auditor to multiply your projected sales by 1.5 or 2.0 and to send a bill to you for the additional premium.

A: Three bad things can happen. First, the carrier can cancel your existing policy if you are still insured with them. Second, they can turn the debt over to a collections agency, which can result in litigation against you and/or a ruined credit record. Third, if you attempt to obtain coverage with a new carrier, you must truthfully answer the question on your application that pertains to cancellation of any insurance policy. The new carrier will refuse to provide a quote after they find out that you did not fully pay your prior carrier. On the other hand, if you do not answer the question truthfully on your application, your new carrier can use this as a basis for denying a claim.

A: Your rate per $1000 of sales is based on your projected sales. The higher your projected sales, the lower the rate per $1,000 of sales that you typically will receive. Insurance carriers do not want to have companies overestimating their sales in order to receive a lower rate and then have to refund the premium based on the lower rate.