One of the questions we frequently receive from our charter school clients concerns how their general liability premium is actually calculated. Most schools don’t know how insurance companies and underwriters calculate their premium and why it fluctuates yearly.
General liability premiums are usually calculated based on a charter school’s annual revenue, annual payroll, or number of students.
Premium Based Upon Annual Revenue
Insurance companies use annual revenue for premium calculations because they view a direct correlation between the frequency of claims and increases in revenue. Therefore, the more your revenue increases, the higher your premium. The insurance company will assign you a rate based on your school’s risk factors to calculate your premium. From there, they will multiply that rate wbyyour estimated revenue to determine your annual premium. Most insurance companies do not use this calculation for charter schools, though.
Premium Based Upon Annual Payroll
When your general liability premiums are based on annual payroll, it works the same way as basing it on revenue. The main difference is that when your premium is based on payroll, the insurance companies will classify your employees into different groups based on their work performed. From there, they will assign a rate to each employee classification and calculate the premium. Once again, very few insurance companies use this calculation to determine general liability premiums.
Premium Based Upon Number of Students
Most charter schools’ general liability insurance premiums are based on the number of students attending the school. The calculation of premiums is quite simple—the insurance companies assign a rate and multiply it by the number of students attending. Insurance companies have determined that schools with more students present a greater risk and will have to pay more in premium. This is why it is so essential that you report an accurate number rather than an estimate on your application.
If you have any additional questions about how your charter school’s premiums are calculated, please feel free to call our office.
