Last week, we discussed insurance premium audits and how your charter school can prepare for them.   (You can find the full blog post here.)

This week we want to talk about what your school can do to save money on the audit and avoid any premium increases.

How Can You Save Money?

Depending on your school’s operations and insurance coverage, you can save on premium dollars. (Not all of the following may apply to your school.)

1.    PAYROLL SEPARATION – If your policy has more than one classification code (most charter schools should have 2-3 class codes), payroll must be shown separately for each classification to take advantage of lower-rated classifications. If not, all payroll may be assigned to the highest-rated classification.

Also, have clearly defined job descriptions written down for each employee. Typically, when there is confusion related to the specific duties of an employee, there is a good chance they will be placed into the higher-rated classification code, which will result in an additional premium owed to the insurance company.

2.    EMPLOYEE TIPS – In certain states, tips declared by employees may be excluded from their gross payroll only if separately identified.

3.    OVERTIME PAY – In certain states, you can deduct the premium portion of overtime pay from the gross pay in calculating payroll. For example, if an employee is paid a regular rate of $10.00 per hour and receives time-and-a-half for overtime, the employee’s pay rate is $15.00 for each overtime hour. The $5.00 for each overtime hour can be deducted from your gross payroll only if shown separately on your records, and you must show overtime separately for each classification.

4.    CERTIFICATES OF INSURANCE – Have certificates available for the audit (at your premises or your accountant’s) to ensure that you aren’t billed for an extra premium unnecessarily.

Certificates must cover the period when the subcontractor worked for you (this may require Certificates covering two different policy terms for the subcontractor in some cases). Also, the subcontractor must carry the same liability limits as your policy. For example – if you carry general liability limits of $ 1,000,000 per occurrence & $2,000,000 per aggregate, your subcontractor will need those exact amounts of liability coverage. If the subcontractor has employees, they must also carry the statutory limits for worker’s compensation coverage.

In our 3rd and final post on insurance audits for charter schools, we will address the most common questions surrounding audits.