Sub Specialty Contractor

Hello,

i wanted to start a discussion around insurance policy periods (WC / General/ Umbrella/ Auto), is there an industry norm? and if so why? 

The last 2 construction companies I've worked for have had their policy periods from July - July. 

In most cases I see this as an issue when building out annual forecasts/budgeting and it also makes the accounting for the activity a bit trickier. Also, when it is time for insurance renewals, estimates now carry 2 busy seasons rather than one in a normal fiscal year (Jan - Dec). Also come audit time, results are typically delayed by 3-6 months.

All in all, I would love to start a discussion around the pros and cons of having a July - July policy period vs matching fiscal year (Jan - Dec)

Thank you in advance.

Michael

------------------------------
Michael Ortiz
Controller
ADEP Group Inc.
Dracut MA
(603) 239-3019
------------------------------

Hi Michael,

Our insurance year is also July to July.  I inherited it that was in the late 1980's and have not seen any benefit of changing it.

Our fiscal year is October to September and personally I prefer to NOT have the insurance renewals and audits happening during fiscal year end or calendar year end.

As for forecasting and budgeting, ask your insurance agent to give you an idea about where premiums are going (they know the market),have them review your loss runs and give an estimate how those will affect the renewal year. 

------------------------------
Lucrezia Esteban
Controller
East Muskegon Roofing and Sheet Metal Co., Inc.
Certified Building Solutions, LLC
Certified Sheet Metal, LLC
Muskegon MI
(231) 744-2461
------------------------------

Lucrezia,

Thank you for your response! I've started the conversation with our insurance agent.

Best,

Michael

------------------------------
Michael Ortiz
Controller
ADEP Group Inc.
Dracut MA
(603) 239-3019
------------------------------

Original Message:
Sent: 07-16-2024 07:04
From: Lucrezia Esteban
Subject: Insurance Policy Periods

Hi Michael,

Our insurance year is also July to July.  I inherited it that was in the late 1980's and have not seen any benefit of changing it.

Our fiscal year is October to September and personally I prefer to NOT have the insurance renewals and audits happening during fiscal year end or calendar year end.

As for forecasting and budgeting, ask your insurance agent to give you an idea about where premiums are going (they know the market),have them review your loss runs and give an estimate how those will affect the renewal year. 

------------------------------
Lucrezia Esteban
Controller
East Muskegon Roofing and Sheet Metal Co., Inc.
Certified Building Solutions, LLC
Certified Sheet Metal, LLC
Muskegon MI
(231) 744-2461
------------------------------

I think Lucretia's point is where most will fall: there is enough to do at year end without adding in the renewal. If you are shopping hard every year it can be quite time consuming putting everything together for the brokers. Ours renews 1/15 and we have a 12/31 year end, so December is a bit overloaded and stressful. We don't have a traditional 'busy' season so that does not come into play for us. Plus, on the work comp side we are reporting/paying based on actuals every month so the manipulation of the estimates becomes less important. Our audit results are consistent, we typically get back what they required for a deposit.

I will say that having the renewal right at year end does pretty much eliminate any accounting for prepaids and other insurance accruals for tax purposes. So, one less thing....

------------------------------
Mark Windham
Controller
Brasington Bailey Construction, Inc
Cartersville GA
(470) 315-4220
------------------------------

Mark,

You bring up some very valid points, i really appreciate your response!

------------------------------
Michael Ortiz
Controller
ADEP Group Inc.
Dracut MA
(603) 239-3019
------------------------------

Original Message:
Sent: 07-16-2024 08:57
From: Mark Windham
Subject: Insurance Policy Periods

I think Lucretia's point is where most will fall: there is enough to do at year end without adding in the renewal. If you are shopping hard every year it can be quite time consuming putting everything together for the brokers. Ours renews 1/15 and we have a 12/31 year end, so December is a bit overloaded and stressful. We don't have a traditional 'busy' season so that does not come into play for us. Plus, on the work comp side we are reporting/paying based on actuals every month so the manipulation of the estimates becomes less important. Our audit results are consistent, we typically get back what they required for a deposit.

I will say that having the renewal right at year end does pretty much eliminate any accounting for prepaids and other insurance accruals for tax purposes. So, one less thing....

------------------------------
Mark Windham
Controller
Brasington Bailey Construction, Inc
Cartersville GA
(470) 315-4220
------------------------------

Carrie,

I most definitely agree with you and have taken this into consideration. Thank you for your response!

------------------------------
Michael Ortiz
Controller
ADEP Group Inc.
Dracut MA
(603) 239-3019
------------------------------

Original Message:
Sent: 07-16-2024 12:06
From: Carrie Stone
Subject: Insurance Policy Periods

Most of the time you should set up for your FYE.  This does sometimes present issues if you just have too much going on at year end then it is helpful to have another period that you are not trying to scramble to get so many things done. 

 

Carrie Stone, Vice-President of Finance

 

This email is intended solely for the person or entity to which it is addressed and may contain confidential and/or privileged information. Any review, dissemination, copying, printing or other use of this email by persons or entities other than the addressee is prohibited. If you have received this email in error, please contact the sender immediately and delete the material from any computer.

 

Jeff,

I really do appreciate your perspective on this topic, thank you for the response!

------------------------------
Michael Ortiz
Controller
ADEP Group Inc.
Dracut MA
(603) 239-3019
------------------------------

Original Message:
Sent: 07-16-2024 13:13
From: Jeffrey Michael
Subject: Insurance Policy Periods

Michael,

 

Matching the fiscal year makes a lot of sense as you pointed out.  Some companies may avoid calendar year to avoid the additional stressor around the holidays.  Also if a majority of companies renew calendar, you compete for the attention of the brokers and underwriters.  We are in a captive insurance program and the captive mandates the policy year for members of the captive; ours is 3/1 to 3/1.

 

Thanks,

 

Jeff

Jeffrey S. Michael, CPA, CCIFP

Chief Financial Officer

Celebrating 30+ Years in Business!!!

 

9323 Keystone Street Philadelphia, PA 19114

Wk:215.335.1401 x235 fax 215.708.7399

Cell 215-206-9707

email:jmichael@cippco.com

 

Confidentiality Notice:

This email and any attachments may be confidential and protected by legal privilege. If you are not the intended recipient, be aware that any disclosure, copying, distribution or use of the e-mail or any attachment is prohibited. If you have received this email in error, please notify us immediately by replying to the sender and then delete this copy and the reply from your system. Thank you for your cooperation.