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Every Trade Contractor that purchases insurance will be evaluated on their company size, operation complexity, and risk tolerance. There are a variety of risk financing options available to your company. If you have a solid safety & loss control plan and good loss history, you may want to look at a loss sensitive plan, also known as as a “performance-based program.” Here are three common types of loss-sensitive plans your company should know about:
1. Large Deductible Program
This option is a blend of guaranteed cost insurance and self-insurance. The insured receives a significant premium credit and is responsible for losses falling within the deductible. These programs offer the Insured the opportunity to reduce costs.
2. Retrospective Rating Plans (Retros)
This option is executed on the basis of incurred losses or paid losses. The main difference being the timing of payment—paid loss retros allow the Contractor to hold on to its money longer.
3. Participating Plans (PAR)
These plans—Dividend and Retention Programs—provide a return premium, such as a dividend, to the insured after the policy expires. A sliding scale dividend plan and retention plan are “participating,” which means loss experience determines the size of the dividend.
Each of these three risk financing options has its own benefits. However, depending on what makes the most sense for your company will determine which option you should go with. It’s important to work with a good Broker who can tailor the risk financing plan to meet your company’s specific needs.
To learn more about each plan and additional financial methods, download our eBook, "Risk Financing Methods for Trade Contractors," for more information. You may also reach out to us today!