One of the questions we frequently receive from our charter school clients is in regards to 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 from year to year.
General liability premiums are usually calculated on one of three things for a charter school: annual revenue, annual payroll, and number of students.
Premium Based Upon Annual Revenue
When insurance companies use annual revenue for premium calculations it is because they view a direct correlation in the frequency of claims and increases in revenue. Therefore, the more your revenue increases, the higher your premium will go. To calculate you premium, the insurance company will assign you a rate based upon your school’s risk factors. From there they will multiply that rate with your estimated revenue to determine you 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 in very much
the same as way basing it upon revenue. The main difference is that when your premium is based upon payroll, the insurance companies will classify your employees into different groups based upon their work preformed. From there, they will assign a rate to each employee classification and calculate the premium from there. Once again, very few insurance companies actually use this calculation to determine general liability premiums.
Premium Based Upon Number of Students
Most charter schools’ general liability insurance premiums are based upon the number of students attending the school. The calculation of premium is quite simple – the insurance companies will 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 important that you report an accurate number rather than an estimate on your application.
If you have any additional questions on how your charter school’s premiums are calculated, please feel free to give our office a call.