The consent to rate letter in North Carolina is the legal way for your insurance company to get you to agree to let your insurance company charge you more than the highest rate allowed by the NC Insurance Department.  If you get one, don’t sign it without first checking in with an independent agent that you trust.  You may have much better options than to sign this letter and watch your rates skyrocket.  I’ve blogged about all of this in the past and you can, click here to read past blogs.  But now the insurance companies are using the consent to rate letter in a more insidious fashion.  Their new technique uses this form as a way to get around ratemaking rules in North Carolina.  Be careful; don’t sign this without a second opinion.

To understand the consent to rate form, it helps to understand how insurance rates are generated at in North Carolina.  This state is very different from most other states in that the NC rate bureau holds a lot of power in the rate making process.  In this state, the rate bureau determines the maximum rate that insurance companies can charge for each type of insurance policy.  From there, each insurance company that wants to do business in NC can file their deviations from this rate.  In most cases, the rate bureau rate is far above what most insurance companies would be able charge for your policy if they want to be competitive.  The reality is that insurance company rates are discounted from the maximum rate, sometimes as much as 55%.  There is a loophole in this process though, if an insurance company can get you to agree in writing to allow them to charge you more than the rate bureau maximum rate, then they are allowed to do so.  And the consent to rate form is the form that gives your written consent.  So, don’t sign this form without first understanding all of your alternatives.

So what is the legitimate use for the consent to rate form?  Well, this form is useful if you have had a few insurance losses and you might not be able to buy insurance anywhere from any other company unless you allow them to charge a high enough rate to accommodate the riskiness of your particular situation.  In that case, the consent to rate form can allow you to procure insurance when otherwise you might not be able to do so.

The North Carolina homeowners insurance market is currently in a state of turmoil.  Much of this is due to the fact that the high risk beach houses that are insured in the last resort market provided by the government are not paying a high enough rate to cover their risks.  This wind pool is grossly underfunded and could result in billions of dollars of losses in the event of a large hurricane hitting our coast.  This underfunded risk used to be pushed on to the insurance companies on an unlimited basis.  Several years ago the law was changed to allow wind pool losses to be assessed to all homeowners policies across the state with a one time assessment allowed up to 10% of the policy premium until the wind pool is made whole again.  This sneaky and horribly unfair approach will still not close the gap and insurance companies remain on the hook for a large share of this risk as well.  They want to be able to increase rates, especially in the wind pool itself but the politicians in our state have repeatedly blocked them.  Now I am hearing that some companies are using the consent to rate form to prepare for an end run around the rate bureau and the traditional process of rate making.   They can do this by having their customers sign a consent to rate form on every policy, then holding these forms in file until they need to use them.  Signing one of these documents on an open ended basis like this lets your insurance company hang the sword of Damocles over your head.  You will be agreeing to a rate increase above the maximum rate, sometime in the future, to be used when the insurance company wants it or needs it.   My guess is that eventually the rate bureau will want to change the rules to disallow this kind of rate meddling but until they do, you should do whatever you can to be sure that you aren’t playing into their hands.   DO NOT SIGN A CONSENT TO RATE FORM UNTIL YOU HAVE EXPLORED YOUR OPTIONS WITH AN INDEPENDENT AGENT!!

Clinard Insurance Group is an independent insurance agency located in Winston Salem, NC.  We represent many different insurance companies and we can help you with your home and auto insurance, no matter where you live in NC.  If you have received a consent to rate form and are unsure what to do, please call us, toll free, at 877-687-7557 or visit us on the web at www.ClinardInsurance.com.

If you own a painting company, chances are you have had to purchase trucks and other vehicles to do your work.  There are often very nice tax advantages to this decision.  Hopefully you have correctly insured them, using a commercial auto insurance policy.  Trying to use a personal auto insurance for a truck titled in a business name can create huge problems for you in NC.  Assuming that all of that is true, there is still one last hole to plug  -   I call it the DOC trap.

The DOC trap arises from the fact that a commercial auto insurance policy is designed to protect the business from losses.  Often that business is an LLC, a corporation or even a partnership.  So, if you cause a bad accident in your company truck, the protected entity here is the corporation, not you.  This little problem can be solved if you have a personal auto policy in force that you bought to protect the cars that you own in your own name, or the name of your spouse.   But some painting contractors get into a bit of trouble with their insurance policies when they overreach and put all of the cars that they own in the company name.  Sure, the tax breaks are great if you don’t get caught and speeding ticket points can be a thing of the past.  But, without a personal auto policy, when it comes to a claim against you personally, you could be left holding the bag.

An example might help to explain this coverage gap.  Let’s say you are a painting contractor with 4 employees and your business is set up as a corporation.  Now assume that you are single and you only need that one work truck that you drive and you have that titled and insured in the corporate name.  Now, one day you fail to see a stop light and you slam into a van full of lawyers, all on their way to lunch.  Several of them are severely injured and the hospital bills alone run up to $235,000.   When you call your insurance company to file the claim it all seems great and they pay the lawyers and send them on their way.  But, NC commercial auto insurance policies have a clause that says that the insurance company own the rights of any claims that they pay.  So now they own the right of your corporation’s claim against you for causing that accident.  This could mean that with a large claim, your own insurance company is now suing you for the damages caused in your accident.  Where are you going to get your coverage?  This is where DOC protection comes in. 

DOC stands for drives other car and it will essentially allow you to add your name to your commercial auto policy to put you in the same position as your corporation in the event of a claim.  Of course if you already have a personal auto policy, then your personal auto policy will respond in the same way for you, but often we see painting contractors whose only vehicle is the work truck that they have titled in the business name.   The cost of DOC protection is often less than $200 a year and you can also include your spouse in the coverage at no extra cost.

The DOC trap is just another example of why your painter’s insurance program should not be a do it yourself project.  You need an insurance agent who understands painting contractors and who insures dozens of them.  Hiring an insurance agent who is a specialist in your field will almost always cost you less money.  First of all, agents who write high volumes of accounts like yours are more likely to be able to get you the lowest rates, and their advice and help should be superior to an agent who has only insured a few painters in the past.

At Clinard Insurance Group, located in Winston Salem, NC, we are a niche player in the business of insuring painting contractors.  We do insure dozens of painters all over North Carolina and we understand your needs and speak your language.  We would love to help you with your painter’s insurance questions, just give us a call at 877-687-7557 or visit us on the web at www.LowRatesForPainters.com.