Insured Sub Class Code

* Charge based on total cost paid to insured subs for materials and labor

* Creative ways to to eliminate materials from premium charge computation:

– builder can provide materials

– when material dealer performs installation — separate invoice for labor

As illustrated on an earlier screen shot, the classification code for insured subs makes a charge based on total cost paid to them, which includes both labor and all materials provided by the sub. They’re some creative ways that you can structure these transactions to attempt to avoid the auditor picking up the portion attributable to materials.

You can separately purchase the materials and provide them on behalf of the sub. As a result the subs invoice will reflect labor only.

Also, its an increasingly common practice to pay the material supplier to handle the installation of their materials under a turn key job. In these situations, you may want to require the material supplier to provide separate invoices for material versus labor. This may allow you to get away with only being charged for the labor part under the insured sub class code when you’re audited.

These premium saving techniques may or may not work. It depends on the auditor and how your carrier interprets the definition of “total cost”. Some insurance carriers do include builder provided materials that are used by the sub under this class code. If that’s the case, none of these techniques will work.