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Good Morning.  So we have a client who is a distributor of fruit pulp.  They use the pulp to flavor different drinks and sell it to bars across the country.  It is a new venture and the client tells us he would like to insure his property (inventory) and he would like to get liability coverage as well.

I asked him what his annual sales would be, and he told me  $100,000.  I believe his intent  was to lower his premium as much as possible by using a low sales figure.  However, when we asked him how much inventory he wanted to insure, he told us $500,000.  Now, people do not realize that the Underwriters are not stupid.  If you have a perishable product; and you are telling them you only have $100,000 in annual sales, but you have $500,000 worth of inventory that will spoil it does not make sense.

So basically, the Underwriter flags it as a dishonest type of client who will not get the best pricing.

The tip is, you want to be honest.  Perhaps your exposure basis on your liability side is not revenue.  Perhaps it is Payroll or Square Footage.  Do not make the decision to go in the wrong direction and not tell the truth, as it will only harm you.