February 18th, 2021
If you purchase general liability insurance, chances are you have seen the ACORD 126 form. Depending on the insurance company you work with, you might even have to fill out this form every year.
If you’ve ever wondered why the ACORD 126 exists or why you have to sign it, here is everything you need to know:
ACORD (Association for Cooperative Operations Research and Development) is a nonprofit comprising 36,000 organizations whose goal is to standardize the flow of information among insurance institutions.
As you can see, almost every insurance company and insurance broker in the world uses the ACORD 126 as the preferred form to collect underwriting information on individuals or companies seeking insurance.
What makes this form different from the hundreds of others that ACORD provides is it specializes in the collection of information needed for commercial general liability insurance policies. Insurance companies use this standardized form to collect, verify, and update the information needed to underwrite a general liability insurance policy that fits your business from an exposure and coverage standpoint.
As a purchaser of commercial general liability insurance, you don't typically complete this form yourself. Your broker will most likely ask you questions and fill out the form on your behalf whenever your insurance is quoted or renewed.
As mentioned above, the ACORD form serves three purposes; to collect, verify, and update information pertinent to your commercial general liability insurance policy.
When any of these “actions” is needed by an insurance company, they will require you to sign the ACORD 126 form.
For example, the ACORD 126 form is used to collect relevant business information when first underwriting your general liability policy. When renewing your current general liability policy, the form is used to confirm or update your existing information. And when your insurance company wants to verify the information you provided them is correct, they will also require you to fill out and sign the form.
Although as a customer, you might not be filling out this form yourself, you might be wondering what each section of the Acord 126 means before you sign it. You can click here to download a blank fillable Acord 126, or you can just follow along as we go section to section starting from the top of the application.
The first part of the ACORD 126 is the coverages section. This is where you submit your policy limits, or the limits you are requesting on a quote, to the insurance company.
In addition to the limits, you have the option to choose a claims-made policy or an occurrence-based policy. You can also use this section to request either a property damage or bodily injury liability deductible.
Unlike the coverages section, which describes the coverages that you have or want to purchase, the goal in the schedule of hazards section is to collect information about your business relevant to the rating of your insurance policy.
The classification is a description of the operations you perform. The class code is the corresponding numerical code for the description of operations.
The premium basis is the rating factor, which determines the risk level for the classification code. For example, below “S” is listed as the premium basis for both classifications. “S,” or Gross Sales, is the best way to determine the risk of a company in that classification.
Payroll (P) is another commonly used premium basis in ACORD 126 forms, especially for contractors in the construction industry.
It is very rare to have a claims-made general liability policy, but they do exist. A claims-made policy contains a unique set of claims reporting requirements. If you have (or are requesting) a claims-made general liability policy, you will need to fill out this section.
Employee benefits coverage is an add-in to many commercial general liability insurance policies. If you add an employee to your payroll, but fail to correctly add that employee to the benefits program, this policy will kick in and pay for the mistake.
We most frequently see claims for mistakes in the company-sponsored life insurance or health insurance programs.
If you are requesting or renewing this coverage, you need to fill out the employee benefits liability section.
The contractors section is reserved specifically for contractors who are quoting or renewing their commercial general liability insurance.
Since contractors have a unique set of risks, insurance companies need to ask a unique set of questions while underwriting the policy. If you are a contractor, this part of the form needs to be filled out.
Whereas the previous section was reserved for contractors, this section is reserved for companies with heavy products and completed operations risk (usually manufacturing and construction companies).
The goal of this section is to determine what products you offer, customer contracts you have, and vendor controls are in place.
If you have additional insureds, you will need to list them on a supplemental ACORD form (ACORD 45). But if you only have one additional insured or loss payee, you can add them in this section of the ACORD 126.
For example, you might need to put the name of a certain customer or vendor in this field if they have requested additional insured status on your commercial general liability policy.
All applicants need to fill out the general information section. This is where insurance companies try to understand the true risk they are covering through a series of 22 yes/no questions. The answers help your insurance company predict whether your operations could result in certain claims.
The remarks section is where your broker might detail certain information about the policy or reference a certain form or application.
The final section of the ACORD 126 is for your signature. This section states that you are an authorized representative of the company, are authorized to sign, and the application is correct to the best of your knowledge.
The ACORD 126 form is a necessary application that you will frequently see if you purchase commercial general liability insurance. If you need help filling out this application or are unsure about what you are signing, let us know.
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