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Brian S. Smith is an insurance professional with the Insurance Office of America in Atlanta, GA. He incorporates a process called “Risk Reconnaissance” which is a comprehensive method of uncovering corporate risks and insurable gaps. His work has a focus on government & defense contractors, specializing in Defense Base Act insurance. In addition to blogging, Brian hosts the Risk GovCon Podcast and is one of the founders of Atlanta GovCon.

It is great news to be awarded a government contract.  All the hard work that went into the proposal preparation and the on-time delivery has resulted in a “Big Win” for your company.  But what about the insurance costs?  Sure, you have insurance on your company, but does it anticipate the new exposure?  The new contract?  Wait, Is DBA Insurance reimbursable?

Premium determination for the new contract can have varied results.  If the insurance premium is low, no problem.  If the premium is higher than expected, the impact on the contract profitability can be devastating.

Can the insurance premium be reimbursed by the US Government?

Each awarded government contract stands on its own for reimbursable costs. Two contract types include firm-fixed-price contracts and fixed-price contracts.  The contracting officer and the proposal team must understand the insurance cost impact to the contract.  Costs outside of the scope of the operations will straddle the company with additional costs, reducing profitability.

Cost reimbursement must be approved by the contracting officer, and submitted for repayment if permitted.  On a fixed-price contract, there may be no relief.  It is important to know in advance, the overall cost of insurance.

To determine the premium, the rate, calculated per $100 in payroll, will provide an estimate of the cost. Your insurance broker/professional should assist with the rate determination. By contacting their office and asking for a rate associated with a certain occupation, you can determine the cost of insurance in advance so that profitability will not be marginalized.

If the insurance purchase was not considered during the proposal stage, it will impact the overall profitability of the contract award.  I recommend you speak with your insurance professional on the cost of the insurance and if the cost is worth the award.  They may come back with a very high rate, one that will simply put the entire contract profit in jeopardy.  Other considerations outside of DBA Insurance is the cost of business travel accident insurance.  Finally, ask Is DBA Insurance reimbursable?

Business travel accident is not required by contract but is suggested to fill in the gaps presented by DBA insurance.  For instance, if an employee suffers an illness such as influenza or pneumonia, this may not be covered under the DBA policy since it was likely not caused by a workplace matter.  That being said, the business travel accident insurance would provide for medical care as well as transportation should the employee need to be evacuated to another location.  in short, check with your insurance professional to make sure the gaps are covered.  Learn more about ancillary coverages such as business travel accident by visiting TheRiskRecon.com website.

In conclusion, the cost may be reimbursable, but it is important to know the costs before a contract is awarded.  Minimizing profit loss is critical in sustaining any operation, especially for government & defense contractors.