Archives for March 2019
Risk Education—If you do a Google search for “Myth,” several of the definitions that pop up include gentle phrases, such as “a widely held, but false belief or idea,” “fallacy,” “fabrication,” and “untruth.”
You probably won’t be surprised to see stronger terms like “lie” and “fake news.”
You might possibly disagree with the characterization of “alternative fact.” (I know I did.)
But no matter how you define “Myth,” when you’re talking about the protection of your business, and the thousands of dollars (or hundreds of thousands) you pay out each year for insurance coverage—there’s no room for mistaken beliefs of any kind. You deserve to know the truth.
Here are several “all-too-common” Commercial Insurance Myths—BUSTED by Risk Managers from American Risk Managers, Inc.
1) If You Have Commercial Insurance, Your Business Is Covered For Any Type Of Loss.
Unfortunately, this is not correct. You could have dangerous gaps in your coverage and not be aware of this until you have a denied claim.
You are most certainly an expert in your business field. But you probably don’t have enough knowledge of insurance terms and terminology to ensure that you’ve obtained the correct coverages and set sufficient limits.
And what about conditions, limitations and exclusions? Don’t let the fine print undermine your attempts to safeguard your company from risk.
Have an Independent Risk Management Consultant design an insurance program to fit your company’s specific needs. That’s the best way to protect your business and its assets. (And save money at the same time.)
2) You Can’t Do Anything About Your Workers’ Compensation Insurance Costs.
Untrue. Yes, you are required to have Workers’ Compensation Insurance according to your state’s guidelines.
But there are still several things you can do to help keep your Workers’ Compensation costs as low as possible.
- Promote safety and keep your losses (claims) down. Your premiums are set according to a formula that compares your business and its losses to similar types of businesses and their losses.
- Double-check your payroll amounts and ensure that all figures are reported accurately.
- Double-check the classification codes for your employees. You shouldn’t be paying the same amount for office employees as you do for truck drivers.
3) The Workers’ Compensation Premium Amount You Are Paying Is Not Subject To Change.
Woe unto the company that is surprised by an insurance audit and has their Workers’ Compensation premium costs doubled.
Unfortunately, this happens too often. Sometimes, there are errors made by the company. But in other instances, errors can be made by the auditors.
You are paying an “estimated” amount based on payroll, classification codes and a mysterious Modification Factor.
Get a Risk Manager involved to make sure your audit has no mistakes and your reporting was done correctly. Far too frequently, our staff finds numerous Workers’ Compensation inaccuracies. (And sometimes, a premium audit increase can even be turned into a refund.)
4) You Need To Buy Insurance To Cover The Complete Cost Of Replacing Expensive Assembly-Line Machinery.
Yes, you do need insurance. But no, you don’t need excessive coverages…
For example, if you have five $1 million machines on your production lines, you may think you need $5 million worth of insurance coverage. (This writer did… until her boss set her straight.)
In reality, you could obtain a type of Blanket Policy to cover these machines at a much lower rate than the one you’d pay for regular Property Coverages.
This is another area where a Risk Management Professional can help you save MORE than enough money to cover their fees.
And if your company is big enough to have million dollar machines, your policies probably run in the hundreds-of-thousands-of-dollars-range.
Our Risk Managers usually find at least 25-35% savings for clients of this size. (I’ll let you do the math on that.)
5) I Can Use Higher Deductibles To Help Buy More Insurance Coverage.
Not necessarily. You’ve heard the saying, “Don’t bite off more than you can chew.” That’s certainly an appropriate phrase to describe the dangers of setting deductibles too high.
There are many factors that need to be taken into account when determining appropriate levels of deductibles.
- The services or products you produce;
- The number of employees; and
- Overall company size (and sales).
You also need to consider:
- The size of your insurance premiums. (Small deductible changes won’t make much of a difference if you have huge premiums.)
- The number of losses you’ve had in the last several years. (If your losses are low, then your deductible amount is a type of “self-insurance.”)
- Can you afford to pay out if/when a claim occurs? (Deductible funds must be readily available without putting a strain on your company’s regular cash flow.)
Deductibles are a “mixed bag” when it comes to best policies. Again, here’s a situation where your Independent Risk Management Consultant can help save you a bundle of money OR help save you from a huge and painful blow to your bottom line.
You have multiple policies covering your company—General Liability, Business Interruption, Fleet Coverage, Directors’ & Officers’ Liability, Umbrella Policies, and many more.
Some of your policies should not have deductibles at all.
On the other hand, if you have very low losses and very high premiums, you may be able to save a lot of money on certain deductibles.
But how do you know if these are the same policies that you shouldn’t apply deductibles to?
You need to get an expert opinion. Risk Managers can work with your Insurance Company to negotiate deductibles (and rates and premiums).
And if you do save some money, buying more of the same type of insurance with your deductible savings may not be the best bet.
If you’re already adequately covered, those funds might be better used in another area of your business or to obtain coverages you don’t have yet.
A Risk Manager will check the exposures present in your business and advise you on coverages needed to fill-out your current insurance program.
6) The Company That Is Doing Some Sub-Contracting For Our Business Is Covered By Their Own Insurance, So Our Company Is Safe.
Not good enough. You still need to protect your company against loss EVEN IF the third-party or outside contractor working on your company’s behalf has insurance.
Any outside parties doing work anywhere for your company—on your premises or elsewhere—should first sign a contract absolving your company of any responsibility for negligence or accidents.
These types of contracts should be carefully worded (get your Risk Manager to check the language) and then signed and dated before any work begins.
Other protective steps include:
- Alert the subcontractor to the amount of insurance needed to do business with your company. (For example, $1 million. If they only have $500,000, they’ll have to obtain more insurance.)
- Have the subcontractor provide you with the Certificate of Insurance proving they have the adequate coverage limits.
- Have the subcontractor add your company as an “Additional Insured” on their insurance program.
7) The Big Print Gives It To You And The Little Print Takes It Away.
False. Insurance Policies are contracts—no matter the print size—designed to meet future obligations on your behalf.
These types of contracts must also be drawn up so as to pass rigorous reviews from various regulatory departments.
Insurance Contracts are also based on actuarial tables. These tables tell underwriters not only the likely number of claims that will occur, but also the severity per occurrence and the overall total severity.
Pricing is then established to meet company expenses, distribution costs and funds to pay anticipated losses. The pricing of competitors is also taken into account.
When making decisions on your options, you need the help of someone who understands the Insurance Marketplace and who is trustworthy.
Risk Managers can walk you through the maze of contract legalese so that you can understand your options and pick the most fitting policy.
8) I’ve Been With The Same Insurance Company For Years. I Even Play Golf With My Agent. So, I Am Sure That They Are Getting Me The Best Prices.
Regardless of how dear you feel your friendship is, business is business. Would you expect your friend to lose money by doing business with you?
Plus, no matter how good your friendly agent may be at finding you the lowest cost for insurance from THEIR company, a Risk Manager is going to bid out your account to SEVERAL different insurance agents and brokers.
Your agent can certainly be included in this bid process. Original agents seem to compete well against others. In our experience, they retain the accounts 50% of the time.
These original agents are usually able to obtain some extra savings through their brokers and companies to help them quote lower rates and premiums.
And the other half of the time—lower rates and more savings were found through different companies, brokers and agents.
Either way, you and your company benefit.
Fairytales, Fables and Myths all have their places—just not in your Commercial Insurance program and budget.
More Myth-Busting Advice Is Just A Phone Call Away!
(Photo Credit: Vladislav Reshetnyak/Pexels.)
RISK PREVENTION—Business owners and top managers face risks each and every day—not just on the Ides of each month.
Not familiar with “Ides?” You’ve probably heard, “Beware the Ides of March,” a phrase from William Shakespeare’s play, “Julius Caesar.”
On the Ides of March in 44 B.C., Caesar was assassinated by Brutus. Four years later, also on the Ides of March, 300 persons were executed in retaliation for Caesar’s death. (Reference: Wikipedia.)
The Ides in Shakespeare’s play referred to the middle of March or March 15. But, according to the length of the month, the Ides could also fall on the 13th or 14th day.
Since every month has a middle, every month has its own Ides. And we could say, “Beware the Ides of July.” Or “Beware The Ides of October.”
But who wants to run around being wary all the time?
You have better things to do—like focusing on your business. So, what’s a good solution?
The best way to get a handle on your Ides (and all the other days of the month) is to hire a professional to manage your risks.
Risk Managers can help you control, transfer, reduce or eliminate the risks associated with your company.
And, although Independent Risk Management Consultants never sell insurance, they can help you select the best coverages for your business.
A Risk Manager will design a program JUST for your company, because it’s not “one coverage fits all.” The best insurance coverage for your company may not necessarily be the best coverage for another company.
Insurance policies, limits, and deductibles should all be customized for your particular business or industry—focusing on its needs—and the products or services that you sell.
We can help you with that. That’s What We Do.
BUT… Since the Ides are fast approaching, here are a few of the top insurance policies we usually recommend for our clients.
Ideal Policies For Ides (And Other Days)
Cyber Liability Insurance
With hackers coming up with new ways every day to steal information over the internet, Cyber Liability Insurance is one coverage you definitely don’t want to neglect.
Any business that stores personal information, such as credit card numbers, Social Security numbers or other sensitive data, needs this coverage to protect themselves against damages caused by a data breach.
Directors & Officers Liability Insurance
Directors & Officers Liability Insurance (D&O) is designed to protect your company’s leaders against losses and lawsuits suffered as part of their duties as officers and directors of the company.
Defense costs for alleged wrongful acts are usually included in these policies, but intentional illegal acts are excluded.
And although most commercial-type insurance policies focus on the company, D&O is a “personal protection” policy for directors, officers and their estates.
Stock Throughput Policy
A Stock Throughput Policy (STP) is an “all-risk-type” policy that protects your company’s stock from losses or damages from the time of any item’s acquisition until its disposal.
Whether your products are in their raw material form in a warehouse; are partially constructed in your factory; or are completely finished, but not yet shipped; an STP covers them. In transit items are also covered.
Property Policies cover your buildings and contents from loss, damage or theft. Some specialized forms of Property Insurance include coverages for fire, flood, earthquake and other weather-related catastrophes or perils.
An “Open Peril Policy” would cover any loss, unless certain named losses were specified as “exclusions.”
A “Named Peril Policy” requires that any damage-causing losses be named ahead of time and listed in the policy.
Similar to how an umbrella protects you from getting wet on rainy days, an Umbrella Policy offers an extra layer of protection on top of your other insurance policies.
Some Umbrella Policies will not kick in until you have reached the limits of your other liability coverages, so ensure those limits have been established correctly.
Other types of Umbrella Policies can be purchased to extend limits of primary policies and cover otherwise uninsured losses—in some instances.
Business Interruption Insurance
Also known as Business Income Insurance, this type of policy is designed to protect your company from the loss of income after a disaster.
Coverage should be designed to start from the onset of your income loss and continue throughout the businesses’ down period.
Policies can be written to include aid with extra expenses associated with cleanup and restoration, emergency shipping of replacement equipment and advance payments of lost income.
(Learn more about this crucial coverage in “Business Income Insurance: Protecting The Lifeblood Of Your Company.”)
Electronic Data Processing Policies
Electronic Data Processing (EDP) Policies insure certain exposures that are not normally included in a standard Property Policy.
Computer equipment, software programs or data losses caused by damages from hacking, viruses, temperature extremes, lightning or electrical surges—and even mechanical breakdown—could be included in your insurance coverage.
An EDP Policy is designed as an “all-risks-type” policy, but you will need to provide a detailed list of all the equipment you want to be included in your coverage.
Boiler And Machinery Policies
Boiler and Machinery (BM) Policies protect against losses, such as machinery breakdown or explosion, plus various other occurrences that are excluded from a Property Policy.
BM Policies can also include heating and air-conditioning systems, refrigeration units, large ovens, electrical systems, elevators and some types of office equipment.
Your BM Policy can also be designed to provide funds to help remedy lost production time, goods spoilage from mechanical breakdowns or power failures, and explosion damage to surrounding equipment.
Inland Marine Policy
Inland Marine Policies are designed to protect the loss and/or damage to property or items that are not in a fixed location.
Examples of Inland Marine listings are a forklift used at one of your companies or a backhoe that is used in several different locations.
Another listing could be a small motorized vehicle that remains on company property—used to transport personnel from building to building.
Commercial General Liability
Commercial General Liability (CGL) is your primary line of defense against damages or injuries related to your business, its operations or its products.
CGL covers claims associated with property damage, personal or bodily injury and associated medical payments.
Advertising injuries are usually included in CGL Policies and can cover offenses and violations associated with slander, libel and copyrights.
Automobile Liability Policies
All companies should have all company vehicles that leave their premises listed on their Automobile Liability Policies.
These types of policies protect your company if one of your drivers is involved in an accident involving another vehicle. Costs associated with any Injuries to other drivers and passengers, as well as damages to their vehicles, are covered.
Any property that is damaged by your company’s vehicle is also covered.
Liability Policies usually do not have deductibles, but will have flexible limits, such as “per person” and “per accident,” that can be set higher than a state’s required minimum.
Auto Physical Damage Policy
This type of policy covers physical damage to your company’s vehicles, while liability covers other people’s vehicles, properties and injuries.
If the vehicles in your company’s fleet are not completely paid for and you have a loan, an Auto Physical Damage Policy is required by your bank.
Your bank will also need to be listed on your policy as a co-insurer.
Workers’ Compensation Insurance
Workers’ Compensation Insurance is required for businesses with a certain number of employees, but program rules differ from state to state.
Also known as “Workers Comp,” this insurance is a “no-fault” type of coverage and provides medical payments and lost-wages for employees who are injured or become ill on the job.
The cost of long-term or permanent damages, as well as retraining for other positions, is included. Some types of workers, such as independent contractors, are excluded.
If an employee were to be killed while on the job, their spouse and children would be eligible for benefits.
Persons who choose to receive Workers’ Compensation payments and benefits give up their rights to sue for any type of negligence.
Your company’s payments toward this program are set by job category and the amount of your payroll, so make sure your employees are classified correctly and your payroll recordings are accurate.
The amount of losses (or claims) for your business also affects your costs for Workers’ Compensation. (See “How To Check Your Experience Modification Factor: Cracking The Code” for more information.)
Employment Practices Liability
Employment Practices Liability (EPL) Insurance protects your company against employment-related claims and lawsuits.
Having an Employee Handbook and being aware of the best practices regarding hiring and firing employees may help ward off problems, but companies of any substantial size should strongly consider an EPL Policy.
Claims falling under the EPL category include any type of discrimination or harassment, wrongful termination, violations of wage and hour laws, and many more circumstances.
Companies should let their Risk Management Consultant help design the best EPL coverage for their company, taking into account their workforce and other variables that are unique to their specific industry or service.
Professional Liability Insurance
If your company provides professional advice or services, then you need Professional Liability Insurance (PLI) to ward off negligence claims and lawsuits.
Whether an error or omission was made, a financial loss was experienced by a client, or you are being accused of a failure to perform, you and your company need to be protected against economic and financial losses.
This type of insurance is also required in certain areas, in certain types of professions, and by some companies who might wish to do business with your company.
Specialized coverages for some professions are also available. For example, if you want to add a Registered Nurse to your payroll to treat minor injuries at your factory, you would want to be covered by PLI.
Trustee & Fiduciary Liability
If your company offers a pension or profit-sharing plan, or you and your company are in any type of trustee position regarding safeguarding assets, then you need some type of Trustee & Fiduciary Liability Insurance.
Your company can be held accountable for any and all decisions and actions that are made, as well as any breaches of duty.
Alleged wrongful acts can include improper assessments, contributions that are considered too few or too many, returns on investments that are seen as too little, and even risks that are thought of as being too high.
A Crime Policy protects your company from the loss of merchandise, money or property due to employee theft, fraud or dishonesty.
Coverage would include illegal funds transfer, computer theft, and forgeries, including claims associated with counterfeit monies created by employees.
A special type of Crime Policy, referred to as Kidnap & Ransom Coverage, can be purchased to cover extortion.
Pollution Coverage from man-made activity is often referred to as Environmental Impairment Liability.
Pollution Coverage provides for contamination clean-up costs and pays for damages to properties, as well as claims of bodily injuries.
Legal expenses, loss of business income and loss of profit associated with an environmental event could also be covered, if your policy is designed as such.
Endorsements may also be added to include risks associated with the transportation of certain products.
For The Best Results
Please be aware that this breakdown of insurance policies is just a brief overview, in our own words, of the types of policies our clients need the most—and so are most recommended by us.
YOUR business and YOUR needs will differ. We highly recommend you consult with an Independent Risk Manager for the best results.
Risk Management Professionals are highly skilled in matching insurance programs to client needs. They are also skilled in finding your business enough savings to cover their fees. More security. Less cost. Why not?
Matching Insurance Coverages To Client Needs For 40-Plus Years! We Can Help Your Company Today.
(Photo Credit: James Frid/Pexels.)