RISK EDUCATION—Start the New Year off right with these great tips for reducing some of the risks for your business. And since “Safety Is Always First,” the first half of our resolutions will focus on safety.

1. Hold monthly safety meetings.

   Safety meetings clear the way for your people to be safer and for your company to be more profitable.

2. Double-check all your equipment from a safety standpoint.

   One company changed the type of ladder they were using and decreased accidents (and Workers’ Compensation claims).

3. Encourage employees to report any and all areas of potential danger.

   As the “boots on the ground” in your factory and the “hands-on machine operators,” your employees are often the best source for spotting possible problem areas.

4. Set up safety awards banquets.

   Create meaningful awards that recognize employees for successfully handling safety-related situations.

   Certificates are okay, too, but being recognized as part of the company’s makeup—and from a consensus opinion of the workforce—has the most meaning.

5. Include non-management participation in all aspects of your safety awards.

   This includes the creation of the awards and choosing the recipients.

   Obtaining feedback and participation from non-management employees is a vital step in making these awards a success.

6. Set up “Early Back To Work Awards” for employees who’ve suffered on-the-job injuries.

   This type of award would be given to an employee who returned to work as soon as they were released for work by their physician.

7. Post a No Harassment (of any kind) Notice.

   Many employees will follow leadership examples on this issue, so make sure your company’s attitude starts at the top.

   Some companies are also seeing great benefits from promoting “Mindfulness” education and activities.

8. Encourage breaks. Research shows that employees who take regular breaks are MORE productive.

   Employees with time cards usually have scheduled 15 minute breaks each morning and afternoon.

   Staff employees may not have scheduled breaks, so encourage them to self-monitor a few minutes of downtime to recharge their batteries a couple of times a day.

9. Offer free English classes to any employees who are non-native English speakers.

   Check to see if there are any state-funded programs in your area. English classes increase employee retention rates (and morale).

   Some companies even offer added motivation in the form of a few cents an hour raise to employees who complete certain levels of their programs.

10. Sick Employees? Create an atmosphere where “staying home to avoid spreading germs” is encouraged.

    Your company will probably avoid more lost productivity from other employees getting sick.

    And your employees will also appreciate the protection from contagious sicknesses they would then take home to their own families.

For More Tips On Reducing Risk – Give Us A Call Today!

American Risk Managers
Risk Management That Pays for Itself in Lower Premiums
www.Amerisk.org  1 (800) 548-0117  Advisor@Amerisk.org
Serving Alabama, Mississippi, Tennessee, Louisiana & Arkansas

RISK EDUCATION – Just because you’re paying premiums on Commercial Property Insurance doesn’t mean your company is adequately covered for loss.

Without setting the correct limits on your policies, you won’t receive the funds you need to completely rebuild. And even on partial loss claims, you’re probably going to lose a significant amount to Co-insurance Penalties.

This might be alarming to hear, but you’re not alone.

“A vast majority, 75-80%, of our new clients in the last 40 years have been underinsured.”  —Walter Haney Sr.

But, unless you’re the Owner or CEO of a construction business, there’s a good chance you just don’t have the knowledge or experience needed to set realistic rebuilding limits.

We’re happy to offer you some suggestions on setting limits from a Risk Management perspective. But we’re also going to remind you of the need to personally consult with an Independent Risk Manager.

Your Insurance Agent’s duty is to fulfill your order based on limits provided by you. A Risk Manager will look out for your best interests—making sure correct limits are set. Plus, they can usually find increased and enhanced client coverages, AND premium savings, as well.

Key Considerations On Setting Property Limits

The process of setting limits for your company’s Property Insurance Coverage starts with establishing the needs of YOUR specific business.

If you have a brand new facility, with all new equipment, then your needs will be much different than a company that’s running its entire operation out of a portion of an old manufacturing building.

What about the size of your facility? Do you own multiple buildings? In how many different locations? What are the structures of your buildings? Are they constructed out of brick? Metal? Concrete?

What kinds of equipment, interior furnishing, inventory, and other contents will you need to replace if they’re lost or damaged?

After you establish your needs, THEN you determine the value.

Values are not something to be estimated on paper from a faraway office.

A Risk Manager will visit all the properties of their clients. They’ll walk around. They’ll take a good look at their client’s operations inside and outside. They’ll visit the manufacturing floors and observe the work in process.

For example, if you’ve been running your business for decades, you might have replaced older machinery with new technology—needing less room than before. (You won’t NEED to build back to the same size.)

Technology changes could also mean you’re using automated machinery and may have downsized the number of employees over the years. (You won’t NEED to rebuild a facility for 1,200 employees, if you only have 500.)

A Risk Manager is also going to check the prices for replacement machinery. (Do you NEED new machinery or will second-hand work just as well? Does this machinery NEED to be shipped from overseas?)

A Risk Manager will also check the construction cost by square footage based on local labor in your area. (In your city, does labor average $100 a square foot? Or are you in an area with costs around $300 a square foot?)

Another important consideration deals with insuring machinery that doesn’t stay in a fixed location, but moves around, being used in different places. Known as Contractors Equipment or Inland Marine, this type of business property also needs to be insured, with detailed lists kept and replacement limits set.

For example, a Utility Company that provides gas, power and water to its customers could use the same Inland Marine Equipment (such as backhoes, welders, trenches and cranes) in all its different departments and locations.

You’re also going to have to provide lists (called Schedules in the Insurance World) of all your computers, telephones and digitally-controlled equipment and machinery.

Costs for office contents are easily underestimated. And check to make sure you’re not still paying premiums based on new equipment 15 years later. Older equipment will be depreciated at claim time.

Again, these are just samples of numerous considerations. Hopefully, you realize by now that you and your business deserve a professional opinion.

A Risk Manager is going to make sure you’re covered. They’ll follow a detailed process that includes looking at all of your current insurance policies, closely examining all limits and values, and then comparing them to your specific needs.

They’re also going to double-check that you’re covered under the correct Property Coverage Value type, which brings us to our next topic.

Property Insurance Value Breakdowns

There are different types of Property Insurance Coverages and the one that’s best for your company is the one that best fits (you guessed it) YOUR NEEDS!

Types of Property Insurance Coverage can include:

• Replacement Value;
• Actual Cash Value; and
• Functional Replacement.

Replacement Value

If your company is new or you’re still manufacturing the same type of items, using the same equipment and using the same sized spaces in your facility, you’re probably going to want to insure at Replacement Value, also known as Replacement Cost.

Insuring to the proper Replacement Value means you’ll be able to replace your facility and equipment—everything that is damaged or destroyed—with the correct amount of money needed to replace both its size and quality level.

Actual Cash Value

Whatever a willing buyer would pay for your facility; its structure and its products TODAY—is called Market Value, also known as Actual Cash Value. But insuring with this type of policy means that depreciation will be deducted from your insured amount.

Rebuilding a structure usually costs considerably more than its previous value because of debris cleanup and site prep, as well as increased costs for raw materials and local labor.

(Side Note: Land, driveways, parking lots, slab and foundations are not usually included in any type of policy, unless specifically requested.)

Functional Replacement

If you have an older facility and maybe only use a portion of it, or your equipment has changed with technology and you don’t need as much space, you might consider insuring for Functional Replacement, also known as Agreed Value Provision.

With this type of coverage, you’ll be focusing on needed values more than present values. You’ll be moving toward what you’d actually need to build back, if you have a claim. And you won’t take a big depreciation hit or be subjected to a Co-insurance Penalty.

Plus, there are only minimum requirements that you’ll have to meet to fulfill your end of a Functional Replacement Contract AND you and your insurance company can come to this understanding before any losses occur.

“That’s what a Risk Manager is supposed to do—settle the claim—before the claim happens.”  —Walter “Wally” Haney Jr.

Co-insurance Penalties

If you have an endorsement from your insurance company that you’re only insuring to Functional Replacement or an Agreed Value Provision, then you don’t have to worry about Co-insurance Penalties.

But if you are insuring your property to Replacement Value or Actual Cash Value, then both of these types of coverages will have Co-insurance Clauses built into the policies.

What does this mean? This means that you must set proper limits for these coverages. You can’t insure a $3 million building for only $1 million. You’ll pay a steep penalty for being under-insured. You’ll actually be considered as a “Co-insurer,” thus the Co-insurance Penalty.

Penalties are set on a percentage basis, usually 80%. But some companies could use different percentages, such as 90%.

In this case, the amount of insurance you purchased (say $1 million) would be divided by the amount you should have purchased (the $3 million) and any losses—big or small—will be reduced by this same amount.

For example, even if you only had $100,000 worth of smoke damage to your $3 million facility, since you had lower limits than you should have had, that $100,000 will be divided by 3—the same percentage as $1 million divided by $3 million (.333). You’ll get $33,333 back (less your deductible) on this $100,000 claim.

Added Protection: Business Income Insurance

A Risk Manager will not only help you establish the correct amount of Property Insurance Coverage, limits and values you need to get your business back up after a disaster, they’ll also suggest added protection.

You can have a provision included in your policy to provide extra financial help (including payroll expenses) until your business is operating to the level it was before the incident.

Known as Business Income Insurance or Business Interruption Insurance, this crucial coverage is always recommended to our clients. More information on these policies and their benefits can be found in Business Income Insurance: Protecting The Lifeblood Of Your Company.

Saving On Premiums By Using Deductibles

Okay, so you’ve learned about setting proper limits and you’ve added Business Income Insurance. Are you interested in saving money on the front-end—the premiums you pay?

A Risk Manager can take a look at your losses to see if your company would be a good fit for Self-insurance Coverage. In this case, you would be assuming responsibility for part of (or whole) building losses. The amount of loss you choose to accept is called a “deductible.”

“We’ve done this for most of our big accounts. We were able to save them a lot of money by putting in correct deductibles. And we’ve been thanked for finding such significant savings—being told our help was ‘Spot On.'”   —Walter Haney Sr.

Loss Premium Models

Your Risk Manager can use Loss Runs established over the last 7 years and calculate limits that can significantly lower your premiums.

These types of equations are known as Loss Premium Models and they follow a step-by-step process.

Risk Managers will:

• Begin with your values;
• Overlay your past loss history;
• Calculate correct limits;
• Factor in different deductible amounts; and
• Determine how much you would cost yourself if you covered your losses using these various deductible amounts.

Higher deductibles can create lower premiums, as you are taking on more Self-insurance responsibility. And if you have no losses, that’s even more money you can put back into your pocket (and your business).

“You estimate possible losses over 7 years (based on your history) to see what the cost would be. It might be zero. You may not have any losses in there—particularly with property. With property, you don’t have any losses or you have big losses. You don’t have any nickel and dime stuff.”  —Walter Haney Sr.

For some clients, larger deductibles can greatly reduce premiums. One company may be able to handle a $100,000 loss and easily write it off. A $10 million loss would be hard for any company to survive.

Blanket Coverage

Last, but definitely not least important, is Blanket Coverage.

You can get Blanket Coverage and Blanket Limits so that you can insure multiple locations and different types of polices.

You establish a specific Blanket Limit, but the entire coverage amount can also be used to fulfill a claim at one location, two locations—or all locations—up to that Blanket Limit.

You can also buy Blanket Limits for Equipment, Third-party On-site Contractor Equipment and (our good friend) Business Interruption Insurance, as well as for any other risk exposures you may have.

“You never know where a claim will occur, how long your business will be down, or how many people will be involved. Blanket Limits cover everything UP to the limit that you bought—it doesn’t matter where the incident occurs.”  —Walter Haney Sr.

We hope you’ve found this post helpful and now realize the importance of prioritizing this issue to help protect your company. And we also hope you never have a reason to test the limits of your policies.

For Even More Advice On Setting Limits, Give Us A Call!

American Risk Managers
Risk Management That Pays for Itself in Lower Premiums
www.Amerisk.org  1 (800) 548-0117  Advisor@Amerisk.org
Serving Alabama, Mississippi, Tennessee, Louisiana & Arkansas

RISK EDUCATION – If a natural disaster or other catastrophe, such as a fire or a robbery, should temporarily close your business down, you could be facing another disaster—the permanent closing of your company—if you don’t have your stream of income insured.

Business Income Insurance (or Business Interruption Insurance) is a vital protection and should always be included in your commercial coverages.

You’re insuring the most valuable asset your company possesses—your stream of income.

Income acts as the lifeblood of your company. Protecting this lifeblood can determine whether you live or die as a company.

A Misunderstood Coverage

Most businesses either think they don’t need Business Income Insurance or they just don’t think about it at all.

This type of coverage is also frequently misunderstood.

Companies will insure their properties, equipment and machinery, but may not think about insuring their income.

And some agents won’t bring up Business Interruption Coverage, unless it’s built right into their usual forms.

What you are basically insuring is the loss of income from the beginning of the claim period until your business can be fully restored and earning an income that equals the pre-event amount.

Coverage Should Be Carefully Catered

Just like other types of insurance, Business Income Coverages include conditions, limitations and exclusions.

All these considerations are just as important as having the coverage at all and will ultimately determine what is paid, how it’s paid and when it’s paid.

Coverages are available to expedite recovery and help with extra expenses. Some income loss payments could even be made in advance—IF this is written into YOUR policy.

Your loss of income protection should be catered carefully to your exact business needs.

What If?

All types of scenarios should be considered to make sure you are adequately protected.

Ask yourself, “What if?”

Would you be covered if a catastrophe hit your area, but your own facility was undamaged?

If all the surrounding roads are impassable:

• Your fleet can’t deliver;
• Your suppliers can’t deliver, either;
• Your employees won’t be able to travel to and from work; and
• If you are retail, your customers can’t get in and out.

Make sure your particular policy covers all these types of situations.

Get Professional Advice

When calculating exactly how much Business Income Insurance you need, it’s best to consult with a professional Risk Manager.

Offering unbiased advice, an Independent Risk Manager can help you determine exactly what types of coverage you need AND the correct amount you need.

Your Risk Manager will help you complete a detailed Business Income Worksheet for your company.

You can find worksheets online, but Risk Managers provide the expert knowledge needed to correctly estimate all the many variables.

Considerations include:

• Net Annual Sales (after taking away the Cost of Goods Sold);
• Ordinary Payroll;
• Net Income and Expenses;
• Factors for Repairing & Replacing Items;
• Extra Expenses; and
• Many, Many More.

You will also need some funds for future finances—savings you’ll need to go back into business.

Plus revenue to pay salaries and continue employee benefits.

Not A Cookie-Cutter Approach

Deciding how much income you need to recover can’t be determined with a cookie-cutter approach.

There are no easy percentages to follow, because there is no specific number you can base a percentage on.

Each business is unique.

Each company will have a different amount that is needed to get them back into business as quickly as possible.

Only YOU will know how much money you will need.

Smaller businesses may be able to get back on their feet in a shorter period of time.

Larger companies, with huge manufacturing facilities, may take a lot longer to build back.

It all depends on what you make, how big you are, where you are located, what type of equipment you have and EXACTLY what happened to shut you down.

It also depends on the number of employees you have, their salaries, their insurance and benefits…

Is it going to be weeks, months or years before you can get back up to speed?

How much money you need depends on A LOT.

Tip Of The Iceberg

There are a multitude of factors involved—this post only touches the tip of the iceberg that is Business Income Insurance.

Most importantly, we just want to get you thinking in that direction.

We want YOU to consult with someone who has YOUR best interests in mind.

A Risk Manager is going to ask you, “How much money do you need to operate without income?”

And then, they’re going to build everything else around that specific amount of protection.

Hopefully, you’ll never have to use this type of insurance.

But if you do, a Risk Manager will make sure you get the correct amount needed to save your company.

And they’ll also make sure you’re able to collect that amount…

Because—Business Income Insurance is not only difficult to determine—it’s an even more difficult claim to prove.

A Risk Manager will probably insist that the cost for Forensic Accounting be built into your policy.

With an outside firm doing the forensic work, a hard claim to settle will become a much easier claim to settle (and usually for more money.)

A Stronger Position

You put your heart and soul (and possibly your life’s wealth) into your company.

Maintaining a stream of income can make all the difference in your future success.

Business Income Insurance also helps keep your business alive in other areas.

You can sit down with your banker, your suppliers and your customers and say, “We’re not running now, but our stream of income is insured just like the company was still running.”

That’s a strong position to be in.

If there’s nothing coming in—no income at all—you may have to close the doors.

Or even worse—face your banker as they force you to close the doors.

Ask yourself now: IF something destroys your facilities and you want to be able to keep your company—but you have to build it back—all while keeping your employees and other expenses going—HOW much money do you need?

Your next step: Contact someone who can help you get THAT amount of coverage.

Let’s Discuss Your Business Income Protection Needs!

American Risk Managers
Risk Management That Pays for Itself in Lower Premiums
www.Amerisk.org  1 (800) 548-0117  Advisor@Amerisk.org
Serving Alabama, Mississippi, Tennessee, Louisiana & Arkansas

RISK EDUCATION – You might think you can save a lot of money by handling your own Risk Management and dealing with your company’s insurance renewals—but the opposite is true.

Not only is it dangerous for those without experience in Risk Management to be handling their own programs, you’re actually missing out on savings that could add to your company’s bottom line—a nice find before next year’s budget time.

By using a true Independent Risk Manager and having your risks (and insurance renewals) handled on a contractual basis, you could offset the cost of your program with lower premiums.

The Two Biggest Threats To Your Company

UNINSURED – Having no insurance.

UNDERINSURED – Not insuring your products, assets or operations to their true value.

Being uninsured or underinsured can destroy your company.

If you are uninsured, you will suffer a total loss.

If you are underinsured, you will most likely suffer a severe co-insurance penalty.

Other Dangers Include The Failure To Properly Quote:

• Correct Limits – You must accurately designate the amount of coverage needed to replace your company’s buildings and equipment. If you’re not familiar with setting limits, you could dangerously under-value your company’s assets. 

• Coverage Type – There are many types of coverages and professionals can better help you choose which best fit your needs. Coverages include “All Risk,” “Replacement Cost,” “All Exposures Present,” and more. If your company is located in a flood zone or earthquake-prone area, you will need to have insurance specifically designed to cover these types of occurrences.

• Financial Impairments – If you don’t list all the Mortgagees on your properties or equipment, your insurance won’t cover the loss. For example, if you are making payments to the bank on your fleet’s latest tractor-trailer and it gets stolen and wrecked—if you didn’t have the bank listed—you are going to still be responsible for ALL the payments.

With American Risk Managers handling your Risk Management Programs, you’ll never have to worry about being correctly insured.

We’ll make sure your company is safely protected from risks. If a loss occurs, you’ll be able to get the correct amount of money you need to put your business back on track. And that’s worth a lot!

Find Out MORE Ways We Offset Risks & Offer Savings!

American Risk Managers
Risk Management That Pays for Itself in Lower Premiums
www.Amerisk.org  1 (800) 548-0117  Advisor@Amerisk.org
Serving Alabama, Mississippi, Tennessee, Louisiana & Arkansas