5 big misconceptions about Commercial Liability Insurance

5 misconceptions about liability insuranceGeneral Liability insurance covers your employees.

General Liability Insurance only covers your businesses liability to third parties. Third parties do not cover your employees.  Bodily injury claims that involve your employees would involve a workers compensation policy.

Insurance rates solely depend on a businesses claims history

There are many factors that go into what your business pays for commercial insurance and the businesses claims history is one of those factors.  The size of your business, the industry you operate in, the class code within your industry, the years in business, how many employees you have, the revenue of your business and where your business is located also go in to what a carrier uses to determine a rate on premium.

Many businesses cannot afford insurance

There are many ways to save on commercial insurance.  If price is important to your business than express that to your agent.  They can negotiate on your behalf for better rates, deeper discounts or larger credits on premium.  If you have well-documented safety programs in place than express that to your agent as well and they can use it to get a better rate. Another way to save on premium is to choose the pay as you go method for some coverages.  This can allow your business to get coverage in place with a significantly less up-front cost.

 

If I have Workers’ Compensation Coverage my employees cannot sue my for anything.  

Workers’ Compensation Coverage can protect your business from injuries that occur as a part of normal business operations. Employees can sue your business for any reason at any time and it can cost your business a large amount to defend. The accusations do not have to be founded to rack up a lot of legal defense costs. Also, if your business does not have the proper safety precautions in place or if it is found that the injury resulted because of carelessness of the business or its leadership can cause you to be liable for damages.

Insurance is all-encompassing

In most states, workers compensation and general liability insurance are required by law.  They are the bare minimum coverage that a business needs to legally be in business, but they are not enough coverage to adequately protect most businesses. For this reason, it is important to partner with an experienced independent insurance agent.  They can negotiate with the carriers to get your business better coverage at rock-bottom prices.

Restaurant Insurance

3 tips to find the best Restaurant Insurance. 

How much insurance do I really need? What are the correct types of insurance for my restaurant? What types of restaurant insurance can I do without? What is the bare minimum I can get away with for restaurant insurance? These are all very common question that insurance agents get asked when a restaurant owner is looking to protect their business for the first time or a seasoned business owner is looking to renew their coverage. The answer to this question is like many things; ‘It depends’. There are many variables that go in to owning and operating a restaurant and those variables bring on many risks. Not every business owner is comfortable with the same amount of risk.  Depending upon how much risk you are willing to take, here are 3 tips to help you make sure you are purchasing the amount restaurant insurance.

Are you classified correctly?

First off, the small business owner needs to make sure their business is classified properly. This applies for both workers compensation and general liability insurance. Each state has their own governing body for these coverages.  The best way to determine if you are properly classified is to ask for help from an experienced independent insurance agent. When talking with your agent, it is crucially important to be honest with them.  This is important for the time you are open, how much and what types of alcohol you serve and what exactly your employees do.  Restaurants are classified different based upon the risks they face. Being properly classified can save your business immensely.

Pay as you go option

Workers comp coverage is required by state law in 48 out of 50 states. getting this coverage in place is an enormous cost.  Pay as you go workers’ compensation is s a great option for seasonal or cash strapped businesses. Pay as you go workers’ compensation allows a business to pay premium based upon the amount of payroll as opposed to an estimate of the monthly payroll. For many businesses they can get coverage in place for as little as a few hundred dollars.

Determine the proper type of Commercial Auto Insurance

Many business owners do not think they need any type of commercial auto insurance. Just because your business does not own vehicles, doe snot mean you do not need to secure some form of commercial auto insurance. If you do own vehicles that are going to be used for business purposes you most definitely need commercial auto insurance coverage. Also, if you have employees who use their own vehicles for business purposes than the business is liable for all accidents. Hired and Non-Owned Auto Coverage is a policy that kicks in when your employees use their own vehicle or a rented vehicle not owned by the company. Regardless of how small the activity may seem, when the employee is using any vehicle to do business activity you are liable.

 

 

Small Business Insurance

It’s human nature for a business owner to wonder how much and which types of small business insurance coverage their business actually needs. To be successful, a business has to be comfortable with some amount of risk. Taking the first step to open a business is a risk.  With that simple fact, one would have to assume a small business owner is comfortable with some amount of risk.  Now how much and what types of risk the business owner is willing to take are completely unique to the industry the business operates in and the personal philosophy of the business owner.

Coffee shops need Small Business Insurance. Find out the latest information at https://www.myinsurancequestion.com/

Here are 5 insurance policies every business should secure.

General liability

General Liability insurance protects an organization from damage to third parties who are not associated with the business. Third parties may include customers, the general public, vendors or anyone that could potentially be damaged by the actions of your business.

Workers compensation

Workers’ compensation insurance is similar to general liability except it deals only with your employees.  Workers comp is the ‘exclusive remedy’ for injuries that occur to employees as a part of normal business operations. This policy provides medical coverage and some lost wages for injured workers who are hurt as a result of normal business operations.  Employers benefit from the policy by not having to worry about being sued for injuries that occur as a normal part of business operations.

Business interruption

Business Interruption insurance will protect a business in the event it is forced to be closed for an extended period because of another covered loss. The covered loss is an important part of this coverage. If you are the victim of a hurricane or a flood and you do not have coverage for that loss, the business interruption coverage will not kick in. This is typically included as a part of a business owner’s policy (BOP).

Employment practices liability insurance (EPLI)

EPLI coverage is a type of insurance coverage specifically designed to protect your business from lawsuits relating to the employment process. Over the past decade employment lawsuits have increased significantly. If you stay in business long enough, chances are you will face an employment related legal issue. Your business can face one of these lawsuits even if the employees of that business have not done anything wrong. It can also cost an enormous amount of time and money for a business even if the business is found to be innocent.  An EPLI Policy can protect a business in just this case.

Commercial auto or hired and non-owned auto

Driving risks are one of the most difficult parts of insuring a business. When driving a vehicle is involved in the work of a business, the frequency and severity of claims tend to rise dramatically.  Of course if your business owns vehicles and employees drive those vehicles as a part of their work, the business needs a commercial auto policy.  A business does not have to own a vehicle to face liability around employees injured while driving any vehicle.  If you have employees who use rental cars while they are travelling on business purposes than the business is liable for any accidents they are involved in while they are travelling.  This is because the purpose of the employee being where they are is because of the business function.  If you have employees who use their personal car for business purposes, the business is liable for any damage caused in an accident that occurs.  The employees personal auto insurance policy will cover the damage to their car, but the business will need additional coverage because the liability to other people  involved in the accident rests with the business.  These instances can be covered by a Hired and Non-Owned Auto Policy, which can be added to most standard business owner’s packages (BOP’s).

5 ways a Safety Program can help your Business.

Insurance is one of the biggest expenses for a small business. If there is a way to save, the extra cash flow can help a business immensely.  A well-documented safety program are a solid way to lower what a business pays for insurance coverage. An effective safety program does not have to take an enormous amount of time away from your business.  If implemented properly the program can cause your business to have less injured workers, lower your insurance premium, lower the amount and severity of claims, prevent your businesses insurance rates from increasing when a claim does occur and it can prevent your business from being dropped from coverage altogether.  If a well-documented safety program is implemented properly it will be a win-win situation for both your employees and the bottom-line of your company.

How can a safety program help with your commercial insurance premium?

Here are five ways a well-documented safety program can benefit your business.

Less Inured Workers

 Safety and preventing injuries is simply the right thing to do.  Safety is the right thing for your employees because they will experience less injuries on the job. Safety is the right thing for your business because you will experience less injured workers having to take time away from the job.  This will decrease the stress on the rest of your workforce and it will lower or eliminate costly insurance claims that can be a financial disaster for your business.  Doing the right thing may seem simple and obvious to most business owners, but many businesses do not take the time to implement a thorough safety program and in the long run it costs them immensely.    

 Your business can get a better rate on insurance premium

Insurance carriers are more likely to offer your business better credits and discounts if your organization has a well-documented safety program in place. The program shows that your business operates more like a well-oiled machine and less like a rusty old farm tractor.  Documentation is especially important to this program.  If you do not have documentation of this program, you might as well not have one for insurance purposes.  The documentation will help your agent to negotiate better coverage and for the underwriter at your carrier to offer deeper discounts on premium and more credits toward your policy.

Less Severe Claims

When a thorough safety program is in place, the business will experience less accidents.  The severity of those accidents will be less. Additionally, if you incorporate a return to work program as a part of the program; injured workers will return to work more quickly. This is extremely important for your insurance policy because the quicker a worker returns to work, even in a limited capacity, the more likely they are to return to work permanently. This can impact the amount of a claim.  How much your insurance carrier has to pay out for claims in a given term impacts your businesses experience modification rating.  This is one of the few factors that carriers use to determine what they will charge your business for insurance premium.  When injured workers do not return to work and stay on workers’ compensation for extended times, it can negatively impact your experience modification rating. This rating along with the industry your business operates in are the two most important factors that determine your rate for insurance premium.

When incidents occur, your business is less likely to have insurance premium rates go up.

When accidents occur; more than likely, your rates for commercial insurance are going to increase.  They are less likely to be increased because of just one accident or a string of minor claims, but in the landscaping business eventually a large claim will occur.  This is simply the nature of the business.  If you have a strong safety program in place, your insurance agent can use the program to explain how the claim is more of an outlier and not a signal of how your organization does business.  When a large claim does occur; if a safety program is in place and it is well documented, your insurance agent can use the program to show the underwriter that this incident is not a sign that your business will have more claims in the future.

 Safety Program

Safety programs can prevent your business from being dropped altogether. 

If you have several claims or one large claim during one insurance term, the insurance carrier may consider refusing to offer coverage moving forward.  If this happens and your business cannot find a carrier on the open market to offer coverage for your business you may be forced to buy some coverages from the state provider.  For instance, if your business is looking for workers compensation insurance in California you are already operating in the most expensive state in the country to purchase coverage.  The assigned risk provider is sometimes referred to as the provider of last resort, the state fund or the state pool.  This provider of last resort is typically significantly more expensive than the open market.  In most states once you are forced to purchase coverage from the state provider you must continue purchasing from that provider for a period of usually two or three years.  This is designed to deter businesses form having excessive claims.  A safety program can help prevent this from happening to your business.  Just like how your insurance agent can use a well-documented safety program to prevent an increase in premium they can also use it to find some coverage on the open market.

20 Quotes for small business owners about Risk.

20 Quotes Small Business Owners can use to access risk.  

JFK quote about risk.

“There are risks and costs to a program of action. But they are far less than the long-range risks and costs of comfortable inaction.” JFK John Fitzgerald Kennedy

 

“Take calculated risks. That is quite different from being rash.” — General George Patton

“Biggest profits mean gravest risks.”  Chinese Proverb

“The best we can do is size up the chances, calculate the risks involved, estimate our ability to deal with them, and then make our plans with confidence.” Henry Ford

 

“Security is mostly a superstition. Life is either a daring adventure or nothing.” — Helen Keller

“If things seem under control, you are just not going fast enough.” — Mario Andretti

“Yes, risk-taking is inherently failure-prone. Otherwise, it would be called ‘sure-thing-taking.'” — Jim McMahon

“You’ll always miss 100% of the shots you don’t take.” — Wayne Gretzky

“Danger can never be overcome without taking risks.” — Latin Proverb

 

“I’ll play it first, and tell you what it is later.” — Miles Davis

 

“Whenever you see a successful business, someone once made a courageous decision.” — Peter Drucker

“Business people need to understand the psychology of risk more than the mathematics of risk.” Paul Gibbons,

“Opportunity and risk come in pairs”   Bangambiki Habyarimana, The Great Pearl of Wisdom

MLK was a man who was not afraid to take on risk.

“The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.” — Dr. Martin Luther King, Jr.

 

“Leadership is the art of getting someone else to do something you want done because he wants to do it.”  – Dwight Eisenhower

“You don’t close a sale, you open a relationship if you want to build a long-term, successful enterprise.” ~Patricia Fripp

“Most people think “selling” is the same as “talking”. But the most effective salespeople know that listening is the most important part of their job.” ~Roy Bartell

Albert Einstein

 

 

“Life is like riding a bicycle. To keep your balance, you must keep moving.” ~Albert Einstein

 

 

“Leaders become great, not because of their power, but because of their ability to empower others.” -John Maxwell

“It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” – Charles Darwin

Why do Work Comp Rates Vary from state to state?

Citizens of the United States enjoy a very high quality of life. According to a 2016 Business Insider Article, Americans enjoyed the 9th highest quality of life of any country in the world. Workers’ compensation coverage is a huge contributing factor to this quality of life. A strong workers’ compensation system provides the ‘exclusive remedy’ that helps prevent litigation between employers and employees when accidents happen on the job. When a strong Workers’ Compensation System is in place, employees are guaranteed some wage replacement while hurt and not able to work. Employees also receive payment for all medical expenses as a result of injuries that occur as a part of normal business operations. In turn, employers can rest easy knowing they will not be held liable for employee injuries, except in circumstances where the employer intended to cause the injury or was willfully negligent.

Work Comp Rates

In the United States, Workers Comp Laws are left up to the state governments. In most states, employers are required to carry workers’ compensation insurance. There are a few exceptions to that rule, but for the most part all employers are required to carry some baseline coverage to protect their injured workers.  There are many things a state government must do to administer a workers compensation system. The two main things states do that can effect price are; determine a process for assigning rates on industry class codes and provide employers with a provider of last resort (state fund or assigned risk provider).

Provider of Last Resort

Rates can be strongly impacted by the strength of the provider of last resort. This is frequently referred to as the state fund or the assigned risk provider. The assigned risk provider is offered to employers who cannot find a carrier to offer them coverage on the open market.  The business may not be able to find coverage on the open market because of their past claims history or because they operate in a high risk industry.  How well the state goes about setting up this relationship goes a long way towards determining the rates employers pay for coverage in that state.

There are three main ways states go about providing this service.

  • State provided fund
  • Public-Private Partnership
  • Partner with an outside agency

The Workers’ Compensation Fund of Utah (WCF) and The California State Compensation Insurance Fund (CSCIF) are two examples of states who provide their own fund. These two states area good comparisons to show how rates are affected by either a strong or weak state fund. In Utah, The WCF has a 57 percent market share while the next largest provider owns only a 3 percent share of the market (2). In comparison, The CSCIF controls just over 11 percent of the market compared to just under 10 percent for the next largest provider. As a result, Utah has workers comp rates that are 107 percent cheaper compared to California. This is not the only contributing factor to the discrepancy in prices, but it goes to show how drastic an impact a strong state fund can have. Now in California’s defense, the Gross Domestic Product (GDP) in Utah is nearly 1.7 trillion dollars less than California (2). That is another huge factor driving up prices in California.

 

Another factor impacting rates on workers’ compensation insurance is how a state goes about determining rates on all the different industry classification codes. There are two ways states can go about providing this service. They can provide their own rating bureau or they can partner with an outside agency to do this in-depth work. Most states partner with the National Council on Compensation Insurance (NCCI) for determining rates on class codes. A few states have an organization that is part of the state government who determine rates.

Determining Rates on Class Codes

New York and Arkansas are two contrasting states that are a good example for how these different approaches can effect the rates on workers comp coverage. New York has its own bureau, The New York Compensation Insurance Rating Board (NYCIRB) while Arkansas outsources these duties to NCCI. As of 2014 Arkansas has rates on Workers Comp Coverage that are 90 percent cheaper than those rates in New York. Now again in defense of New York, it does have a GDP that is just under a trillion dollars more than Arkansas. That is a strong factor contributing to higher rates, but so is the fact that New York does not use NCCI to determine rates. Typically states who have their own bureau have higher rates across the board. In most cases, NCCI is better at doing this task than the states are themselves. The one exception to this is the state of Indiana. Indiana has their own state rating bureau, but enjoys some of the lowest rates on workers comp in the country.

In both of these examples the larger states have different ways of going about administering their workers compensation policies. These different ways contribute to escalating rates on workers’ compensation insurance. Now part of the reason for them doing things differently might be the vast size of the economies in these state’s. They may not be able to outsource this job for an economy in the trillions of dollars where as another state may be able to outsource more easily because their economy only amounts to 100 billion. Both of these examples do show how the strength of the state fund and how efficiently a state determines rates can drastically effect the amount employers pay for workers comp coverage.

These factors are two of many factors that can have a huge impact on rates employers pay for workers comp coverage. This is why it is immensely important to consult with an insurance industry professional when quoting a policy. It is also important to quote with agencies who have access to many different insurance carriers within your state. The more carriers your agent can get a quote from, the more likely your businesses is to get more comprehensive coverage and lower rates on premium.