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.

5 facts about insurance

5 little known facts about insurance, every small business owner should know.

General Liability covers my employees if they are injured at work

This is false. General Liability Insurance covers your businesses liability to third parties injured by the actions of your business. This goes for both property damage and bodily injuries.  One thing a general liability policy does not cover is the injuries that occur to your employees.  For these injuries you need a separate workers compensation insurance policy.  Workers comp will cover your employees for medical care and some lost wages when they are hurt on the job and not able to work.

The only thing that determines your rate for insurance is your loss ratio.  

There are many things that go in to how a carrier determines what you pay in premium for coverage.  First is your classification code.  It is pretty easy to understand that an accounting firm is taking on a lot less risk compared to a roofing company.  The level of risk is going to be represented in the amount those businesses pay for premium.

Your personal auto insurance will cover your car when you are using it for business purposes.  

You may need Hired and Non-owned Auto Insurance.This statement is not true.  If you are using your car for business purposes, it is not completely covered under your personal insurance policy.  The personal insurance policy will pay to cover the damages to your car, but it will not cover your liability to third parties. That liability falls on the shoulders of the business.  For that reason, you will need to secure either a commercial auto policy or a hired and non owned auto policy.

You must pay your insurance premium in full up-front.

This is not true.  Most commercial policies require 25% or more of the premium in order to get coverage in place than you pay 9 monthly payments over the last 9 months of the policy period.  There are also options the insurance industry has developed to help cash strapped companies. This is the Pay as You Go option.  Pay as you go can get coverage in place for only a few hundred dollars and then you pay premium each month based upon the monthly payroll.  This is an excellent option for seasonal or cash straped businesses.

There is no need for Business Insurance if you work out of your home.

This is absolutely not correct.  The liability needs you face are different if you work from home, but there are still risks you need to cover.  If you drive to clients houses you need some form of commercial auto.  If you have specialized equipment you may need inland marine coverage and if you offer professional advice you more than likely need professional liability.  These are just a few coverages you may need for a home office and an experienced insurance professional can help you make sure your business is protected with just a short conversation.  It is important to be thorough and honest during these conversations.

6 things an underwriter loves to see when quoting commercial insurance.

For most small business owners, purchasing insurance is not one of their favorite things to do. Most business owners would rather be involved in the day to day operations of what their business does to make a profit. Taking a little extra time before you pick up the phone to get a quote can make all the difference in the world when you are offered a quote.  Here are 6 things to keep in mind when speaking with your agent about a business insurance quote.

Small Business Insurance

Have your info.

Everyone wants a quote and they want it quick, but insurance is not a business in which a company can quote a price on the drop of a hat. Proper tax id number, your experience modification rating and accurate payroll figures make the process much quicker for an agent to get a quote from the underwriter. If you don’t have this information a carrier cannot and will not offer you a quote. to save yourself and the carrier some time, have this information ready before you start looking around for coverage.

Safety programs are in place

Safety programs can be expensive and time consuming, but they absolutely benefit your company in many ways. First and foremost, they lower the amount and severity of injuries that occur to your employees. Second they limit the amount of time it takes injured employees to return-to-work. Third it can impact what you pay in premium for commercial insurance. If and when you have an injured employee, your insurance agent can negotiate on your behalf with your insurance carrier to not raise your rate on premium because of the claim. If a detailed safety plan is in place the carrier might see this one incident as more of an outlier and not a sign of how the business operates. If there is not a safety plan in place your business is much more likely to have your rates go up or be dropped by your carrier altogether.

A thorough and accurate website

The accuracy of your website is extremely important. Your agent is going to have a conversation with you about your operations. During this conversation it is important to tell him not only what your business does, but more importantly what your business does not do. Your website needs to match up with this description.  If you run a landscaping business that does not work on trees, but your website offers tree services than an underwriter is going to wonder what else you are not telling them. This is a great way to get a higher premium or more likely be denied coverage altogether.

A detailed payroll history

I know you may not like giving away too much information about your business, but the more accurate this number is that you give to your agent the more accurate your quote will be.  This will all get straightened out during an end of term audit, but it is best to prevent over or underpaying on premium by giving accurate numbers to your carrier up front.

Don’t be a rate jumper

A business who seems to change carriers every year at the slightest drop in premium. Carriers want to establish a long term relationship with a customer. If you have several carriers over the last few years it may be a red flag that those carriers dropped your business or that the carrier may only have your business for one term. Unless your payroll is extremely high it may not be financial sound for them to quote you.

 

Don’t forget, in the end they work for you

If you forget a few pieces of information that are necessary for a quote than it might be expected for the agent or underwriter to be a bit frustrated. But never forget that these people work for you. If they make you feel too uncomfortable do not hesitate to walk out and speak with another agency or carrier. Do what you feel is best for your business.

12 terms to familiarize yourself with before your next renewal.

Twelve tips for the next time you purchase Small Business Insurance.

Insured

The person, group, or organization whose life or property is covered by an insurance policy.

Insurer

Insurance company that issues a particular insurance policy to an insured. In case of a very large risk, several insurance companies may combine to issue one policy.

Named Insured

Any person, firm, or organization, or any of its members specifically designated by name as an insured(s) in an insurance policy.  .

Learn these terms to help your business at your next commercial insurance renewal.

Premium

The price or amount paid for insurance.

Claim

A formal request to an insurance company asking for a payment based on the terms of the insurance policy.

Carrier

A company that offers and underwrites insurance policies.

Insurance Carrier

Policy

A document detailing the terms and conditions of a contract of insurance.

Underwriter

The person who decides whether to provide insurance and under what terms.

Agent/Broker/Producer

A person licensed by a state and employed by an insurance company to sell insurance policies on the company’s behalf.

Find out if you really need Umbrella Insurance Coverage at www.myinsurancequestion.com

Umbrella Coverage

Umbrella coverage protects your business when your existing liability insurance policy limits can’t cover all the expenses of a claim.

Hired and Non-owned Auto

A coverage that is commonly added or endorsed onto a commercial auto insurance policy. This endorsement adds additional coverages for the insured in the event there becomes a liability issue for an automobile accident involving a vehicle they don’t directly insure (rentals or employee owned cars).

Experience Modification Rating

An employers’ Experience Modification Rating refers the factor calculated from actual loss experience. It is used to adjust the businesses premiums (higher or lower) based on the businesses loss experience relative to the average underlying manual premiums for workers compensation coverage. The Modifier (Mod) compares the insured experience to the average class experience.

 

5 Insurance Policies you might not realize your Small Business needs.

Once a year every small business owners takes on the daunting task of purchasing insurance for their business. Most start with the bare minimum coverage. In most states it is legally required to have workers’ compensation and general liability coverage in place before you open your doors. This is just the bare minimum coverage a business needs to protect it from the risk the business faces. A few other coverages, like commercial property or auto coverage, are obvious to most business owners.  There are several other risks business owners may face that they may not realize. Here are 5 such coverages business owners may not realize they could benefit from.

 

Inland Marine

Inland marine coverage is a specialized form of property insurance for equipment your business owns that is not a piece of property nor a vehicle. It is frequently referred to as ‘floaters’ coverage. This is because the equipment covered is meant to be in transit.  A prime example of a company who needs this coverage is a landscaping company who has trailers and lawnmowers that they transport away from their premises on a regular basis.

Hired and Non-owned Auto

Many small businesses think if they do not own vehicles they do not need any form of auto coverage. That may be right, but in many instances this is not correct. If you have employees who run simple errands like running to the post office or to the bank to make change for the register than your business is liable for injuries that happen as a part of that business activity.  Another common time this coverage comes in hand is when you have employees who travel and use a rental car as part of their trip. In most instances the coverage you buy from a rental car coverage will cover the car you are driving, but not other liability risks related to the business. Hired and Non-owned Coverage take help protect your business from those risks.

Cyber/Data Breach Coverage

Cyber insurance consists of two coverages that are almost always sold in tandem. One covers first party damage to you and your business and the other covers third party liability to third parties who may be damaged by your business as the result of a data breach.

EPLI

Employment Practices Liability Insurance is a specialized type of liability coverage for wrongful acts the may arise from the employment process. This coverage includes claims that include wrongful termination, discrimination, sexual harassment, and retaliation.  Depending upon the carrier and the particular policy you secure it can extend to cover claims like inappropriate workplace conduct, defamation, invasion of privacy, failure to promote, deprivation of a career opportunity, and negligent evaluation.  Lawsuits of this type have been on a steady increase for two decades.  If you stay in business long enough it is a matter of when, not if, you face an EPLI Claim.

Owners and Officers Coverage

This type of insurance coverage is specifically designed to cover defense costs and damages arising out of wrongful act lawsuits brought against an organizations board of directors or officers.  It is crucially important to have this coverage in place for growing small businesses and especially Non-profits.  Officers can provide very beneficial guidance to these types of organizations and one claim, whether founded or not, can result in huge losses for the organization.

Have employees travelling? Do you know what kind of insurance you need?

Many businesses have employees who travel regularly as part of their job.  This is a part of many industries that can open up new markets and help to keep important clients happy. Nothing can replace meeting with someone for a firm handshake and a smile. With this travelling brings on a diverse amount of risk that your business is taking on. Your business should have written policies in place for how to protect company information while employees are travelling. Here are some things to consider:

 

  • Are your employees flying or driving?
  • Is the car being driven an employee owned vehicle, a company vehicle or a rented vehicle?
  • Are the employees taking a company laptop, tablet or other computer device?
  • Are all of your insurance policies still in place when the employee is out of state?
  • Is the employee coming home immediately after business is done. If not, policies need to be clear when they are on company time and when they are off.

 

Here is a list of policies to consider when having employees travel as part of their job. It is also always a good idea to consult your agent or insurance professional about the risks you may be taking.

 

Hired and Non-owned Auto Insurance –  Hired and non-owned auto insurance is commonly added as an endorsement onto a commercial auto insurance policy. The endorsement adds additional coverages for the insured for an automobile accident involving a vehicle they don’t directly insure.

 

Commercial Auto –  Commercial auto insurance for company vehicles is an important aspect of any business insurance program. This coverage provides protection against physical damage and injury resulting from car accidents. It should also provide some protection from theft and vandalism.

 

Workers’ Compensation –  Depending on where your employees are travelling to you may need to check with your insurance agent or carrier to make sure your employees are covered underneath your workers’ compensation policy while they are travelling. The Walsh Test is a good measuring stick to determine where jurisdiction will be when a workers compensation occurs involving more than one state.

 

Cyber Liability Insurance –  Cyber Liability Insurance, also known as Data Breach Coverage is coverage for your business from the intentional or accidental release of secure information to an unsecured environment.  A breach is typically a single incident where confidential, or protected information, is either viewed, copied, or stolen by someone not authorized to have access to the data.  You need to have a strict company policy in place for how you will safeguard company and client information while the employee is travelling.

 

Insurance policies are not all created equal

Taking the leap of starting your own business is never an easy one. Whether you are a weekend warrior looking to pick up some extra income or branching out all on your own; you are taking a risk and putting yourself out there. this is something that most of the population could not fathom, but you are truly the future of our economy.

Most new businesses determine a budget, buy tools/equipment, set up a website and plan for all the business to come in. Insurance tends to be a side note that you know you will need to check off your list, but far too many too not take this aspect serious. Many new business owners seem to look at insurance and attempt to find the cheapest price they can find. This is a mistake that can lead to financial disaster for your business. Here is why this method of thinking can get you into trouble:

When you are a new business a few things tend to be very common. You generally know what kind of work you want to d. You might or might not have an idea of what work you are not willing to do. You also might have only a few employees, but you probably don’t know how much you’ll pay them. On top of that who knows how much sales you will have your first year. When you are shopping for a General Liability Insurance Policy these are all things you need to know. Before picking up the phone to call an insurance agent, here are a few things you need to keep in mind when comparing quotes:

 

Compare the Total Premium but also the rate being charged

Many companies will quote based on minimum premium. For an owner only company this might keep you at this level and not be a problem. Once you start adding employees or increase your operating space, other coverages might be necessary. The rates could increase much faster with one company as your company starts to grow. Talk with your insurance agent about these types of things so you have a ball park idea of what to expect down the road.

Look at the Exclusions on the Policy

As a general rule no insurance policy covers everything. All insurance policies will have some sort of exclusion. These exclusions outline a “hazard” that the insurance carrier will not be responsible for covering. This is very important to know, so you can avoid these exposures. Especially since your business will be on the hook for them. A lot of times they are exclusions for a reason. It is not typically for a carrier to strip down the policy just for a cheaper price. Most of the time these inclusions are in higher hazard areas. In the past these areas have cost insurance companies big and they are attempting to limit the risk they take. Taking this approach in your business operations can help you decide what work are not willing to do. It is usually easiest to make changes early on in your business as opposed to later down the road. Knowing these exclusions is important to minimizing the risk to your business and helps you determine what amount and type of risk you are willing to take in your daily operations.

Occurrence or Claims Made?

General Liability forms are written on either an Occurrence or a Claims Made basis. Occurrence is typically going to be more expense. If it is even available. Claims Made Policies limit the reporting period that you can report a claim to be covered under your policy. Professional Liability policies are typically offered only on Claims Made basis. If Claims Made is your only option, one of your main priorities should be making sure you don’t have a lapse in coverage. A lapse in coverage can leave your business vulnerable for much more than you may think.

 

Compare rating factors

Depending on the policy type, your type of business and coverages being offered; rating factors could vary into what determines your premium. Here are a few variables that can drive the premium though:

Square Footage: The amount of space for your building, the amount occupied and the amount of retail space can directly impact pricing of your liability policy. This is especially important for retail businesses. As well as General Liability, it can also impact your Commercial Property Coverage.

Payroll: Payroll is a direct rating factor for all Workers Compensation Policies. It also is a primary rating factor for most Contractors General Liability policies as well. Getting help to anticipate what your payroll will be should be something a decent agent can help you with.

Employee Count: Employee Count can be a direct rating factor for some General Liability Policies. It can also be a determining factor for Employment Practices Liability Insurance Policies.  In some cases full time vs part time can make a difference as well.

Property Value & Valuation Type: The amount of Value, Reinsurance rule and Valuation type can all impact your pricing for your property coverage. If the Valuation is Replacement cost vs Actual cash value, than the coverage is very different. This is because of how the claim will be paid and the amount your business is insured for. If the valuation amount is not sufficiently covering the amount of property you have this can leave you not receiving the full value you lost in the event of a claim. This is something that is much better to compare when choosing an insurance policy than hashing it out with your insurance carrier when its too late and you have a claim.

Gross Sales, Garaging Zip Code, Location Address: These are a few other of many variables insurance carriers will look at in quoting your insurance policies. Sometimes they are direct rating factors but on most policies they can be a gauge for determining your pricing.

 

There are many factors to consider when determining which policy and coverages are right for you. There are less expensive policies that don’t cover as much, and there are also Cadillac plans that might cover more than you are looking for and many options in between. The key to take from this is not that you have to go with the Cadillac or to take the cheapest option, but make sure you are comparing the correct variables to know you are choosing the right option for you and knowing what you are covered for and what you are not covered for.

The Importance of Your Company’s Website for Getting Business Insurance

The web presence of a business dramatically affects the business insurance options available for that business.  Much of the insurance buying landscape for businesses is shifting to the online/e-commerce environment. This often offers businesses faster service, better prices and the opportunity to get quoted by more carriers. Many of these transactions are conducted exclusively over the phone and by email.   An agent seeing a business face to face is becoming less and less common. Thus, underwriters are increasingly relying on a company’s website to assess whether they want to insure a company or pass on the opportunity.

For some industries, such as contractors, many insurance carriers will require evidence of a business online before they will quote that business (even if a formal website is not be required).  This gives the insurance carriers more confidence they know what business they are insuring. A good web presence helps businesses obtain better business insurance by getting quotes from more carriers.

Websites are generally used as a marketing tool for businesses. They often are over-expansive in the services they list they will offer.  That is good for marketing, but can make it more difficult for businesses to get insured.   Insurance company underwriters often rely on information contained on a website more than any other resource available. Thus, they will often decline quotes if services are offered which are ineligible for coverage. The rub is that often the businesses don’t really offer all of the services listed on their websites. Many times websites are created by a vendor the business owner contracted with, and their only goal was to make the website the strongest it could be from a marketing perspective. Additionally, the business owners may not always monitor their website on an on-going basis or update the website for changes in business operations.

However, when it comes to getting insurance, it is important that your company’s web presence most accurately reflects your business operations. Editing your company’s website is one way to accomplish this task. Sometimes, it is possible to explain why websites advertise services which are not really offered. However, sometimes it is not. Furthermore, sometimes carriers might price insurance more conservatively due to their potential doubt of the company’s operations based on an inaccurate website. An accurate website puts a good foot forward with insurance carriers.

There are many persuasive reasons to have an accurate and current website. Ease in obtaining business insurance (and potentially better priced business insurance at that) is another reason to add to that list.