Business Income Coverage

Business Income Coverage

If you are thinking about adding business income coverage or would like to learn more about why you have it, let me start by defining what Business Income Coverage. According to The Insurance Risk Management Institute, business income coverage is commercial property insurance covering loss of income suffered by a business when damage to its premises by a covered cause of loss causes a slowdown or suspension of its operations. Coverage applies to loss suffered during the time required to repair or replace the damaged property. It may also be extended to apply to loss suffered after completion of repairs for a specified number of days. Business income coverage is also referred to as business interruption coverage.

Now that we have defined business income coverage, lets look at how it works.  This coverage is designed to cover what your business lost. Not the businesses total revenue. What is typically covered under this policy is profits, fixed costs, temporary locations, extra expenses, civil authority and few other areas like training cost. Most policies will have a standard 72 hr waiting period before coverage begins. You may be able to modify this if you talk to your agent. They can a;ways check with carriers for additional options to expedite this process. The period of restoration ends when property should be repaired or replaced within a reasonable time-frame. This is in comparison to a similar quality and type of business as yours to either repair the facility or move to a new location.

Business income amounts are determined by comparing historical net income with actual net income during the period of business interruption. The loss is the difference between the net income that would have been earned under normal business conditions and the net profit or loss that has occurred during the period of restoration. Lets say after repairs have been completed that the business is still not generating the business it would have prior to the loss. You can add extended business income coverage to you policy for up to 60 days. For example if your business resumes and income is still below normal amounts then extended business income would pay the difference for that time period.

Also, business income coverage will cover what is called extra expenses. This part of the coverage is for the cost to rent a temporary office space, lease computers or office machines, and installation of new equipment during the period of restoration. Just like business income, this is limited to the 12 months from the date of loss. The time limits on business income may seem like they are not long enough, but according to industry studies most businesses who don’t have this coverage do not reopen their doors.

Business income and extra expense is designed to help you through an uncontrollable event. Within the coverage of most policies it can prevent you from losing key staff members that otherwise would leave to find other employment due to the loss of a paycheck. This is a basic snapshot of the coverage for you to get a grasp of what it can do for your business. In most cases this coverage is already a part of your BOP policy. Many business owner’s look at it and think this could never effect their business, but in reality it can save your company. It will benefit certain types of businesses more than others, but it can help everyone. Retail Stores, Medical Offices, Restaurants, or anyone that operates out of an office location where customers come to you need this coverage. Contractors can also benefit from this coverage, but it is not as critical as locations where customers come to them to generate business.

 

 

Types of Business Insurance

The other day I was going through my emails at work and I notice something that I hadn’t really noticed before. In the past couple months, I have received numerous emails from clients asking what different insurance policies cover and what additional coverage they need. After replying to each individual email, I came up with the great idea to create a template that briefly explains the different kind of business insurance policies a business owner might need.

 

What Types of Business Insurance Are Available?

The main types of business insurance you should consider include:

  • Property and Casualty Insurance: Property insurance covers the physical location of the business (even if it is rented or leased) and its contents from things like fire, theft, flood, and earthquakes—although read the terms carefully to make sure they include everything you need. Casualty insurance, on the other hand, covers the operation of the business, but the two are usually grouped together in policies.
  • Commercial Auto Insurance: Commercial auto insurance covers your business for loss or damage to vehicles used by your business and for damage to others caused by your business vehicles. Note that vehicles used for business are not covered under your personal auto insurance policy even if a vehicle is used for both business and personal purposes.
  • Liability Insurance: Liability insurance covers you in the event someone sues you for negligence, which can occur, for instance, if someone falls on your property.
  • Product Liability Insurance: Product liability insurance covers your business for damages caused by a product designed, supplied, or manufactured by your business.
  • Business Interruption Insurance: Business interruption insurance can make up for lost cash flow and profits incurred because of an event that has interrupted your normal business operations.
  • Health Insurance: Health insurance provides health coverage for you and your employees.
  • Life and Disability Insurance: Life and disability insurance covers your business in the event of the death or disability of key owners, partners, or employees.
  • Workers’ Compensation Insurance: If you have employees, you must, by law, participate in workers’ compensation programs; workers’ compensation insurance covers employees if they are injured on the job.

 

            I get it! Trying to find the perfect coverage at an affordable price is extremely difficult. If you are a new business owner or even a business owner who hasn’t gotten any insurance before, it can be complicated. Not knowing what each term means in a policy is frustrating. That is why I provided a brief description of the basic policies that business owners frequently purchase. Never be scared to call a professional and ask them for more advice. And always make sure you are reading the exclusion page on your policy. You want to make sure you are properly covered for your job. The last thing you want is for something to happen, and realize something isn’t covered under your policy.

Ride Sharing and Auto Insurance

Our country is dealing with some phenomenon’s that we have never experienced before and its causing some big changes in the insurance business.  Not all insurance companies have caught up to the technological advances of Drones, Driverless Cars and Ride Sharing or “Transportation Network Companies” as states are now referring to now.

Drones and Driverless cars are going to have to be an article for another day. For now, companies like Uber and Lyft are quickly changing how Americans get around. They both offer an opportunity for individuals to make money off their personal vehicle by giving others a ride for a fee. Ride sharing is a trend that is developing into a major industry that insurance companies and state lawmakers have quickly had to adjust to. Most states are opening up to this, some more openly than others as you would expect and the same goes with insurance companies.

 

What does Ride sharing have to do with Insurance?

Most personal auto policies are going to exclude business use from coverage on your policy. Many carriers have “business use” as an option, however it is important to know what that means as the coverage can vary greatly from carrier to carrier. So if you are driving for one of the new or existing Ride sharing companies it is important to know your personal auto coverage well. If Ride sharing is not covered at all, you really should take action. Either by seeing if a commercial policy is available with your current insurance company that would cover Ride sharing (not all carriers do) or by shopping for a new personal or commercial auto policy that will cover these operations.

 

Limits, limits limits….

As insurance agents we preach that the state minimum limits are very risky for your personal auto policy. In states like Missouri the state minimum liability limits are $25,000 for bodily injury, $50,000 for total bodily injury and $10,000 for total property damage. Think about the last time you went to the doctor with anything serious. It’s not far fetched to say these types of limits are not hard to meet in any serious vehicle accident. Consider if you were to have a paying customer in the car or possibly multiple. Many articles are pointing out the coverage gaps that Ride sharing brings about. This is important, however the limits of your policy are something that need to be addressed even if your insurance carrier says they will cover the claim. The coverage doesn’t matter as much if the limit of the coverage is too small to cover the claims.

For example; say you were to get into an accident which caused injuries to the another person which resulted in bodily injury claims of $90,000. If you have state minimum limits in Missouri with $25,000 in bodily injury liability per person this means $65,000 of the damages are not covered by your insurance and that goes back to you personally. Forget about mortgage, student loans and all other bills, that is a big hit that leaves nothing for you to show for it. If you had spent a little more on your auto insurance policy and had limits that were more acceptable, your insurance could cover this.

The amount an agent would recommend for auto insurance is going to vary on your individual circumstances and risk. Generally most recommended commercial auto policies have limits of at least $1 Million combined single limit. This allows a sufficient baseline of liability limits to make sure your covered claims are covered to the amount you would need them to be. The minimum limits we would typically recommend for a personal auto policy are around $100,000 bodily injury for each person, $300,000 for bodily injury liability for each accident and $100,000 Property Damage Liability. If you add the Ride-Share exposure, increasing those limits to at least $500,000 or $1 Million individually or combined single limit is better to make sure your protected for the full amount you need. This does cost a little more in premium. However, if a claim occurs the premium difference is the last thing you are going to worry about. Especially if your limits are less than the cost of the accident.

What is Workers’ Compensation Insurance?

Workers’ Compensation Insurance is a state mandated insurance coverage required by nearly every state in the country. The basic purpose of Workers’ Compensation Insurance is to assure injured workers get medical care and compensation for a portion of the income they lose while they are unable to work as a result of injuries sustained on the job.  Workers give up the right to sue employers for injuries that occur as a part of normal business practices. Inured workers can sue employers if there is some form of negligence on the part of the employer.

Workers' Compensation

Workers receive these benefits regardless of who was at fault in the accident. In most cases if a worker is killed while working, workers comp (as it is often abbreviated) provides death benefits for the worker’s dependents. Also, Workers’ Compensation Coverage prevents the employer from bearing the full cost of injuries that occur during normal business operations. Employers also gain the relief that they cannot be sued for injuries that occur as a part of normal business practices.

In the United States, Workers’ Compensation Laws were implemented throughout the first half of the 20th century.  In 1908 President Taft signed the first legislation requiring mandatory employer coverage for employees working in multi-state commerce. Over the next 40 years each state enacted their own state specific workers’ compensation programs. Wisconsin was the first state to adopt such legislation and Mississippi was the last state to adopt a formal workers’ compensation program.

Workers' Compensation Insurance Claim Form

One of the most important legal concepts with regards to workers’ compensation insurance is that it is the “exclusive remedy” when an employee is injured on the job.  This means that employers who purchase coverage  can not be held liable for employee injuries in most states, except under narrow circumstances where the employer intended to cause injury to the employee or was willfully negligent. The idea behind the exclusive remedy clause is to force compromise between employers and employees. Employees give up the ability to to win large suits against employers in order to receive fast and limited financial return. Employers exchange liability regardless of fault, for legal protection from potentially devastating tort judgments in court.

In most states, employers are legally required to carry this insurance coverage. Each state has certain exemptions to the requirement. Two states (Oklahoma and Texas) have laws that allow certain employers to opt-out of the workers’ compensation requirement, if they qualify. Tennessee and South Carolina Legislatures are also proposing similar opt-out provision’s. This opt-out provision has been in the news a bit as of late. Oklahoma is in its second year of allowing companies to opt-out and fewer than thirty businesses have applied for and been granted the privilege.  Unlike Texas’s system, Oklahoma employers must meet certain financial and other requirements to qualify, including a written benefit plan that provides coverage and benefit levels that meet or exceed the minimum requirements set forth in the law.

Most states and employers are taking a wait and see approach to these changes to the opt-out provision.

 

 

What is Pay as You Go Workers’ Compensation?

Pay as You Go Workers’ Compensation Insurance is a fairly new program that is designed to help business owner’s free up cash so they can pay their insurance premium’s monthly instead of in one lump sum. Pay as You Go Workers’ Compensation benefits employers in three main ways:

  1. Pay as You Go Workers Compensation Insurance allows businesses to pay their premium monthly instead of in one large payment.
  2. Pay as You Go frees up cash flow for more immediate business needs.
  3. Pay as You Go prevents audits because both payroll and premiums are calculated monthly instead of yearly.

My Insurance Question can help you pick out the best Pay as You Go Workers' Compensation Insurance Policy.

Pay as You Go Workers’ Compensation Insurance Coverage benefits businesses by allowing them to pay their insurance premium’s monthly based on the payroll of their workforce that month only. This is a great option for industries like construction, farming or landscaping. These industries sometimes have a hard time forecasting payroll because of the weather and many other factors. If your business deals with these types of issues than Pay Go may be a great option for you and your business.

 

Another benefit of Pay as You Go Workers’ Compensation Insurance is that it frees up cash flow for more immediate business needs. With a traditional Workers Comp policy typically twenty five percent of the premium is due all at once. The rest is usually paid in nine monthly payments. This means the business is spending money on insurance immediately that could be used on other more urgent business needs.

Pay as You Go Workers' Compensation Insurance

Finally, business owner’s benefit from Pay Go Workers’ Compensation Coverage because it prevents audits from happening more frequently. An end of term audit still happens, but Pay Go prevents audits from happening more frequently and makes the difference owed much smaller. With the monthly payment format there is less risk of over or underpaying the premium.

Should you Price Check a Flat Renewal Quote?

In meeting with carrier representatives frequently, I always get updates on the marketplace from a broad array of perspectives. Recently, one of the common themes in the current marketplace is that many renewal quotes are a similar price to what they were in the last year. However, carriers are often pricing quotes for new business to that carrier at very low rates in an attempt to win additional business in a flat market.

For example, as I was price checking my upcoming renewal accounts recently, I was able to save one client around 20% on their policy even though their renewal quote with their carrier had not changed from the prior year. By having their renewal policy price checked, this client saved 20%. It’s not to say you should move your business insurance every year as there are advantages to having continuity with one carrier in case claims or service issues arise. However, potential savings can exist even if your renewal pricing is the same as last year’s pricing.

The current marketplace has several carriers notably pricing aggressively to compete for new business opportunities. One of the carriers that comes to mind right away for workers’ compensation insurance is The Hartford. They are discounting their base rates up to 40% for certain business types and in certain states. It is a hard to beat combination when an A rated carrier with excellent customer service is pricing as low as any carrier in the marketplace for certain businesses.

Another carrier that comes to mind is GUARD Insurance. They are another A rated carrier that is affiliated with insurance giant, Berkshire Hathaway. GUARD has been rapidly expanding into the marketplace for small and mid-sized businesses. If you haven’t shopped your business insurance in a few years, GUARD may not have been an available option at the time you decided on a carrier. Now, they are the leading carrier for many industries (particularly certain artisan contractors) in the marketplace and also offer excellent customer service.

There are so many variables that it is hard to write generally about some of the best carriers in the marketplace for particular businesses. However, AmTrust, Employers, FirstComp and Travelers are all highly rated carriers which offer great customer service and are pricing certain industries very aggressively to attempt to grow their business.

There can be other reasons that it may make sense to price check your business insurance. For one, your claims history may be more favorable than it was several years ago.   Other insurance carriers may offer more favorable payment plans than you currently have. An example in the workers compensation arena is that pay as you go insurance might be available. Over time, different carriers happen to prefer certain industries more or less than they do at other times. That can lead to better pricing in some cases than may have been available at different points in time.

Without checking prices, it’s hard to know whether or not there might be better options out there than your current carrier.

Deductibles, Self Insurance and First Dollar Coverage?

Deductibles, Self Insurance and First Dollar Coverage?What is the best option?

When it comes to buying insurance there are a lot of decisions to make which can make the process a bit overwhelming for most. Insurance, like most purchases we make is a decision that has a variety of options to consider. For most of us this decision is based on a three things; Price, Coverage and Service. Is there more to the equation though?

Workers compensation in particular tends to be written on what we call “first dollar Coverage”. This means there is no deductible option and when a claim is filed the insurance carrier will pay claims without you having to first pay a portion before their on the hook. This is a nice policy to have as you don’t have to worry about funding a claim if that takes place, however depending on your premium amount and claims history you could be leaving a lot of money on the table with this option.

Generally when the premium is below $100,000 the benefits of a deductible are slim compared to the discounts offered by most carriers. However, if you have a a competitive market company who offers a quote compared to the fund this option might be worth considering. The savings could be much greater, so you don’t want to rule them out.

When a company starts paying in excess of $100,000 in premium per year this is when considering a high deductible option could be beneficial. This is mostly because that business will typically have an established insurance history and more opportunity to spread out risk. This allows for a better chances of savings. This is where a high deductible option can sometimes save you 20-30% off your premium, but this comes with the risk of you paying out more if claims develop frequently. Examples of the types of deductible plans would be an Aggregate deductible. This is where you pay the claims until the aggregate amount (Typically starting between 50-100k) then the insurance carrier picks up the tab there after.

The opportunity for savings in this business gets bigger and more creative as your premium grows. Once you are paying in excess of $250,000 per year in workers compensation premium you really need to consider alternative options besides first dollar coverage. The only exception is if you have uncontrollable claims history that cannot be corrected. If that is the case than this is a serious issue. This issue needs focus before considering alternative workers comp plans. If you’re not in this boat considering high deductible options are still an opportunity but the savings are not the best. At this point, self insurance is starting to sound appealing. The cash flow that gets tied up in claims reserves can be significant even though the savings can be great. The rewards are likely 5-7 years out. At this premium amount a Captive Self Insured Retro Plan is a great option for a company at this premium threshold or higher with the ability to control their claims. The best part about this plan is it essentially takes the rates out of the equation.

The Captive Self-insured Retro Plan Model we use at our agency is a 3-year plan. Many like this option because it locks in workers comp rates over a 3-year term. Since this is a retro plan, instead of having 1 set premium based on your payrolls, you will have a minimum and a maximum premium. This will change based on your claims development over the 3-year term. The minimum amount accounts for administrative costs for running an insurance company and having the claims handling in place. This plan can often offer premium savings in excess of 50% compared to first dollar coverage policies, if you perform well. The max premium will account for these same costs but give you a worst case scenario if claims get out of control. This allows for a conservative approach to managing risk while allowing the opportunity for maximized savings.

There are several variables to consider when selecting the best plan for your company. The Retro captive program I described is a good solution to consider for your company for the long term. If you would like to know more about it, any insurance agent should be able to discuss these options for your companies future and premium savings.

What do I need for a Work Comp and GL Quote?

Items needed to get a quote on Workers’ Comp and General Liability Insurance

Many times while talking to a prospect and gathering information I get the question “why do you need that, I just need a quote”.  Agents can usually give you a business owner a phone indication depending on the state you are calling in reference to, but that is only an indication and not a formal quote. Any agent can easily go into detail about why they need an address and Employer Identification Number (EIN). Sometimes the business owner on the other end of the phone does not want to give out the information.  At that point an agent has to say, unfortunately I cannot get you a quote unless I have your EIN and other needed information. This is a good piece of information to have if you are looking for a quote on workers’ compensation or general liability insurance for the first time. Below are all the basic questions any agent will ask while on a phone quote. These are also the questions you will get frequently via email when an agent needs more information on a submission sent in to me.

 

  1. It is very important that we have the correct name and spelling of the company. The way the company is formed is also crucial for Officer & Partner Exclusion Regulations per state.
  2. Phone numbers and email addresses are very important for the agent working on your quote and the future insurance carrier. Many carriers require agents to enter an email address upon quoting and or binding an account.  This is typically for billing and information delivery.
  3. Mailing and physical addresses: Many times this is a PO Box for a mailing address and that is acceptable.  However, a physical address is needed for the application and auditing purposes. In some cases there are multiple states and different mailing addresses. Your agent will need to know where to mail important policy information. Which address it needs to go to needs to be specified.
  4. Years in business: If you have been in business 5 years but are just now needing work comp or liability insurance our insurance carriers are going to want to know why. If you are a new venture and hiring employees for the first time, agents have different options for you than a business that has been in operation with employees and no workers comp coverage. All of this needs to be known to get an accurate quote.
  5. Federal or Employer Identification Number:  This number is very important for many reasons. This number acts as the Social Security Number for your business. This number also acts as a way for each agency or agent to identify they are working on your account specifically. For instance if you call four different agents and they all have the same insurance carrier appointments then it’s first come first serve. Meaning the agent that enters in your information first will have the ability to present the quote. The other agents will be “Blocked” from the market. This EIN will also follow you with the National Council on Compensation Insurance (NCCI). This will show what class codes you have used in the past as well as any past audits out for your company. On a side note please give any and all information to your agent. If an agent asks if you have ever had a Work Comp policy and you say no never, the carrier will have record that you have had a policy before. This makes for a very uncomfortable conversation for all involved.
  6. Officer and owner information: I cannot convey in words how important or vital this piece of information is. Depending on the state and how your company is formed determines what officers/ partners & percentage owned will allow some exclusions. I have seen this go many different ways and usually the head ache could have been detoured with correct owner information.
  7. What are the estimated annual wages for each department (office, field, sales): Workers’ Compensation Rates are based solely on Payroll. Your payroll times the rate of the class of business per 100 in payroll. We as agents understand that if you are just starting out this can be a hard number to decide on. Take it with small numbers first for instance how much money per hour?, how many hours a week?, and how many weeks will the employee be working for you? This number will give you a real number that you can give the agent to quote with.
  8. Detailed description of operations: Agents need to understand what your business is doing on a day-to-day basis. Telling your insurance agent I have a construction business does not give us a lot to go on. What kind of construction? Commercial or residential, new build or existing? Are you an artisan contractor? Or maybe you own a machine shop. What are you machining? All of the questions we are asking are so we can get you the most accurate quote.
  9. If you have a Workers Comp policy in place, agents are going to need a copy of your Loss Runs or Claims history along with an Experience Modification Number (if you qualify for one). You can obtain both of these documents from your current carrier and you do not have to call your agent if you do not want to.  Along with this information if needed a supplemental application will be sent to you to be filled out, signed and returned.

 

Always remember insurance agents are here to help you get the coverage you need. If at any point, do not be afraid to ask questions. Many times this is the first time making a call to inquire about work comp insurance and there is a lot to know before actually purchasing a work comp policy.

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.

Lets talk about Landscaping!!

When I first started doing workers compensation insurance, I had the privilege of writing a lot of landscaping types of risk. I have never been a landscaper, so it was difficult to understand all the aspects of landscaping insurance. For example, are you just mowing yards, are you trimming bushes, are you cleaning the yards, are you replanting the grass or flowers, are you doing edge work? Who knew there would be so much that goes into just one risk?

Landscaping insurance liability questions at myinsurancequestion.com

So, while you ponder on the type of landscaping you do, let me tell you there are plenty of carriers that love writing landscaping insurance.  Except tree trimming and that does not classify as landscaping!! So moving on, I find it very interesting that all the types of work my clients have been doing and the challenges I had to write them. So let me walk you through the process of how this is done.

First, we need to talk about exactly what you do. Never be scared to tell an agent what you actually do on a daily basis. If you cut grass, say that. If you trim trees, tell them! I can’t stress how important it is that you tell the agent exactly what you do. The agent and underwriter will do research on your company and we will scroll through every picture and question whether or not you are doing something… so tell us everything!! It is beyond stressful for the client (i.e. you) to have to wait for a carrier to quote your work comp landscaping insurance policy and at the very last minute tell you they found some issues with what you say you do. Especially if you didn’t tell them that you did something. If you have a website that says you do tree trimming, we will know. If your Facebook page has pictures of you climbing ladders to hang plants, we will see them. So tell us exactly what you do. We understand you might have been declined by a lot of other agents, but we are trained to write tough/difficult risks, or we can tell you who to call exactly. We won’t waste your time and we don’t want to waste ours.

Secondly, after you have told us exactly what you do, we will discuss the payroll and employee count. No agent has your actual monthly payroll reporting in front of us, so we need you to be honest. If you pay one of your landscapers $10,000.00 a year, tell us! Honesty is the best policy. If you are starting out as a new company, we will help you figure that out.

Thirdly, this is the best part, we quote your landscaping business. Believe it or not there are a lot of carriers that are competing to write landscapers. You need work comp for a reason, so let us find the best price for you. I get how stressful it is to try to find coverage in your area… but let me take that stress away. I can shop dozens of carriers and I can get you the best coverage for the lowest price.

In the past three months I’ve spoken with 19 landscaping companies. Seven of those companies have become my clients.  I’ve used four different carriers to place those policies. That shows how much our insurance carriers are willing to compete against each other for landscaping insurance. Landscaping has so many aspects to it that it is a fun risk to write. Also companies are competing for the general liability and business owners insurance too.