Small Business Insurance Jargon

Small Business Insurance Jargon you need to know as a business owner

Buying commercial insurance is something a small business owner has to do once a year. It is not something most business owners think about on a daily basis. When interacting with employees within the industry, there may be an awful lot of small business insurance jargon that is not exactly common knowledge to the general population. Here are ten terms to familiarize yourself with before your next renewal.

Small Business Insurance Jargon

BOP

BOP Stands for Business Owner’s Package or Business Owner’s Policy. A BOP is a package of policies, sold in tandem for businesses in a certain industry or classification code. Because of historical claims records, insurance carriers know the common risks for certain businesses in certain industries and they have created packages of policies specific to that industry.

Experience Mod

The Experience Modification Rating is frequently referred to as the Mod or the Experience Mod. This rating is a formula that includes the businesses Employer’s FEIN by the rating bureau (NCCI or the State Bureau).  The rating compares your loss data to other employers within the same class code of your business. The rating is expressed as a credit or debit on your policy.

Actual Cash Value

The current value of an insured piece of property. This is simply the appraisal value of a piece of property and does not include additional expenses related to a property loss.

Replacement Value

The value of purchasing a new property to replace a lost or damaged property,but it pays for the replacement at today’s value. Depending upon the language in the policy, a replacement value policy may include additional expenses like tear down and removal of debris, bringing the property up to current codes, and construction costs on the new property.

First Party

First Party Insurance Policies are policies that deal with the damages to you and your business. They may include damages like replacing a vehicle after a crash, replacing specialized equipment damaged during a storm, or even hiring a PR Firm to restore the reputation of your business after a data breach.

Third Party

A Third Party Insurance Policy deals with the liability your business faces relating to outside third parties that are damaged by the actions of your business. This may include repairing a broken window caused by the employee of a landscaping company or medical costs for someone slipping on their way to the bathroom in a restaurant.

EPLI

EPLI stands for Employment Practices Liability Insurance. This is an insurance policy that can protect your business when it faces a lawsuit related to hiring and firing of employees. In 2016, the Equal Employment Opportunity Commission, collected more than $482 million for victims of discrimination in private, federal and state and local government workplaces. The reason there is a need for this policy is that a lawsuit does not have to be founded to take up an enormous amount of time for you and your business to prove your innocence. An EPLI Policy can help your business stay afloat when you face one of these claims.

E&O

E&O stands for Errors and Omissions Insurance. It is also called Medical Malpractice in the Medical Profession. This policy protects the insured (you the business owner) against liability for committing an error or omission in performance of professional duties. This may include work done by an engineer or architect on a particular construction project. It may also include the work done by a doctor during surgery. Generally, such policies are designed to cover financial losses rather than liability for bodily injury (BI) and property damage (PD).

Hired and Non-owned Auto

Hired and Non-owned Auto Insurance Coverage is designed for businesses who have employees who use their personal vehicles for business purposes or employees who use rented vehicles. The time that these employees are using the vehicle for business purposes is a time when your business is liable for the damages that are caused to third parties as a result of an accident that is the fault of your employee. It is commonly added as an addition to a commercial auto policy, but if your business does not own any vehicles it can be sold as a stand alone policy.

Inland Marine

An Inland Marine Insurance Policy is a specialized form or property insurance that is often referred to as equipment coverage. The primary distinction between inland marine and other property insurance is the fact that inland marine is designed specifically for property which is likely to be moved or in transit. Landscaping companies that have equipment on a trailer is an example of this risk. Inland Marine may be needed for companies with highly specialized property that requires a unique valuation. A land surveyor who uses specialized surveying equipment may need this policy.

 

Claims Made Vs Occurrence

Have you ever wondered what the differences are between a Claims Made Vs Occurrence Based Liability Insurance Policy?  

The choice to choose a Claims Made Vs Occurrence Based Liability Policy can have an enormous impact on your business.  Making certain your business has the proper coverage can make an enormous impact to your bottom line, when a claim occurs.  Claims Made Vs Occurrence Policies are typically in relation to a general liability, professional liability, and employment practices liability insurance.  The types of businesses who are more likely to need this type of coverage include contractors, architects, engineers, attorneys and medical professionals.

Claims Made Vs Occurrence Based Insurance Policies

Claims Made

A Claims Made Insurance Policy covers claims filed during a given period of time. In most cases, a claim must be filed during the term of the claims-made policy in order for it to be covered by the insurance carrier. If the claim is filed two months after the policy has ended, the claim will not be covered.  The positive to this type of policy is price. Claims Made Policies are generally less expensive compared to Occurrence Based Policies.

Occurrence

An Occurrence Based Insurance Policy covers claims that arise from damage or injury that takes place during the policy period.  This is regardless of whether the claim was filed during the term or after.  A claim can be filed many years later and still be covered, as long as coverage was in place during the time of the occurrence.  This is important for professionals like architects who give professional advice and services to physical structures that may have a problem years down the road. If it is found the problem with the structure was the result of the engineers faulty work, the engineer can be liable for damages.  With an occurrence based policy in place this would be covered under most circumstances.

For most business owners, an occurrence policy is more appropriate and is commonly purchased.  Only using a claims based policy can be a bit of a gamble.  In most instances, the additional cost of an occurrence policy form is minimal compared to purchasing a claims made policy.

Why are both Claims Made Vs Occurrence Based Insurance Policies Offered.

Why are both Claims Made Vs Occurrence Based Insurance Policies offered?

The primary reason claims made coverage is still around is because there is a demand and because insurance companies may only be willing to write certain types of risk on a claims made basis.  This is because it is much easier for an insurance company to estimate price for insurance premium and measure their profitability with a claims made policy compared to an occurrence policy.  This is because there is a clear start and stop date to coverage. With occurrence coverage, it can take years or even decades for insurance companies to measure their profit and loss.  In the most simple terms, a business owner who purchases an occurrence policy for one year will always be insured for future claims while a claims made policy only covers the insured for that time period unless they purchase additional tail coverage.  If the business owner is willing to take the risk in exchange for a lower premium, claims made policies are still offered.

Real Estate Insurance Needs

5 Types of insurance every Real Estate Agency should have.

 

Real Estate Agencies take on a unique set of risks compared to other traditional businesses.  Many businesses, like a restaurant for example, have a brick and mortar location where a majority or all of the business takes place.  Real Estate Agencies, while most do have a physical address, have a majority of their work taking place at a third party location.  These locations frequently are at the property they are helping to sell.  For this reason, real estates agencies have to secure a unique group of coverages in order to adequately protect their business. Here are 5 recommended coverages most real estate agencies should secure.

 

  •    General Liability Coverage
  •    Errors and Omissions (Professional Liability)
  •    Property Insurance
  •    Hired and Non-Owned Auto
  •    Workers’ Compensation Insurance

 

General Liability Insurance

For most real estate agencies, the risks related to general liability coverage are often minimal.  This is primarily due to not much business occurring at the physical location.  A majority of their work is done over the phone, by electronic mail or at a third party location. Off-Premises risks can be extensive for this industry. That is true whether you are dealing with the selling of properties or rental properties.  These risks typically arise from sales visits, inspections, open-houses and similar work done at the customers’ home or other buildings.  In some cases, there is an agent representing both the buyer and the seller.  Any damage that occurs during joint operations, like an open-house, can cause a dispute between all parties involved. Monitoring of keys is another risk that must be dealt with carefully.  Documenting every time, you access a facility is highly recommended to limit the risk you face regarding access to the facility.

Errors and Omissions Coverage (Professional Liability)

Exposure associated with errors and omissions (E&O) may be the most significant risk a real estate agency faces.  This is because a majority of the work you do is highly specialized and you are giving advice.  If you give the wrong advice, it can cause the business to be liable to the client in the future. To limit these risks the agency can make sure all employees have the proper credentials, experience and has the proper ratio of professional employees to clerical employees. Thorough background checks are essential to limit E&O Claims.

Commercial Property Insurance

If your agency owns physical property, you need to secure Commercial Property Insurance.  There are two ways these policies are sold.  They are sold on a replacement base or on an agreed upon value of the property.  In most cases, it is better to secure a policy at replacement level.  This will include the cost to tear down the facility, remove all debris and build a new facility.  If your policy is an agreed upon value it typically does not include these additional costs.

Commercial Auto/Hired and Non-Owned Auto Coverage

If you own vehicles for your employees to use when they are away from the office than you need to secure a Commercial Auto Policy.  Most real estate agencies do not own vehicles specifically for company use, but they do have agents who use their personal cars for business purposes.  When these employees are using their personal vehicles for business purposes the business is liable for any accidents that may occur.  The business is not liable for the damage to the employee’s car. This is covered by the employee’s personal auto insurance policy.  The business is liable for damage to the car and any bodily injuries that may occur to third parties.  A Hired and Non-Owned Auto Insurance Policy will take care of most liability a business faces resulting from accidents that occur when employees drive their personal cars or rented vehicles for business purposes.

 

Workers’ Compensation Coverage

Workers’ Compensation Insurance is required by law in 48 out of 50 states.  Each state has their own rules and regulations regarding the administration of this system.  Each state has their own exceptions for some small or family owned businesses.  Workers Comp is similar to general liability, except that it covers employees and not third parties.  When an employee is hurt on the job, work comp coverage will cover some of their lost wages (typically 60%) and medical costs incurred as a result of the injury.

What is Cyber Insurance? Does my business really need it?

Cyber Insurance is a new and emerging part of the insurance sector. Most of the coverages are so infant that common terms have not yet been established by the insurance industry. Most of the risks associated with cyber technology are so new that many business owners still think they do not effect their business. Those business owner’s are wrong.  In today’s day and age, it is becoming more and more difficult to operate a successful business without a presence online or without storing some type of information about your customers. In these situations a business must have cyber insurance or run the risk of being liable for all costs as a result of a data breach.

Learn how to prevent your small business from being a victim of a cyber attack at myinsurancequestion.com

A normal General Liability Insurance Policy does not cover damages caused by most data breaches. This is a fact many business owner’s do not realize. Many business owner’s think General Liability Insurance is an all encompassing coverage. It is not all encompassing. Most General Liability Policies covers losses due to bodily injury and property damage. Third party information lost in a data breach does not fall under losses covered by a General Liability Policy. A separate Cyber Insurance Policy is necessary in addition to a General Liability Policy.

Frequently business owner’s think they just don’t have enough customers for cyber insurance to be relevant. They might think not enough people in their business even use a computer for business purposes or they do not have enough customers for someone to want to hack them, but the main way data is stolen is not from sophisticated hacking techniques. Data is often stolen by someone stealing a laptop. A stolen laptop could happen to any business, not just those who work with advanced computer technology.

When a data breach does occur, the average cost to a business is around $200 dollars per customer. If your business loses the information of 100 customers, it could cost your company $20,000. If that amount were 10,000 customers it would cost about $2 million. Could your business survive a loss of these amounts? If not than you need some form of cyber insurance.

There are three main types of coverage a company may need:  Cyber Liability, Cyber Security and Technology Errors and Omissions. The first two deal with coverage resulting from a data breach. The third deals with companies that provide technology services and products.

Keep your business secure from a data breach by reading the most up to date information about cyber insurance at my insurance question.com

Cyber Security

Cyber Security is the term most commonly used to refer to first party coverage. First party coverage deals with damages to you and your company. These damages are often referred to as the immediate response costs resulting from a data breach. These costs include notifying all customers who are affected, hiring a forensic team to find out how the breach occurred and providing credit monitoring services for up to one year. These three costs are required by law in most states. Cyber Security Coverage would also cover costs like hiring a public relations firm to help repair your businesses tarnished image and setting up a post breach call-center to service customer concerns.

 Cyber Liability

Cyber Liability is the term most commonly used to refer to third party liability dealing with a data breach. Some industry professionals may refer to it as Information Security and Privacy Insurance. Third party coverage deals with damages to anyone who is not you or your employee, who was harmed by the data breach. It includes customers whose data was stolen or vendors you do business with. This will pay up to the policy limits for court costs, defense costs, some fines related to the breach and lost monies that were stolen from those effected.

Technology Errors and Omissions

The final type of coverage is Technology Errors and Omissions Insurance. This type of policy is a form of liability insurance that helps protect businesses providing all types of technology services and products. This coverage prevents businesses from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in a civil lawsuit. Costly mistakes can and will happen, even to employees with the best training and years of experience. Technology Errors and Omissions Insurance is designed for when these errors take place. A good example where this coverage is necessary would be if a web developer provided faulty coding that causes a business to be closed for several days because their website is down.

Not all businesses need all three of these coverages. The most common coverages businesses need are Cyber Liability and Cyber Security. Not all businesses will need Technology Errors and Omissions Insurance, but those that do typically are at a very high risk if not insured. Most insurance providers prefer to offer these coverage’s as a part of a Business Owner’s Policy (BOP). A BOP usually includes general liability, business property, business loss of income, EPLI and cyber insurance. Offering packages like this contain the cost to the business and helps ensure there are no gaps in coverage. In today’s business climate some form of cyber insurance is essential to all businesses. Is your business at risk?

 

 

Insurance Help on Vacation

A while ago, I took a phone call from a client in need of help getting Errors & Omissions (E&O or professional liability) Coverage for a large contract he was working on.  However, my client was in Italy on vacation and the coverage needed to be in place before the job started in three days. To say he was in a panic would be an understatement.  I wrote his work comp insurance and our agency handled many endorsements on his policy for him.  However, it was a different agent here within our company who wrote his Liability Policy.  But he trusted me with his insurance needs, so I presented him with the following options:

  • I could write him a new Liability Policy with E&O Coverage included.
  • I could become his Agent with the current carrier, but it would take several days.
  • I could write a stand alone E&O Policy, but it would cost a little more since the liability would not be attached.

This actually was no problem at all. I just needed an Errors and Omissions application filled out, signed and returned to me. Thanks to technology the client had all of this information back to me by the next morning. All the way from Italy.

Liability Insurance help on a beach vacation.

When I presented the first quote, which was the stand-alone E&O policy, my client was shocked at the price of the coverage. In the past he had only had a liability policy. I explained the bulk of his company’s exposure was in the Errors and Omissions Liability and he should expect to pay more for this coverage.

The second quote was with a new carrier.  It was a Business Owners Package (BOP) with E&O as an added coverage. This was also the carrier I had his Workers’ Compensation Policy with. This was a great quote and made the most sense to me. However, the client did want to wait for the quote from the carrier he currently had for his liability coverage. This is the company I had taken over as the Agent of Record (AOR). In the end both carriers had great pricing and coverage. My client chose to go with the carrier that already had written his Work Comp and offered all of the endorsements he needed for the contract he was working on.

After discussing all of the projects his company had coming up in the next year I offered him a Commercial Umbrella Policy to extend his coverages. I explained that this would help protect his company if ever a claim went beyond the limits of his policy. The client thanked me for mentioning an umbrella policy and he agreed that his business needed this coverage.

We were able to get all the documents signed, the policy bound and all of the needed certificates of insurance out to the Holder by the deadline. It all got taken care of expediently. All while my client was on vacation.