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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.

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.

6 Tips for controlling the cost of a Workers Compensation Claim.

Quickly report all claims to the insurer.

Some states have requirements for how quickly a workers compensation claim must be reported. Insurance carriers have specific departments that deal with claims exclusively. They will know the process thoroughly for filing a workers’ compensation claim. Because this is a process your business hopefully does not deal with frequently, getting your injured worker the proper coverage quickly will be easier with the help of your carrier. Documenting the claims allows the carriers to pick up on patterns and help businesses develop programs to prevent common injuries.

Make sure supervisors are adequately trained.

Taking care of an injured employee may not be at the top of the priority list when hiring a manager for your business. Hopefully it is not something your managers have to encounter very frequently, but it needs to be something they can effectively deal with for the success of your business. Many businesses have a point person who studies the workers compensation claim process thoroughly. It is still important to have this person train the other managers to be aware of this process in case of an incident occurring when they are not on duty or away on vacation.

Communicating with your employees is important to limiting the impact of a workers compensation claim.

Keep complete notes of the injury and reporting process.

Note taking is crucial in everything you do within your business. This is especially important when you experience a workers compensation insurance claim. It may seem tedious, but it can save your business immensely if a claim makes it into the court of law. Besides the fact you need to cover your business legally, accurate documentation helps your carrier document injuries within your industry. They can use this information to see patterns and to determine appropriate safety programs to deal with those patterns.

Communication is key.

Communicating with all parties involved in the workers compensation claim is extremely important. This starts with communicating with your employee. In most states they have the right to seek a second opinion, but the more you keep your carrier in the loop of these situations the better they can help you control the cost of the claim. Separate from the cost of the claim, it is in your best interest to let your injured employee know you care about their well-being. Communicating with both your insurance agent and carrier is important as well. The carrier is the one equipped to handle the claim, not your agent. The agent can be helpful if you feel your carrier is not living up to your expectations. Keeping them updated on the workers compensation claim can help you ensure you are getting the proper attention from your carrier and they can help you prepare for explaining the claim when you go to renew your policy.

A proper safety program can prevent employee injuries and limit a workers compensation claim.

Prevent employees from injuries.

Safety programs are key to the long term success of your business. Making a safety plan part of your ongoing training is essential to your business and it does not have to take a lot of time. Fifteen minute discussions two or three times a month should be sufficient. Make sure the meetings have a specific topic and ask for feedback from your employees. Asking for their feedback gets them involved in the discussion. This will make them more involved in the program. It can lead to higher job satisfaction if those employees feel like you are listening and make changes based on their feedback.

Create a return to work program.

Studies have shown that the quicker a person gets back on the job in any form or fashion, the more likely they are to return to permanent work. Humans are creatures of habit. Coming to work is part of their habit and the longer they go without that habit the more likely they are to create new habits not associated with your business. This is when a claim can get out of control if an injured employee goes on long term or permanent disability. Designing low impact work of some kind will allow those employees to return to work and get back in the routine of work quicker.

Additional Insured or Waiver of Subrogation

My Customer Service Representative (CSR) and I see a ton of requests for a Certificate of Insurance. Many of our clients do not understand what a Certificate Holder is or what being an additional insured means. I want to describe the differences between additional insured and a certificate holder. I want to explain this because, many clients don’t understand why an Additional Insured cannot be named on a workers comp policy. These same clients do not understand why the same person can be named on Liability Policies. Well I am going to shed some light on this situation. Here are four common terms that will help a business owner through the process.

Certified, additional insured, waiver of subrogation.

Certificate of Insurance:

A certificate of insurance is a document issued by an insurance company to verify insurance coverage to another person. The document tells what coverage is secured and under what specific conditions grated to the listed individuals. The document lists the effective date of the policy and the type of insurance coverage secured. Also, a certificate of insurance includes the limits of liability and the dollar amount of coverage. It is important to understand the holder of the certificate is not covered under the policy. The certificate serves as proof the holder made sure the person they are interacting with secured coverage.

Additional Insured:

When an insurance professional refers to an additional insured, they are referring to a type of status associated with General Liability Insurance Policies. Those policies provide coverage to other individuals or a group of individuals who were not initially named on the policy. After endorsement, the additional insured will be protected under the named insurer’s policy. They can file a claim in the event they are sued. Additional Insured is available on General Liability, Auto Liability and Umbrella Liability.

Certificate Holder:

A certificate holder is an individual or entity that is named on the certificate of insurance. When named on the certificate, they are notified when coverage is cancelled prior to the renewal date. This is needed in the event a business is partnering with a contractor or another business and that business does not hold the necessary coverage for the business interaction. No coverage protection under the contractor’s policies is provided to a Certificate Holder.

Waiver of Subrogation:

A Waiver of Subrogation means the insurance carrier agrees to relinquish any right to recover damages if it is determined in the course of investigating the claim that the client or one of the client’s employees was responsible for the loss. An insurance carrier may reserve the “right of subrogation” in the event of a loss. This means the company may choose to take action to recover the amount of a claim paid to a covered insured, if the loss was caused by a third party.

Waiver of Subrogation is available on General Liability, Auto Liability, Umbrella Liability and Workers Compensation. A Waiver of Subrogation provision prevents an insurance company (who steps into the shoes of the insured after it pays a loss) from suing the other party to the contract. This is likely the party who caused the loss. Moreover, Waiver of Subrogation provisions found in contracts are generally upheld by Courts.

When a contractor works another person’s property, there are risks involved. Contractors can damage personal property or be injured while performing work. Companies and individuals that hire contractors want to be certain they will not be held liable for injuries, damages or substandard work. For this reason, they will frequently request to see a certificate of insurance from those contractors.

In my experience, most client’s call and request an additional insured to be added to a work comp policy. An Additional Insured cannot be added to a Workers Compensation Policy. As stated above, an Additional Insured is naming someone else on a policy and a Work Comp Policy is written to cover injured employees. Workers Comp does not cover another company. The alternative to this issue would be requesting a Waiver of Subrogation. If you are a sub contractor and you are working with a larger company requesting a Waiver of Subrogation, it is important to make sure you the contractor understand what you are being asked to waive.

If your company hires subcontractors, it’s important to get a certificate of insurance from every subcontractor. Even if you trust your subcontractors. For example, if you have worked with these contractors in the past you need to get updated certificates. Even if you knew the to have insurance in the past they may not have it now. A business owner should submit a request for a certificate each time they hire a contractor. This insures they have proper insurance. Proper insurance at the time you hired them. Doing this can prevent a scenario where you inadvertently take on the risks associated with the work your subcontractors perform.

The content of My Insurance Question is created by the experts at The Insurance Shop LLC. The Insurance Shop is an independent insurance agency that was founded in 2005. Over the past decade and a half, the agents at The Insurance Shop have developed relationships with more then a dozen insurance carriers. These carriers give their agents the ability to shop your policy around and make the carriers compete for your business. If you are looking for a better value when renewing your commercial insurance package, let us shop insurance so you don’t have to. Give us a call today at 800-800-4864.

12 terms to familiarize yourself with before your next renewal.

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. .

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.

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.

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.

Additional Terms to consider familiarizing yourself with before your nest renewal

Waiver of Subrogation

A Waiver of Subrogation is a contractual provision whereby an insured waives the right of their insurance carrier to seek redress or seek compensation for losses from a negligent third party.

Certificate of Insurance

A certificate of insurance is a document that is used to provide info on specific insurance coverage and provide verification insurance is in place at the time of issuance. The certificate contains the types and limits of coverage, the carrier, policy number, named insured, and the policies’ effective dates.

Certificate Holder

The certificate holder is the person, business, or nonprofit organization who is provided with a certificate of insurance to prove coverage is in place at the time of issuance. The certificate holder will be notified if at any time the policy is cancelled before the listed policy effective date.

Additional Insured

The Additional Insured is the person or organization who is not automatically included as an insured on an insurance policy, but who is included under the policy at the request of the named insured.

20 terms you need to know when purchasing or renewing commercial insurance

For many business owners, purchasing insurance is a foreign concept. Like many industries there are terms only the insiders know and they frequently use when discussing the policies. Here is a list of 20 terms that will give you a leg up the next time you are purchasing or renewing your commercial insurance policy.

20 commercial insurance terms to be aware of the next time you look to buy small business insurance.

Insurer – a person or company that underwrites an insurance risk; the party in an insurance contract undertaking the risk to pay compensation.

Insured – a person or organization covered by an insurance policy.

Peril – the possibility that you will be hurt or killed or that something unpleasant or bad will happen. exposure to the risk of being injured, destroyed, or lost.

Premium – An amount to be paid for an insurance policy. It is an amount paid periodically to the insurer by the insured for covering their risk.

Deductible – A deductible is the amount you have to pay out-of-pocket before the insurance company will cover your remaining costs.

1st person liability – First person liability is for damage that is done to you or your business. A good example of this would be a commercial property insurance policy. This policy covers the damages to you and your property. It does not cover the damage to another persons’ property or if they are hurt on your property.

3^rd person liability – Third person liability is liability that you or your business has to other third parties. Third parties can include customers, vendors, other businesses or anyone who may be harm by the actions of you or your business.

Claims-made policy – A policy written on a claims-made basis means that if the insurance is in place when the claim is made, but not when the occurrence took place than the insurer responsible for the claim is the insurer when the claim is made. This is common for professionals like a lawyer or an engineer. In these professions a claim is frequently filed months if not years after the occurrence takes place. At that time the insured may have coverage with a different company and there may be some discrepancy between who is responsible for the claim.

Occurrence based Policy – A policy written on an occurrence basis means that the insurer responsible for the claim is the insurer who was in place when the occurrence took place. If an engineer works on a house and there is a problem with the house years later than the insurer responsible for the occurrence is the insurer that was in place when the occurrence took place.

Endorsement – an endorsement is a document attached to an insurance policy that amends the policy in some way. An endorsement may add, remove or alter the scope of coverage under the policy.

Negligence – Negligence in relation to insurance means a person or business did not demonstrate appropriate amounts of care or responsibility for a particular situation. The failure to take appropriate precautions can cause you to be considered liable for the damage. This can also be referred to as the failure to use a degree of care considered reasonable under a given set of circumstances. Liability policies are designed to cover claims of negligence.

Named Insured – Any person, business or organization who is specifically named as an insured on an insurance policy. This is different from entities who although unnamed may fall within the policy definition of an insured.

Ordinance or Law Coverage – Coverage for loss caused by the enforcement of an ordinance or law regulating construction and repair of a damaged property. Older structures that are damaged may need to be upgraded in regards to electrical, plumbing, venting, etc. A typical commercial property insurance policy does not pay for these additional cost. This policy is an endorsement on top of your commercial insurance policy and will cover the additional costs needed to bring the new building up to date.

Hammer Clause – A ‘Hammer Clause‘ is a provision within an insurance policy that gives the insurer the right to settle for an undisclosed amount and if the insured does not agree to the settlement than they take on some or all of the risk. In some cases, the insured takes on all of the risk, but in many cases it is 70/30 or 50/50.

The Assigned Risk Provider (Also known as the pool or the state fund) – The assigned risk provider applies to workers’ compensation coverage. It is the provider of last resort within each state for businesses who cannot obtain coverage on the open market. The business may not be able to obtain coverage for a number of reasons. Typically, it is because of the small size of the company or because of their loss history. The Assigned Risk Provider offers coverage at a higher rate and typically once you are in the pool you must stay in the pool for 2-3 years.

Business Owners’ Package (BOP) – A business owner’s policy, commonly referred to as a BOP, combines several lines of coverage built into one policy. They are often better suited for small business owners because they offer targeted coverage options designed for specific types of businesses within certain industries. They are usually less expensive then purchasing coverage separately because the business is purchasing multiple policies for liability, property, commercial auto, etc.

Artisan Contractor – This term refers to businesses in several different industries. It includes many occupations that involve skilled work with tools at the customer’s premises. Carpenters, plumbers, electricians, roofers and tree surgeons are some professions that would be included in this group of businesses. Also included are diverse other skilled service providers, such as interior decorators, piano tuners and exterminators.

Loss History – Loss history is a documented history of damages or losses connected with a given asset. It is a way for the insurance carrier to determine the amount of claims your business has against an insurance policy. They use it to determine how much premium to charge or if they are willing to take on the risk altogether.

Inland Marine Insurance – Inland Marine Insurance is property insurance for property that is likely to be in transit over land. Many inland marine coverage forms provide coverage without regard to the location of the covered property; these are sometimes called “floater” policies. As a group, inland marine coverage forms are generally broader than property coverage forms.

Umbrella Coverage – The umbrella policy serves three purposes: it provides excess limits when the limits of underlying liability policies are exhausted by the payment of claims; it drops down and picks up where the underlying policy leaves off when the aggregate limit of the underlying policy in question is exhausted by the payment of claims; and it provides protection against some claims not covered by the underlying policies, subject to the assumption by the named insured of a self-insured retention (SIR).