Business Insurance
Lower deductible higher premium or higher deductible lower premium which is the better choice?
Tuesday, July 6th, 2010 | Business Insurance, Personal Lines, Risk Management, Uncategorized | No Comments
Tuesday July 6, 2010 – Regardless of the type of insurance, one of the basic dedcisions for individual and business insurance buyers, is what deductible would make sense for the particular type of policy.
A deductible is the amount of loss that an insured must pay before the insurance carrier pays the first dollar on the claim. Sometimes deductibles are non monetary; for example in the form of a waiting period. A business interruption policy may have a 30, 60 or 90 day waitning period before insurance pays for the lost income. However most deductibles are in dollars; for example a $500 deductible may be chosen for an auto insurance policy.
Of course premium is directly related to deductible. For example, a homeowners policy with a $500 deductible is considerably more expensive than one with a $2,500 deductible. The reasons for this fact are: (1) with a higher deductible, the insured is telling the insurance carrier that he/she will take care of the more common small losses. They only want insurance to pay the occasional more costly claims. and (2) insurance carriers believe that when the insured is “self-insuring” small losses, they will have a higher incentive to apply loss prevention techniques. For example a homeowner with a higher deductible policy is more likely to install a burglar alarm to prevent a burglary in the first place.
My own perspective on this subject is that insureds should take the highest possible deductible that they can comfortably pay in the event of a loss. Everytime an insured absorbs (i.e. pays) small losses below the dedutible, the loss does not get reported and there is no record of a claim to affect future premiums.
However, many folks prefer a lower deductible – sleep insurance. They don’t mind a somewhat higher upfront premium for the peace of mind that regardless of the type of loss their out-of-pocket cost is manageable. That is why I mentioned above that the best deductible is the highest amount the insured can absorb comfortably (emphasis on “comfortably”). In reality however it is also known that many small losses are not reported even on policies with low deductibles. People and businesses tend to take care of a small property damage by just fixing it, or replace an inexpensive personal item without reporting a claim. The time and effort needed to report a claim and follow up with the claims process is simply too much for the small insurance payment. So insurance carriers make a higher premium and get a free pass on claims, too.
The choices that each of us make in buying insurance are based on our own individual situation and can differ from person to person and from policy to policy. One may choose a lower deductible plan for health insurance and pick a high deductible homeowners insurance. Consult with your insurance agent and ask him/her to review all of your insurance policies to make sure you are buying enough insurance to protect you, your family and your business but that you are not over-buying insurance. Such a review may save several hundereds of dollars a year by adjusting policy types, limits and deductibles.
Call Pacific Way at 909-599-1972 or email me at roobik@pacificway.net to discuss your specific insurance needs.
World Cup Risks Supported by Insurance
Friday, June 4th, 2010 | Business Insurance | No Comments
June 4, 2010 - The 2010 FIFA World Cup held in South Africa begins in a week. Before a ball is struck, it’s important to note that global insurers and reinsurers are providing billions of dollars in risk protection for the event.
Munich Re reports that staging the World Cup finals is an enormous undertaking for both hosts and organizers and presents risks on every scale. The list of those requiring protection ranges from FIFA, the official organizer of the World Cup, to broadcasters, sponsors, travel firms, airlines and retailers.
In fact any party connected with the event will likely require insurance to cover their costs, expenses and profits should the event be cancelled. Munich Re observes:
In addition to contingency cover, insurance protection against war or terrorist attack is another important protection. South Africa was among 16 countries that saw their terrorism threat level increase, according to Aon’s 2010 Terrorism Threat Map released earlier this week.
Reuters recently reported that at least $5 billion of cancellation and other insurance is in place for the 2010 World Cup, with coverage spread out among the global insurance and reinsurance marketplace.
Do I need a commercial auto insurance policy?
Tuesday, December 29th, 2009 | Business Insurance | No Comments
December 29, 2009 - As a businessowner, you need the same kinds of insurance coverages for the car you use in your business as you do for a car used for personal travel — liability, collision and comprehensive, medical payments (known as personal injury protection in some states) and coverage for uninsured motorists. In fact, many business people use the same vehicle for both business and pleasure. If the vehicle is owned by the business, make sure the name of the business appears on the policy as the “principal insured” rather than your name. This will avoid possible confusion in the event that you need to file a claim or a claim is filed against you.
Whether you need to buy a business auto insurance policy will depend on the kind of driving you do. A good insurance agent will ask you many details about how you use vehicles in your business, who will be driving them and whether employees, if you have them, are likely to be driving their own cars for your business.
While the major coverages are the same, a business auto policy differs from a personal auto policy in many technical respects. Ask your insurance agent to explain all the differences and options.
If you have a personal umbrella liability policy, there’s generally an exclusion for business-related liability. Make sure you have sufficient auto liability coverage.
Call Pacific Way at 909-599-1972 for a free no obligation quote.
How can I insure my home-based business?
Monday, December 7th, 2009 | Business Insurance | No Comments
December 7, 2009 – Let’s face it. Launching and running a business takes capital, motivation and yes, even physical stamina to handle the stress and demands of a new or growing venture. And it’s risky. In fact, one out of every five businesses fails within the first five years of opening.
Handling inventory, scheduling time, purchasing supplies, handling payroll — there are a myriad of procedures every home or small business entrepreneur needs to know, but one of the most critical and often neglected is buying proper insurance coverage.
Taking a Business Inventory
What would happen if a fire or other disaster destroyed your property, making it impossible for you to get back to business right away? Would you remember what property had been destroyed? One way is by taking a complete inventory of all your personal business property, determining its value, and deciding what’s worth insuring. Having an up-to-date business inventory will help you get your insurance claim settled faster, verify losses for your business’ income tax return and help you purchase the correct amount of insurance.
Start by making a list of personal business property, describing each item and noting where you bought it and its make and model. Clip to your list any sales receipts, purchase contracts, and appraisals you have.
What Is the Right Coverage for You?
Then there’s the question of what types of coverages you’ll need. Aside from personal business property, there is liability insurance, business income, insurance for the building, boiler and machinery, human failure, employee protection and management protection, among others. The type of coverage you need depends on a number of factors including what kind of business you operate.
How to Keep Costs Down
The key to minimizing your insurance cost is to shop around and obtain several options and quotes. An independent commercial insurance broker is able to access multiple carriers and will present a comparison of coverage and premiums for you to consider. Contact Pacific Way at 909-599-1972 to discuss your exposures and insurance needs.
What does a businessowners policy cover?
Monday, December 7th, 2009 | Business Insurance | No Comments
December 7, 2009 – Insurance companies selling business insurance offer policies that combine protection from all major property and liability risks in one package. (They also sell coverages separately.) One package purchased by small and mid-sized businesses is the businessowners policy (BOP). Package policies are created for businesses that generally face the same kind and degree of risk. Larger companies might purchase a commercial package policy or customize their policies to meet the special risks they face.
BOPs include:
- Property insurance for buildings and contents owned by the company — there are two different forms, standard and special, which provides more comprehensive coverage.
- Business interruption insurance, which covers the loss of income resulting from a fire or other catastrophe that disrupts the operation of the business. It can also include the extra expense of operating out of a temporary location.
- Liability protection, which covers your company’s legal responsibility for the harm it may cause to others. This harm is a result of things that you and your employees do or fail to do in your business operations that may cause bodily injury or property damage due to defective products, faulty installations and errors in services provided.
BOPs do NOT cover professional liability, auto insurance, worker’s compensation or health and disability insurance. You’ll need separate insurance policies to cover professional services, vehicles and your employees.
Small Business Insurance Basics
Monday, December 7th, 2009 | Business Insurance | No Comments
December 7, 2009 – Insurers often combine a number of insurance coverages into a package that is sold as a single contract. The most common policy for small businesses is the Businessowners Policy (BOP).
The BOP includes business income insurance, sometimes called business interruption insurance. This compensates a business owner for income lost following a disaster. Disasters typically disrupt operations and may force a business to vacate its premises. Business income insurance also covers the extra expense that may be incurred if a business must operate out of a temporary location.
To cover specific risks associated with a business, a variety of additional coverages may be added to the basic BOP. For example, if a business has an outdoor sign, the BOP doesn’t cover it unless coverage is specifically added for an additional premium. If a business relies on electronic commerce, the owner can add coverage for lost income and extra expenses in the event the ability of the business to conduct e-commerce is slowed down or stopped due to a computer virus or hacker.
Only small- to medium-sized businesses that meet certain criteria are eligible for a BOP. Factors insurers consider include the size of the premises, the required limits of liability, the type of business and the extent of offsite activity. Premiums for BOP policies are based on those factors plus business location, financial stability, building construction, security features and fire hazards.
Major Coverages
Most small businesses need to purchase at least the following four types of insurance.
1. Property Insurance
Property insurance compensates a business if the property used in the business is lost or damaged as the result of various types of common perils, such as fire or theft. Property insurance covers not just a building or structure but also what insurers refer to as personal property, meaning office furnishings, inventory, raw materials, machinery, computers and other items vital to a business’s operations. Depending on the type of policy, property insurance may include coverage for equipment breakdown, removal of debris after a fire or other destructive event, some types of water damage and other losses. It may also provide operating funds during a period when the business is trying to get back on track after a catastrophic loss.
2. Liability Insurance
Any enterprise can be sued. Customers may claim that the business caused them harm as the result of, for example, a defective product, an error in a service or disregard for another person’s property. Or a claimant may allege that the business created a hazardous environment. Liability insurance pays damages for which the business is found liable, up to the policy limits, as well as attorneys’ fees and other legal defense expenses. It also pays the medical bills of any people injured by, or on the premises of, the business.
3. Business Auto Insurance
A business auto policy provides coverage for autos owned by a business. The insurance pays any costs to third parties resulting from bodily injury or property damage for which the business is legally liable, up to the policy limits.
4. Workers Compensation Insurance
In all states but Texas an employer must have workers compensation insurance when there are more than a certain number of employees, varying from three to five, depending on the state. Workers comp insurance, as this coverage is generally called, pays for medical care and replaces a portion of lost wages for an employee who is injured in the course of employment, regardless of who was at fault for the injury. When a worker dies as a result of injuries sustained while working, the insurance provides compensation to the employee’s family. An extremely small business, such as one operated by one or two people out of a home, may not need workers compensation insurance. But it often needs more property and liability insurance than is provided in a typical homeowners policy.
Other Types of Business Coverages
1. Errors and Omissions Insurance/Professional Liability
Some businesses involve services such as giving advice, making recommendations, designing things, providing physical care or representing the needs of others, which can lead to being sued by customers, clients or patients claiming that the business’s failure to perform a job properly has injured them. Errors and omissions or professional liability insurance covers these situations. The policy will pay any judgment for which the insured is legally liable, up to the policy limit. It also provides legal defense costs, even when there has been no wrongdoing.
2. Employment Practices Liability Insurance
Employment practices liability insurance covers (up to the policy limits) damages for which an employer is legally liable such as violating an employee’s civil or other legal rights. In addition to paying a judgment for which the insured is liable, it also provides legal defense costs, which can be substantial even when there has been no wrongdoing.
3. Directors and Officers Liability Insurance
Directors and officers liability insurance protects directors and officers of corporations or not-for-profit organizations if there is a lawsuit claiming they managed the business or organization without proper regard for the rights of others. The policy will pay any judgment for which the insured is legally liable, up to the policy limit. It also provides for legal defense costs, even where there has been no wrongdoing.
4. Key Employee Insurance
Life or disability income insurance can compensate a business when certain key employees die or become disabled. These coverages cushion some of the adverse financial impact that results from losing a key employee’s participation.
5. Umbrella Policies
As the name implies, an umbrella liability policy provides coverage over and above a business’s other liability coverages. It is designed to protect against unusually high losses. It provides protection when the policy limits of one of the underlying policies have been used up. For a typical business, the umbrella policy would provide protection beyond the general liability and auto liability policies. If a company has employment practices liability insurance, directors and officers liability, or other types of liability insurance, the umbrella could provide protection beyond those policy limits as well.
Call Pacific Way at 909-599-1972 to discuss your small business insurance needs.
Do I need professional liability insurance?
Monday, December 7th, 2009 | Business Insurance | No Comments
December 7, 2009 – Professionals that operate their own businesses need professional liability insurance in addition to an in-home business or businessowners policy. This protects them against financial losses from lawsuits filed against them by their clients.
Professional liability insurance is a specialty coverage. Professional liability coverage is not provided under homeowners endorsements, in-home business policies or businessowners policies (BOPs).
Call Pacific Way at 909-599-1972 to discuss your professional liability exposures.
What is employment practices liability insurance (EPLI)?
Monday, December 7th, 2009 | Business Insurance | No Comments
December 7, 2009 – EPLI covers businesses against claims by workers that their legal rights as employees of the company have been violated.
The number of lawsuits filed by employees against their employers has been rising. While most suits are filed against large corporations, no company is immune to such lawsuits. Recognizing that smaller companies now need this kind of protection, some insurers provide this coverage as an endorsement to their Businessowners Policy (BOP). An endorsement changes the terms and conditions of the policy. Other companies offer EPLI as a stand-alone coverage.
EPLI provides protection against many kinds of employee lawsuits, including claims of:
- Sexual harassment
- Discrimination
- Wrongful termination
- Breach of employment contract
- Negligent evaluation
- Failure to employ or promote
- Wrongful discipline
- Deprivation of career opportunity
- Wrongful infliction of emotional distress
- Mismanagement of employee benefit plans
The cost of EPLI coverage depends on your type of business, the number of employees you have and various risk factors such as whether your company has been sued over employment practices in the past. The policies will reimburse your company against the costs of defending a lawsuit in court and for judgments and settlements. The policy covers legal costs, whether your company wins or loses the suit. Policies also typically do not pay for punitive damages or civil or criminal fines. Liabilities covered by other insurance policies such as workers compensation are excluded from EPLI policies.
To prevent employee lawsuits, educate your managers and employees so that you minimize problems in the first place:
- Create effective hiring and screening programs to avoid discrimination in hiring.
- Post corporate policies throughout the workplace and place them in employee handbooks so policies are clear to everyone.
- Show employees what steps to take if they are the object of sexual harassment or discrimination by a supervisor. Make sure supervisors know where the company stands on what behaviors are not permissible.
- Document everything that occurs and the steps your company is taking to prevent and solve employee disputes.
Call Pacific Way at 909-599-1972 to discuss EPLI coverage for your business.
Cash Flow Management Crucial to Small Businesses
Thursday, June 25th, 2009 | Business Insurance | No Comments
June 25, 2009 – The heartbeat of any small business is its cash flow. That’s why it’s so important for small businesses to pay careful attention to successfully managing their cash flow.
What is cash flow? It’s the difference between receipts and payments and it shouldn’t be confused with profit and loss or income and expenditure. During these rocky economic times, cash flow management is often a challenge, particularly when small businesses are faced with paying large premium down payments for their workers’ compensation insurance.
Roobik Galoosian of the Pacific Way states, “There is a new solution to this old problem for small businesses – a pay-as-you-go premium payment service for those small businesses that have a Hartford workers compensation policy and use Intuit® QuickBooks®.” This new service is named XactPAY Web®. It’s a payroll-based premium calculation and billing service offered through Hartford agents that allows small business owners to take care of workers’ compensation premium payment on a pay-as-they-go basis, one pay period at a time.
Roobik adds, “QuickBooks dominates the “do-it-yourself” payroll management software market with over 3 million small business customers.” Of these 3 million, 1 million utilize QuickBooks to manage their payroll. The Hartford is the first insurance carrier to offer a pay-as-you-go workers’ compensation premium payment services for QuickBooks’ customers.
XactPAY Web integrates fully with a business’ Intuit QuickBooks Payroll software and automatically calculates the premiums for Hartford-issued workers’ compensation policies each time payroll is run using QuickBooks Payroll. This new system helps improve the business’ cash flow by eliminating the need for large down payments and minimizing the potential for year-end audit adjustments. Traditional billing methods have crimped cash flow by requiring employers to pay all or part of the year’s workers’ compensation premiums in advance, potentially tying up thousands of dollars at the beginning of each year.
Roobik adds, “This free solution can help small businesses where it matters most – keeping more cash in hand.”
To learn more about XactPAY Web and Intuit payroll, visit www.qbpayroll.com/xactpay or call Pacific Way.
QuickBooks® is a registered trademark and service mark of Intuit Inc. in the United States and other countries, and is displayed herein with permission. XactPAY Web® is a special edition for QuickBooks users with (1) a 2007 or newer version of any PC Desktop version of QuickBooks, and (2) a subscription for Intuit QuickBooks Basic, Standard, Enhanced or Assisted Payroll (XactPAY Web is not available to QuickBooks Online Payroll subscribers). Intuit Inc. receives a royalty fee from The Hartford in connection with The Hartford’s use of the Intuit name, marks and other property, which are used for purposes of marketing the XactPAY Web service. The purchase of a Hartford Workers’ Compensation policy is necessary to utilize the XactPAY Web service. All insurance policies offered by The Hartford are sold through licensed insurance producers or agents appointed by The Hartford.
Tempted to Cut Back on Insurance? Think Twice.
Thursday, June 25th, 2009 | Business Insurance | 1 Comment
June 25, 2009 – During these trying financial times, you may be looking for ways to trim the monthly expenses of your small business – perhaps you’ve toyed with the idea of cutting back your insurance coverage.
Roobik Galoosian of Pacific Way suggests that you think twice. “An underinsured business may not have the coverage needed to survive a fire, a theft or an accident on your premises.” Roobik adds that the best course of action is to go over your insurance coverage with your insurance agent.
You may have made improvements to your building or purchased new equipment. That may mean you need to update your coverage. Or, the value of your real estate may have fallen and it might make sense to reduce coverage. But, it’s never wise to decide against the coverage you need to help your business survive. For example, business interruption insurance may be available through your business owner’s policy, or BOP. This insurance provides coverage for a business’ expenses and lost profits if the business can’t operate for a variety of reasons. While this coverage may increase your premium payment, it can make the difference between survival and failure if your business can’t operate because of a disaster.
Your insurance agent can help you to understand your insurance and to evaluate your level of coverage. Roobik Galoosian says, “You may also find that your business needs a policy that is tailored to your particular line of work. The Hartford has a particularly good BOP that can be custom-tailored for the unique needs of your industry with competitive prices.”
For more information, you can visit the Insurance Information Institute Web site: http://www.iii.org/smallbusiness/intro. You’ll find explanations of a variety of business coverages and also descriptions of specific coverages that might be needed in various industries.