6 Key Policy Concepts You Should Know
1) Property Coverages- you can cover just about any business property from buildings , stock, inventory, office contents, raw goods, etc... The key is to insure them at the right value so when there is a loss you are adequately insured and not penalized by the insurance company after a loss. Coverage is limited to your location(s) unless specifically endorsed to cover off your premises.
Some common perils that property policies do not cover are flood, earthquake, and pollution.
2) Liability Coverages- business liability covers property damage or bodily injury of others that your business causes. It will also cover loss of use. So if you are sued or a claim is made against the business because of your work or product or service, the liability policy protects you. The some things the liability policy does not cover are, bad work, product recall, pollution, and damage to property of others in your care, custody, or control. Coverage is nationwide and includes Canada and US territories.
3) Auto Coverages- business auto policies can cover your vehicles used in the business, including your own personal vehicles. It also can cover vehicles the business borrows or rents. Coverage for trailers and towed equipment can be added along with vehicles you service or repair. Coverage is nationwide and includes Canada and US territories
4) Workmans Compensation- work comp covers employees on the job injuries and job related illnesses. It can also cover the executive officers and LLC members of corporations. Each State has laws that govern how work comp policies respond to injured workers. The policy is mandated by law for every business owner to carry if they have employees. The policy will cover part time workers also. Subcontractors and independent contractors might be covered also if the they work for a business that is their only means of income. In other words they could be considered "employees" and trigger the coverage. Coverage is State specific but can cover work in multiple States.
5) Inland Marine- do not let the wording confuse you. Inland marine policies have little to do with water. The policy is used to cover equipment, tools, and various items that move around. For example, construction equipment is a good fit for these policies. The beauty of inland marine policies are they can be taylored to cover just about anything that may move off your business premises.
6) Umbrella/Excess - these policies are written for catastrophe coverage. They pick up where you liability and auto ends. For example, if your business is sued for 2 million dollars and you only have 1 million of coverage, you could look to your umbrella policy to cover and protect you for the difference. The policy can be written to cover over your business liability, auto, and workmans compensation.
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1) Certificates of insurance- these forms are vitally impotant in today's business climate. As a business owner you may be asked to provide a certificate from your vendors and contractors you do business with. The purpose of this is to show you have business insurance coverage, specifically liability and or workmans compensation. The form allows your vendors to comply with policy audits and avoid premium charges for uninsured subcontractors or vendors. It also shows you policy dates to make sure your coverage period is valid. The same can apply for your benefit. By requiring certificates from your vendors, and or subcontractors, you can have some reassurance that everyone you deal with in business is insured and also that their policy dates are valid. Caution however, insurance certifcates are not insurance policies. They only represent coverage. The only way to be assured of coverage is to get a copy of the actual insurance policies.
2) Additional Insureds- In today's business climate you will most likely be asked to add someone to your liability policy as an additional insured. Usually it is required as part of a business contract. By adding another business on your policy as an additional insured you are giving that business access to your liability limits in the case of a claim. It is important to understand this because your limit of liability may not be enough to cover your business and all the additional insureds on your policy. Make sure you have enough limits on your policy and take off addiitonal insureds as soon as your contract will allow.
3) Hold Harmless Agreements or indemnification clauses in contracts
Many times in business you are required to sign contracts that contain hold harmless agreements. These agreements prevent you the contract signer from suing or making a claim to the other party you signed the contract with. These instruments have to be carefully read before signing because you could be assuming liability of the other party without insurance coverage to protect yourself. Make sure you talk with your insurance professional and lawyer before signing contracts that contain hold harmless agreements.
5) Occurrence and Aggregate Limits
These terms are used in your business liability policies to describe insurance limits that cover your business. The term occurrence describes the amount of coverage you have for any one claim in a policy year. The term aggregate describes how much coverage limits you have for the whole policy year. For example if you have a policy that has coverage for 1.0 million per occurrence, and 2.0 million aggregate and you have a $700,000 dollar claim then your occurrence limit will be adequate. Now If you have another claim for 1.0 million in the same policy year, then your aggregate limit will save the day because the total of the two claims is 1.7 million. Note: If you use up your limits in a policy year you have to buy more. That is why having higher aggregate limits is important.
5 Business Insurance 'Gotcha's" that you should know about !
1) Coinsurance- This is one of the most misunderstood clauses in a property policy. It can be complicated but let's break it down in understandable terms. If you insure your building or contents the insurance company wants to make sure you have the value on the policy at least 80% of what it would cost to replace it. If you do not they can penalize you when they go to pay the claim. For example if have your building insured for 100,000 on your insurance policy, and at the time of the loss it costs 80,000 to replace it, then you will get 80,000 from the insurance company. If however the building costs 150,000 to replace it then you may not get the full 100,000 from the policy. This is where coinsurance can get you. The insurance company reduces your payout because you underinsured your property. We could write a book on coinsurance because of it's complexity but the best way to avoid this is by keeping your property values on your policies up to date.
2) Flood is not covered- like homeowners policies flood is not covered under business property policies. However water damage from broken pipes and roof leaks is covered in most policies. Just remember when the water comes from the ground or flows out from stream, lakes, rivers, or oceans, it is not covered.
3) Liability Policies do not cover property of others you are working on- Here is an example, if you are a carpentry contractor doing remodeling in a house, and let's say you are working on fixing the banister on a staircase. During the work you accidentally lean on the banister and the whole thing is knocked down and damaged. Under this kind of circumstance your business liability will not cover you for the damage to the banister because it was in your care, custody and control. There are other policies you should have in place to cover for such an accident.
4) Trailers are not always covered in an business auto policy- If you have trailers that weigh more than 2500 lbs and need physical damage coverage because you have a bank loan against it, then you need to shedule these trailers on your business auto policy. They are not automatically covered as many may think. Call and add them to the policy.
5) Families of Injured Workers can make a claim against your workmans comp policy- Even though work comp coverage is specifically set up to cover your workers injuries, family members can sue for damages under section II of a workmans comp policy. This section usually only has limits of 100,000 per accident, so would be a good idea to increase this limit on your policy.
