An employee is critically hurt in a taxicab accident while on business in China. He had to be stabilized at the scene, flown to the coast and then to Hong Kong. Two operations and two months later, he is sent back to the U.S. on a private charter plane with two nurses and a doctor. The repatriation trip alone costs $140,000, which he would have had to pay had he not had foreign insurance.
Cliff Baseler, vice president at Best Hoovler Insurance Services Inc., a SeibertKeck company, says domestic U.S. policies only cover incidents occurring in the U.S., Canada, Puerto Rico or any U.S. possession.
“A standard domestic insurance policy doesn’t insure against foreign business exposure in general,” he says. “As long as your company has goods, services or people going overseas, you’re going to need foreign insurance.”
Smart Business spoke with Baseler about how to get the most out of your foreign package coverage.
What are the characteristics of international insurance?
There are a number of scenarios where foreign insurance is necessary. For example, a salesperson at an international conference demonstrating a product causes bodily injury or property damage. Maybe you’re exporting products and have a product failure — a propane tank explodes and kills 20 people. If sued, your domestic policy does not respond to lawsuits outside of the U.S. and Canada.
Under a foreign package policy, there are five types of coverage. They are:
- General liability — Covers public liability, including product liability.
- Property coverage — Protection for laptop computers, sales samples, personal property at trade shows, etc.
- Foreign voluntary workers’ compensation — Provides employees workers’ compensation and covers medical costs and loss of earnings as if the employee was hurt in his or her state of domicile. With 24/7 coverage, it also provides medical assistance services and repatriation expenses to get an employee to the U.S., including immediate family traveling with him or her or getting family to the foreign location where the employee is being treated.
- Accidental death and dismemberment (AD&D) coverage.
- Automobile liability — When an employee rents a car, there is certain compulsory insurance coverage in that country, but this provides excess liability.
Other types of foreign insurance exposure include kidnap and ransom, business interruption, crime and ocean cargo for when you’re responsible for your export shipment of goods in a container until it arrives.
How has foreign insurance changed to better serve small and mid-sized businesses?
With globalization and international trade agreements, even a small company could be distributing products abroad, but many small and mid-sized businesses don’t realize the protection needed. Insurance companies have different coverage levels, but usually a minimum premium with all five basic types of coverage runs an affordable $1,500 to $2,500 per year.
How do you decide which coverage and options or limits to buy?
Analyze the exposure — what employees, goods or services are doing and where they are going. Public liability and foreign workers’ compensation are necessary, but property and automobile depend on the circumstances. Property could be worth it if you have sales samples or laptop computers going abroad, but your employee might not be driving anywhere. Additionally, the AD&D for many mid-sized business is already an international 24/7 policy, so there could be a duplication of coverage. The insurance company takes a census of the number of people, where they are going and for how long, and then creates different rates for different risks.
Many policies exclude countries not aligned with U.S. foreign policy, such as Syria, Iraq, Iran and now, Mexico. To get around it, underwriters want to know the finite trip details. For example, Monterrey, Mexico, is a medium risk, while Mexico City is very hazardous and has become its own cottage industry considering the high incidence of kidnap and ransom occurring there. In general, the insurance company writes a blanket policy for all countries, excluding certain ones, and then underwrites exceptions on a per-trip basis.
What’s the difference between buying international insurance in the U.S. or local insurance in the foreign country?
If you write a policy in the U.S., called a non-admitted basis, most countries accept it. However, some foreign countries require a domicile insurance company and a broker to write the policy as a form of protectionism. Therefore, big companies — Travelers, Chartis and Chubb — have foreign divisions writing policies, called an admitted basis. You might need a combination of nonadmitted and admitted insurance to ensure the proper coverage.
It’s almost always advantageous to buy U.S. coverage rather than admitted coverage in the country itself. U.S. coverage provides compulsory insurance on a broader basis and uses a U.S. company and adjuster, with the cost not necessarily more expensive.
What steps should employers take if something happens to an employee or property abroad?
The planning should be part of your disaster preparedness program. Insurance companies have emergency response teams globally who speak the local languages. As part of the service, you reach out to these key contact people if there’s a problem. They also know what steps to take to get the best medical care. For example, in Shanghai, China, hospitals won’t operate unless they’re sure they will be paid.
Additionally, the insurance company will set up a website to be checked on the trip. It gives tips on how to travel and dress, where to avoid, and a security and weather report. It helps employees blend in, which also prevents them from becoming a target.
Cliff Baseler is vice president at Best Hoovler Insurance Services Inc., a SeibertKeck company. Reach him at (614) 246-7475 or [email protected]
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