How much to buy
Well, the choice is yours (with input from your trusted insurance agent or broker, hopefully). However, you should understand how liability limits work within a commercial general liability coverage form (the product that provides coverage for liability losses arising from premises, operations, products and completed operations). This coverage is decidedly important to your operations, as it represents your insurance shield against litigation and damage to your business.
Your commercial general liability policy limit is the most the insurer will pay, regardless of the number of insureds, claims made, suits brought, or persons or organizations making claims or bringing suits. In other words, the limits do not increase if more than one insured person is named in a suit or claim, more than one person or organization is making a claim, or more than one claim or suit is filed.
A key advantage of commercial general liability coverage forms is the right and duty of the insurance carrier to defend the insured against any suit seeking damages for bodily injury or property damage to which the insurance applies. This defense element becomes especially important in most commercial general liability coverage forms since the carrier’s defense costs are outside your limits of insurance. In other words, the defense costs incurred by your insurance company do not reduce the limits of insurance protection.
There are two sets of aggregate limits listed on your policy. An aggregate limit represents the most the insurer will pay during the policy period. Once an insurer is legally obligated to pay the full amount of the aggregate limit (either by judgment or settlement), the insurer has no further obligation to the policyholder during the remainder of the policy period.
Aggregate limits general aggregate
The first aggregate limit is called the general aggregate. This aggregate limit is the most the insurer will pay for damages caused by bodily injury, property damage, personal and advertising injury, except for those sums paid as damages within the products-completed operations aggregate a separate aggregate limit applies to such claims or suits.
Aggregate limit each occurrence
The each occurrence limit is the most the insurer will pay for a single occurrence, regardless of the number of persons insured or suits brought. All sums paid under this limit reduce the general aggregate limit, or the products-completed operations aggregate limit, depending on the nature of the claim.
Separate limits apply for personal and advertising injury, damage to premises rented to you and medical expense. However, sums paid under each of these limits deplete the general aggregate limit as well. Simply put, you can’t afford to do business without the protective cover found in the commercial general liability.
Your insurance needs may seem complex, and they can be. That’s where your local independent agent comes in. Your agent can help you navigate through the intricacies of aggregates and coverages and limits.
Steve Blankenship, manager, underwriting practices group, can be reached at (330) 887-8417 or email@example.com. In business for more than 157 years, Westfield Insurance provides commercial and personal insurance services to customers in 17 states. Represented by leading independent insurance agencies, the product we offer is peace of mind and our promise of protection is supported by a commitment to service excellence. For more information, visit http://www.westfieldinsurance.com
She doesn’t know how badly injured her driver is. Was he at fault? How much is her $120,000 straight truck worth now? She remembers one of the drivers mentioning it might be time to have the brakes replaced. Did it ever get done?
Food products worth $30,000 were in the back of that truck. Are they lying scattered all over the highway right now? That food was on its way to several key customers with just-in-time delivery needs. How badly damaged will those relationships be if she can’t come up with an alternative solution quickly?
Motor vehicles are an integral part of day-to-day business operations. And because they are so common, their ownership and use can quickly become routine. It’s easy to overlook what they are the leading cause of work-related fatalities.
Maintaining a vehicle fleet is not as simple as buying a few trucks and hiring a few drivers. A safety program, with elements of accident prevention as well as follow-up, is a must for any responsible organization.
You might think, “But I can’t afford fleet maintenance, driver training and a safety program.” In reality, your business can’t afford not to have these things. A fleet safety program is an investment in your business not an expense that reduces profits. If developed and implemented properly, you’ll see results. And as illustrated in our example above, not maintaining a safety program can turn a bad situation into an operations nightmare with far-reaching impact.
A fleet safety program isn’t just about preventing accidents. Your organization gains other valuable benefits through fleet safety.
- Fewer business interruptions because of fewer accidents
- Reduction in vehicle expense
- Improved employee morale
- Improved corporate image
- Reduction in insurance premiums
Building your safety program
You may have access to risk-control advice through your insurance agent or broker, and a risk-control expert is probably your best source of how-to information. However, you can get a basic program started by following these guidelines.
- Never forego employment applications, and insist on acceptable pre-employment MVRs and reference checks.
- Make preventive maintenance and regular vehicle inspections mandatory. Don’t forget to keep maintenance records up-to-date.
- Develop and use a formal method of evaluating drivers’ current skills and fill gaps by providing training for deficiencies.
- Place accident report kits in all vehicles, and create report files and follow-up procedures when accidents do happen.
- Insist on safety belt use. Restrict the use of employee vehicles, as well as personal use of company vehicles. Enforce penalties for misuse of vehicles and failure to comply with rules.
But what makes a fleet safety program successful? Endorsement from ownership and management is critical. Company leaders must commit to making sure employees understand what the program represents and being diligent about adhering to it.
You can’t continue to put off the development and implementation of a fleet safety program. If you don’t already have one in place, begin the process today. You won’t regret it and neither will your employees, your customers or the general public.
Steve Blankenship, manager, underwriting practices group, can be reached at (330) 887-8417 or firstname.lastname@example.org. In business for more than 156 years, Westfield Insurance provides commercial and personal insurance services to customers in 17 states. Represented by leading independent insurance agencies, the product we offer is peace of mind and our promise of protection is supported by a commitment to service excellence. For more information, visit www.westfieldinsurance.com.
His worst fears are soon confirmed. The building housing Tim's business -- the source of his and his employees' livelihood -- has suffered significant damage.
Now what? It's hard to think clearly as Tim mentally notes each problem. He's not even sure where to start. He calls his insurance agent, who begins sorting through the claim.
Tim hopes his insurance policy, particularly the property insurance, includes the right types and amounts of coverage. If it doesn't, a loss like this could easily lead to business failure. Luckily, Tim understood the importance of adequate coverage. He and his agent had thoroughly discussed Tim's business and the right way to cover each aspect of it.
Once his agent contacted the insurance company, Tim moved smoothly through the claim process and business operations were quickly restored.
Through planning, Tim and his agent took the steps necessary to ensure continuation of his business. In particular, Tim understood his building needed to be insured to value. But what if he hadn't known the importance, or even chose to ignore it?
In that case, he would have suffered a coinsurance penalty in the event of a loss.
What is coinsurance?
A coinsurance clause specifies the amount of insurance you have agreed to carry in relation to the building's actual value. Typically, this limit is 80 percent to 100 percent of the cost to replace or reconstruct the building.
If you don't carry the limit mandated in the coinsurance clause, you will pay a coinsurance penalty in the event of a partial loss. In other words, the company will only pay a claim in proportion to the amount of insurance you do carry.
Let's say Tim chose to purchase a $1 million limit of insurance for his building. But at the time of loss, it's discovered that the actual building replacement cost is $1.5 million. Will Tim pay a price for this error?
He will . . . literally.
In our example, damage is estimated at $900,000. However, the claim payment will only be $600,000 (the $1 million limit is two-thirds of the actual 100 percent replacement cost of $1.5 million, so the claim payment is two-thirds of the actual loss amount). Tim will have to come up with the additional $300,000 on his own.
Even if a policyholder avoids the coinsurance condition by purchasing agreed value coverage, an agreement to suspend the coinsurance clause, usually for a period of one year, an appropriate limit of insurance (between 80 percent and 100 percent of replacement cost) is still required.
Insurance to value is just one aspect to consider when it comes to insuring a building. There are other issues (such as removing building debris and factoring in the cost of bringing a building up to code) that a business owner should recognize and plan for.
And beyond building coverage, loss to business personal property and loss of business income can have a huge impact on business continuation. That's why it's important to make sure, as Tim did, that you have discussed your operation thoroughly with your insurance agent.
Adequate property insurance protection for your business is not as simple as buying an off-the-shelf policy. Analyze your needs and minimize uncertainty by making the right decisions before you're faced with a situation like Tim's.
Steve Blankenship is manager of the Underwriting Practices Group at Westfield Insurance. Reach him at (330) 887-8417 or email@example.com. In business for more than 156 years, Westfield Insurance provides commercial and personal insurance services to customers in 17 states. Represented by leading independent insurance agencies, the product it offers is peace of mind and its promise of protection is supported by a commitment to service excellence. For more information, visit www.westfieldinsurance.com.
These descriptions convey the disdain many feel when paying insurance premiums. However, the most common financial transfer mechanism is an insurance transfer. Insurance allows an organization to transfer the financial consequences of a loss, especially a catastrophic loss, to an insurance carrier. The carrier pays policyholders for losses and, in turn, distributes the cost of all losses among policyholders.
The insurance policy is an agreement in which the insurance carrier promises to pay claims in exchange for premiums paid by the policyholder. Ultimately, it's a legal contract between two parties.
Components of a policy
The policy is constructed to outline the terms and conditions of the contract, including the obligations and rights of each party. This is true whether the policy is a package (usually covering property, general liability, auto, etc.) or monoline (workers' compensation/employers' liability, professional liability, etc.).
Whether package, monoline or a combination, an insurance program has three components -- common policy declarations, common policy conditions and coverage parts or lines of business.
Common policy declarations
The common policy declarations, or "dec" page, is often overlooked. However, it can make or break an insurance claim. In addition to the premium, the dec page provides critical information.
* Named insured and insurance company. The parties entering into the contract.
* Agent or broker. The "producer" who brought the two parties together and facilitated the execution of the contract.
* Effective date and expiration of the policy. Defined dates on which coverage begins and expires. Subject to terms and conditions of the policy, coverage will be determined based on the timing of the occurrence relative to the policy term.
Common policy conditions -- read them
The standard insurance policy extends specific rights and duties to the named insured. These conditions establish fundamental ground rules for both parties of the contract -- policyholder or named insured, and carrier.
Many of these conditions are contained in a common document that applies to all coverage parts. In addition to the underlying right to coverage (including indemnity and defense), the named insured's traditional rights include the right to cancel the policy, the right to receive cancellation or nonrenewal notification from the carrier, the right to change the policy and the right to receive return premium.
Basic duties of the named insured include paying premium and submitting to examination of books and records and/or inspections and surveys (at the request of the carrier).
Who's on first?
Often, an insurance policy will contain more than one named insured. The common policy conditions make it very clear that the rights and duties pertain to the first named insured -- literally, the first name listed in the declarations.
It is important to consider whether the first name is appropriate for a given right or duty. Also, note that the insured cannot transfer the rights or duties under the policy to any other person or organization without the written consent of the carrier.
Additional insurance policy components
Each coverage segment includes its own set of forms that allow you and your insurance agent to construct the desired policy terms and conditions. These forms define key terms and conditions, including the insuring agreement, causes of loss, exclusions, definitions and specific line of business conditions.
Besides clearly establishing terms and conditions, policies are constructed to allow for clear delineation of coverage between the various lines of business. For example, coverage may be excluded in one form because it is provided elsewhere.
Insurance should never be viewed as a substitute for loss control or the sole means of risk management, but as a critical element. Your insurance agent is there to help you interpret the legal contract that is your insurance policy.
Protect yourself by making sure you understand that contract and how it applies to your business.
Steve Blankenship, manager, underwriting practices group at Westfield Insurance, can be reached at (330) 887-8417 or firstname.lastname@example.org. In business for more than 156 years, Westfield Insurance provides commercial and personal insurance services to customers in 17 states. Represented by leading independent insurance agencies, the product it offers is peace of mind. For more information, visit www.westfieldinsurance.com.
But beyond the obvious entrepreneurial risks, businesses are vulnerable to less obvious threats. Are these threats on your risk radar? And do you rely solely on an insurance policy for your entire risk management solution?
Internal and external risks are part of any business. Exposures can be physical (property and people), legal (liability and compliance), social (corporate image and public relations), economic (marketplace and operations) or juridical (jury or judicial decisions). Your success is driven by your ability to identify and manage all of these exposures through an effective risk management program.
What is risk management?
The basic premise of risk management is protecting assets by identifying, analyzing and controlling exposures or risk. An exposure could be anything -- situation, practice, condition, activity or resource -- that might lead to loss and impact success.
How do you control exposure? You can start with the five elements of risk management.
1. Identification. You have to know a risk exists to manage it. Determine and categorize exposures through policy and procedure reviews, compliance reviews, physical inspections of property and operations, loss activity reviews, contract reviews and insurance policy analysis.
2. Analysis. Assess each identified exposure to determine the impact a loss could have. This will help you prioritize and make good decisions.
3. Control. Risk management is aimed at minimizing loss potential at the most efficient cost. There are more options than you may realize.
* Avoidance -- totally eliminating an activity and/or exposure. Examples include razing a dilapidated building or removing an element of a production process that could cause injury.
* Prevention -- reducing claim frequency. This could be removing an ignition source to prevent fire loss or implementing additional safety training.
* Reduction -- reducing severity of financial impact from losses that do occur. For example, you could install a fire wall or a sprinkler system to prevent the spread of fire.
* Segregation/separation/duplication of exposures -- reducing loss severity. This includes not relying on a single supplier for products, materials and services (segregation), utilizing warehouses in different locations (separation) and implementing data back-up procedures (duplication).
* Transfer -- contractual and/or physical transfer of risk. Consider hold-harmless agreements or using a common carrier for goods transportation.
4. Finance. A business must acquire funds to pay for potential losses. The most common source is an insurance transfer, which represents the acquisition of external funds.
An insurance transfer typically requires internal funding sources. However, insurance should never be viewed as a substitute for loss control or a sole means of risk management.
An alternative finance approach is the acquisition of external funds via a contractual agreement, such as using a hold-harmless and indemnification agreement to shift funding for losses to a third party.
5. Administration. Because exposures are constantly changing, risk management should be a continuous process. An effective risk management program includes developing and implementing policies and procedures, along with regular review and updates of the program.
Whether an organization employs a risk manager or simply adopts the basic risk management tenets, its success depends on the ability to identify and manage exposures. A good program addresses all risks associated with organizational activities -- past, present and future.
Ultimately, risk management is aimed at protecting an organization from financial harm. That includes the protection and enhancement of assets, people and corporate image.
Reach Steve Blankenship, manager, Underwriting Practices Group, at (330) 887-8417 or email@example.com. In business for more than 156 years, Westfield Insurance provides commercial and personal insurance services to customers in 17 states. Represented by leading independent insurance agencies, the product it offers is peace of mind, and its promise of protection is supported by a commitment to service excellence. For more information, visit www.westfieldinsurance.com.