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Work Comp, Liability, Business Income, Business Auto Insurance: Why is it so complicated? Business Insurance isn't just another line item on the balance sheet; it's a way of protecting assets, limiting liabilities, and creating peace of mind. The goal of

Last Build Date: Tue, 06 Mar 2018 09:47:36 +0000


What Your Agent Isn't Telling You About Your Tech E&O Insurance Policy

Tue, 17 Jun 2014 17:54:00 +0000

Everyone is wary of the small print of the insurance policy. The devil is in the details, right?Most general liability forms are standard and written by the Insurance Services Office (ISO), so even though they are wordy and in an insurance language the policies have at least been vetted by countless court cases, decisions, and attorneys over the last 50 years.However, Errors and Omissions (E & O) forms are all written by individual companies and each one is different.  The policiy forms are constantly changing to keep up with new technologies.  The internet only started around 30 years, Facebook started 10 years ago, now we have Snapchat and Tinder and who knows what is next. My point is that as soon as a company creates a form, it must rewrite the policy form in order to exclude new tech that they didn't foresee when they created the product.  These exclusions could be far reaching in their wording and exclude other things that you may assume were covered.I recently spoke to a technology insurance underwriter for the biggest tech carrier in the US. Besides going over the regularly included Tech E&O coverages such as:Denial of Service (DOS) attacksLosses from malicious hackersCopywrite or trademark infringementFailure to prevent disclosure of private informationFailure to prevent the introduction of malicious codeWe discussed at length one crucial coverage:Breach of ContractAccording to my source at the company, 92% of claims came from breach of contract. Breach of contract coverage, sometimes called breach of warranty or representation, provides protection for your software or website company if your customer sues you for a number of reasons, but the main categories are:NegligenceFailure to performMany major US carriers exclude breach of warranty all together or have additional exclusions that can strip coverage in the event of a claim.Exclusion for contractual liability - liabilities that you agree to by contract but may or may not have to do with the work you are specifically doingExclusion for breaches of contract that stem from a payment/fee disputeExclusion for any breach of warrantyNot only are you missing out on coverage if you lose the law suit, but many times the most expensive part is the attorney fees. If the claim is denied, then the company won't pay any money to defend you in court.Not having this coverage can cost you big money. For example, a recent claim involved a software developer who created a software to conduct risk modeling. The customer relied on the software in order to make financial decisions. The company went bankrupt and blamed the software company because the client's decisions were based on the software risk modeling.The claim expenses alone cost over a $1,000,000 and the payout in the end was over $4,000,000. - This claim scenario came from The Hartford (see disclaimer below)For a small software company, a lawsuit can bankrupt the company or force it to make hard decisions such as laying off workers that the company wouldn't have had to make if it had the correct coverage.Have you been involved in a tech related lawsuit related to breach of contract?I'd love to hear your comments.My Disclaimer - This post is not a substitute for professional legal advice. This post does not create an insurance agent-client relationship, nor is it a solicitation to offer legal/insurance advice. If you ignore this warning and convey confidential information in a private message or comment, there is no duty to keep that information confidential or forego representation adverse to your interests. Seek the advice of a licensed insurance agent in the appropriate jurisdiction before taking any action that may affect your rights. Hartford's Disclaimer - The scenarios summarized herein are offered only as examples. Coverage depends on the actual facts of each case and the terms, conditions, and exclusions of eachindividual policy. Please refer to the policy to determine all terms, conditions, exclusions and limitations of coverage. Coverage is provide[...]

Is filing a claim worth it if the value isn't that high?

Wed, 11 Dec 2013 16:50:00 +0000

Is filing a home or renters insurance claim worth it if the value isn't that high?  Items worth: ~$1500  Deductible: $1000A few questions to ask yourself:Could this turn into a larger claim down the line?Am I willing to pay a higher premium if I make this claim?If I'm not sure if I'm going to make a claim for $500, would I be better off at a $1,500 or $2,500 deductible?So here's the rub.  One claim isn't going to kill you and may not affect your premium at all.  You could lose any 'claims free discount' that some companies offer. If you have another big claim such as a water damage claim, you now have a severe claim and have a frequency of claims (2), so you may not qualify for the best rates anymore.  .  Also, keep in mind that many brokers will have to report your claim to the company even if you don't want them to because of the nature of their contractual relationship with the carrier.Prevention:Creating a spreadsheet along with when, where, and the cost of items is a great way to keep track of your household inventory.  There is also software that will do this for you and lets you scan in receipts and attach pictures (  By going room by room and listing everything, you will have a better case when speaking to adjustors.Schedule any heirlooms onto the policy with a specific agreed value.  Also, you can raise the limit for jewelry by endorsement.Also, here's 10 ways to discourage break-ins.This blog was a combination of two questions I answered on Quora.  See my answer and others here:Is it worth filing a stolen item claim against a home renters insurance when the value is not very highHow will my insurance company determine the value of my personal property after payoff after a fire[...]

4 Things to Think about Before Subleasing your Commercial Space

Tue, 05 Nov 2013 21:05:00 +0000

Why Subleasing Complicates Your LiabilityLeasing part of your space can be a great way to make a little extra money for space you are not using.  It helps pay the rent, complimentary businesses could lead to referrals, and it could lead to great personal or professional relationships.  However, you could be putting you and your business at risk.  Here are some liability points to consider:Your Landlord Doesn't Care if Its the Sub-lessors' Fault1. Your agreement between you and the landlord are between the land lord and you.  Unless the person subleasing is specifically named in the lease, the landlord is not responsible for any agreed terms to the subleased entity.Create your own lease (with help from legal counsel) between yourself and the tenant just as if you were the landlord.  Require in the lease that the sub-lessor has at least as much insurance as you have.  A waiver of subrogation saying that you are going to take care of your stuff and they are responsible for their stuff is a great standard clause to add.  Beware of subleasing - Picture by Josh UlfersYour Insurance Company Doesn't Care if its the Sub-Lessors' Fault2. You need to tell the insurance company that you are subleasing space.  The entity you sublease to should have its own insurance and name you as an Additional Insured.  By doing that you gain protection on the sub-lessors policy if the sub-lessor has a claim that is his fault.  Without the sub-lessor having his own policy, your insurance company could even deny a claim stemming from an action from your sub-lessor.Your Business Income Doesn't Include Rental Income3. Making $5,000/month from leasing part of your space?  If business income from renting isn't explicitly added to your policy, then you won't be paid for that income in case of a covered loss.  It's inexpensive, but often overlooked on most business owner policies. You Could be in Violation of your Lease4. Make sure that your lease doesn't have a clause that prohibits sub-leasing.  In most cases it is best to talk with your landlord before making any subleasing decisions.  Violating your lease could put you in jeopardy of eviction or hefty penalties.Talk to your landlord, commercial real estate broker, and your insurance agent before making any subleasing arrangements.This blog article is not a substitute for professional legal advice. This answer does not create an insurance agent-client relationship, nor is it a solicitation to offer legal/insurance advice. If you ignore this warning and convey confidential information in a private message or comment, there is no duty to keep that information confidential or forego representation adverse to your interests. Seek the advice of a licensed insurance agent in the appropriate jurisdiction before taking any action that may affect your rights.  [...]

Is Data Breach Covered Under My Tech E&O Policy?

Tue, 21 May 2013 22:08:00 +0000

Is Data Breach Covered Under My Tech Errors and Omissions Policy?So you are the proud owner of a brand new technology errors and omissions policy. You are so excited that most of your professional services are covered and that you can go into every new contract confidently knowing that if something goes wrong and your software or app glitches that you'll be covered.  Then you stop to ask yourself: Data Breach can happen to any company.  Are you covered?What if my customer's data gets hacked or stolen? There are two answers for this question.  You need to know the difference, so you don't end up owing thousands of dollars for something you could have prevented.Answer 1:Yes, you are covered! On most technology E and O forms, the data you work with in order to perform your professional service would be covered in case it was hacked, stolen, or destroyed. For example, a software company that creates a database system for medical records may need access to the files in order to create the enterprise software.  While creating the software, the main software programmer's laptop is stolen along with access to 1000s of his client's medical records.  Because the programmer was performing a professional service, it would covered.Answer 2:No, you are NOT covered!If you keep digital or paper records of customer's credit cards and company information and your company's computers get hacked and that information is stolen, there is no coverage under the technology E and O form.I could write an entire post on data breach, but here are a few of your responsibilities:You would be responsible in notifying every customer that could have lost data (PR Nightmare)Offer to monitor credit for at least a yearValidating addressesHiring a data breach response companyIf not done in 30-45 days there can be hefty fines and penaltiesHere's a guide for data breaches from Experian: The difference is that the information is not being stored as part of your professional service.So, where can you get coverage for customers' sensitive information?You need to buy a separate data breach policy or add data breach coverage to your general liability.  If you buy a combo general liability/tech E and O package policy, you most likely have the option to add this coverage.  One insurance company that does a great job of this is The Hartford (, this coverage only costs an additional $400-$1,000 per year, but can save you a lot in the back end if there is ever a breach. According to the cited Experian article above, 76% of companies who had experienced a breach of customer data believed the incident had a moderate or significant impact on the organization’s reputation.   Make sure you can bounce back quickly and effectively if you ever have a breach.Besides insurance, what are ways you safe guard your customers' sensitive data?  [...]

What Insurance Should a Technology Start-Up Consider?

Thu, 17 Jan 2013 22:09:00 +0000

Is your tech company protected properly?At different stages of the Start-Up process, you may want to consider different policies. In the beginning stages you may want to pick one or two of the following policies because of limited resources. Once you procure funding and are trying to attract the best of the best, you may want to purchase all of the policies below.Here are the policies you may want to consider in no particular order:•Technology Errors & Omissions (Tech E&O) – Insurance for failures in your technology service that could cause customers damages. Tech E&O is most likely your most important policy because most everything you do would be considered a professional service and is excluded from the General Liability policy.•Data Breach/Privacy Coverage – In case you lose sensitive employee or customer data, this policy pays to notify, monitor credit, and anything else you need to do in case of a breach.•Media Coverage – If you are doing any kind of media/social networking. Some of these coverages are added automatically to the Personal & Advertising injury section of the General Liability policy, but are explicitly excluded for companies with a media focus. Examples of these exposures include: unintentional copyright violations, libel, slander, etc.•International Coverage – If you have operations outside the coverage area (US, US Territories, and Canada)•General Liability Coverage – This is your most basic insurance that most contracts will require: covers basic trip and fall. You can also add supplementary auto coverage for rented and non-owned (including employee) vehicles. If you have company vehicles, you should consider purchasing a Business Auto Policy.•Property – Cover your computers, servers, tenant improvements. In addition, business income is added to this policy; look for coverage including business income for Denial Of Service attacks, etc.•Directors & Officers – Insurance if you have investors or stakeholders. Directors and Officers can be held personally liable for decisions of the company, so this coverage can be crucial in securing high profile board members.•Disability – Insurance for the owners if they are in an accident and no longer able to work.•Key Man Life – Insurance policy in case something happens to your partner. Both partners buy life insurance policies on each other, so they can buy out the partner’s share. This way you avoid becoming partners with that person’s significant other.•Health Insurance – Great way to keep your employees on board and attract great talent.•Workers’ Compensation – Mandated by CA state law even if you just have one part time employee. Good news is that rates for most technology workers are very inexpensive.•Employee Practices Liability – Protect yourself from employment related lawsuits: wage & hour, wrongful termination, discrimination, etc.Some of these policies are offered in packages, while others are sold separately. Most large companies that contract smaller technology services companies will require you to have General Liability, Technology E&O, Workers’ Compensation, and Business Auto.Talk to an independent agent to see which of these coverages would be a best fit for your business.This article was originally published on the Co-Merge website on Jan 11, 2013.  [...]

Protecting Your Business With The Right Kind of Insurance

Fri, 30 Nov 2012 17:22:00 +0000

If there’s one thing you can do as a business owner to minimize the sleepless nights, it’s ensuring you've got the right level of insurance. Nobody likes to think all their hard work might go up in smoke or be washed away in a flood. Unfortunately, it can and does happen. Choosing the right insurance cover will allow you to pick up the pieces and resume operations with minimal financial loss and disruption to business should such an event occur. There are a few simple ways you can work out what kind of insurance is right for your business. Ask yourself the following questions: What is the most catastrophic event that could befall my business? What is the most likely adverse event we’re likely to encounter? Each business has its own inherent risks.  Don't roll the dice when it comes to your business. The answers will be very different according to what kind of business you run and where you’re located. If you sell outdoor furniture, the worst case scenario may be all of your merchandise getting destroyed in a warehouse fire. You’ll definitely want Property Coverage, which insures you against damage to buildings, contents and stock caused by fire and other perils. Conversely, if your run a website design business based in a small office space, you may find Property Coverage less critical. What you willneed is Computers and Electronic Coverage, which insures you against theft, accidental damage, breakdown, fire, and business interruption.This was a guest blog from Belinda J Darling. To learn more about how you can protect your business with the right insurance coverage, contact the experts at [...]

Worker's Compensation Decreasing Rates: Is this Good for Employers?

Sat, 06 Oct 2012 18:55:00 +0000

Worker's Compensation Increases:I wrote this article about how to reduce your workers' comp insurance costs on my company's blog last week based on the report that workers' comp rates were set to increase at least 7% based on new legislation and company projections.
Employers will have less choices for workers' compensation 

Since then, there have been some more news on workers' comp where State Fund, CA's largest insurance company for workers' comp, has said that they will lower rates by 7%.  This sounds like good news to most business owners on the surface, but insurers lower rates are motivated by many factors.  See Insurance Journal's article: Calif. State Fund Board: Drop Rates 7%

As the CA workers' comp market begins to tighten, the State Fund is putting itself in the position to gain more market share in a shrinking market.  When an insurance market tightens it means that consumers will face higher rates, less discounts, tougher underwriting, and less choices of companies.  These market conditions are good for companies such as State Fund because they can entertain many risks that other private insurers will not be able to contemplate.

Lowering rates may force other private companies out of the workers' comp market because they will choose not to compete where they can't make a profit.  This is bad for the business owner because it will mean higher overall costs.   

The State Fund decreased rates will start January 1, but not all class codes renewals and will most likely not be in affect till second quarter of 2013.

'via Blog this'

Report: Higher-Priced Drugs Added $2.1B to 2011 Workers' Comp Pharmacy Costs

Wed, 18 Apr 2012 23:47:00 +0000

Who is paying for these drugs?When the insurance company foots the bill, some people tend to treat themselves to higher cost medicine.  If the insurance company is paying, why not get the name brand?  I'm not blaming people for going for the higher cost meds because it is human nature to perceive a better quality from a higher priced product.  The consumer needs to realize though that the system can't sustain such high prices without them being passed on to the consumer.Employers must pay the premiums for workers' comp, but when people take advantage of the system, we all pay for it.  It might result in higher medical insurance costs, higher prices to make up for business owners' increased over head, and higher prices for over the counter and prescription drugs. Take a look at some of these statistics from a study highlighted in the Claims Journal's article below:$2 billion of waste resulting from use of higher-cost medications when therapeutically equivalent, lower-cost alternatives are available.$107 million of waste through use of out-of-network pharmacies and third-party billing.$40 million of waste from use of higher-cost delivery channels such as retail pharmacies instead of home delivery for long-term medications used by injured workers.Its in all our best interests (insurance companies included) to keep workers' comp premiums down.  Hopefully, we can find a way to curtail useless spending and price gouging by pharmaceutical companies.To read the full article, click the link below:Report: Higher-Priced Drugs Added $2.1B to 2011 Workers' Comp Pharmacy Costs: 'via Blog this'[...]

Insurance Implications of a Double or Triple Net Lease

Fri, 13 Apr 2012 23:28:00 +0000

You've saved up your pennies and invested in a commercial building.  You find a nice tenant and start leasing the space.  You decide to do a triple net lease to keep your overhead down.  Photo by Margan Zajowicz Why that wasn't such a good idea:This is one of your biggest assets, wouldn't you want to make sure it's covered properly?  Tenants don't have skin in the game when it comes to your building and are going to do the least possible to adhere to your requirements.  They are already paying you rent and see the insurance as an additional cost.Your tenant could forget to pay the premium and you could be on vacation when the warning of cancellation comes in the mail.  The policy cancels, there's a fire, and you don't have coverage. Photo by  Alex Patru   Crimes committed by the named insured (your tenant) are excluded.  For instance, your tenant could purposely burn down the building (commit arson) and the insurance company would deny the claim.  Yes, this would be the worst case scenario, but a disgruntled tenant who vandalizes your building would also leave you with uncovered property damage.Please consider the three points above when insuring your commercial property.  Disclaimer:This blog post is not a substitute for professional legal advice. This blog does not create an insurance agent-client relationship, nor is it a solicitation to offer legal/insurance advice. Seek the advice of a licensed insurance agent in the appropriate jurisdiction before taking any action that may affect your rights.  [...]

Disability Insurance Vs. Workers' Compensation

Thu, 05 Apr 2012 23:25:00 +0000

I have often been asked by business owners:  Instead of getting a disability policy, can't I just add myself onto my workers' compensation policy?While it is possible to add yourself onto a workers' compensation policy, the benefits are not the same as a disability policy.Was this paper cut work related?  Here are some of the similarities:Both may pay medical bills if you are hurtBoth may pay disability and lost wagesBoth may pay a portion of your lost incomeBoth will cost you based on your current incomeHere are some differences:Workers' Compensation only pays for on-the-job injuriesWorkers' Compensation will only pay at most 2/3 of your stated incomeWorkers' Compensation may only pay based on your stated payroll (even if you take a draw or have other forms of compensation)Workers' Compensation is based on the rate for your specific class code and you pay per $100 of payroll.  Disability is based on many factors.When does it make sense to add yourself to your workers' compensation?If you can't qualify or afford disability insuranceIf you are in a 'low risk' field such as computer programming and the rate per $100 is relatively affordable.  As an additional protection in case you get hurt on-the-jobIf you have an abnormally high deductible for your health insuranceIf you are prone to accidentsIf you are truly worried about losing your income from getting hurt then nothing will suffice for a good disability policy.  Many people buy life insurance and feel like they have taken care of their family, but if have a bad accident and you don't die then your family can't collect.  Don't forget that not all disability policies are created equal either.  Make sure to read the small print because in some policies you may not be able to collect if you are able to do any other job.  If you are a doctor, you aren't going to like it if the company stops paying because you can get a job as a barrista.  Please note:When employers make workers' compensation claims against themselves, it's a red flag for claims adjusters.  This is because it is easier for an employer to exaggerate a claim than an employee, so be ready to defend any over the top expenses for your medical treatment.  Disclaimer:This answer is not a substitute for professional legal advice. This answer does not create an insurance agent-client relationship, nor is it a solicitation to offer legal/insurance advice. If you ignore this warning and convey confidential information in a private message or comment, there is no duty to keep that information confidential or forego representation adverse to your interests. Seek the advice of a licensed insurance agent in the appropriate jurisdiction before taking any action that may affect your rights.  [...]

Wed, 30 Nov 2011 23:29:00 +0000

How to Save Money on Insurance For Start-UpsThe biggest mistake start-ups make is being too optimistic.  Of course, you wrote in your business plan that demonstrates to your investors that you are going to make $1,000,000 in the first year and turn a profit by year three, but that's not what you should be telling your insurance agent.  As a start-up, cash will make or break your business. CASH IS KING.  You will often have to accept 60-90 terms to get orders, your vendors (and insurance company) will want cash upfront.  Here are a few tips to keep your insurance overhead as low as possible so you can turn your start-up into the business of your dreams:Since its first store opening in 2005, Pinkberry has nearly 100 locations throughout the United States, Mexico and the Middle East...(11/30/2011: Pinkberry Website)Be Conservative on Sales and Payroll EstimatesYou don't know how much you are going to make the first year.  Your numbers are based on estimated sales based on estimated customers based on research and industry benchmarks.  Insurance policies are generally based on either annual sales or payroll, so the higher you estimate the larger monthly bill you are going to have during that crucial first year.   How conservative should you be?  It really depends on your business.  After the first year the insurance company will do a review (nice way of saying audit) with you and will adjust the yearly premium based on your actual sales or payroll.  Go here for a great FAQ on audits.  If you estimated sales of $50,000 per year and you end up doing that in the first quarter, you need to call your agent to adjust the policy so the payments will be spread more evenly.  The last thing you want is to estimate a super low sales or payroll figure, have a great year and have an extremely large bill when the insurance company audits you.  The idea here is to increase cash flow and lower overhead.  Look at all your options with your independent agent when starting an insurance policy.  Keep in mind that your personal assets could be at risk even if you incorporate, so price shouldn't be the only factor in choosing your policy.  Don't know where to start?  Check out this blog post: Insurance 101 for New Business.[...]

What Insurance Does a Dental Office Need?

Thu, 10 Nov 2011 21:58:00 +0000

I love to work with clients that truly are interested in protecting their business from unforeseen losses.  I can’t say that I have a favorite client, but one that comes to mind is Dr. Solomon Cantwell DMD .  He is a dentist that is truly dedicated to his customers, his staff, and the growth of his practice.  He is committed to keeping up to date with the latest dental technology and making his customers comfortable. Solomon and Joe in front of the dental office after talking business insurance.Business Owners Policy and Workers' CompI have worked with him to make sure his equipment, liability, and building are all covered properly on his business owners’ policy.  In addition, we worked together to make sure that his employees had the proper coverage in case they were hurt on the job. Employee Practices Insurancee (Sexual Harassment Insurance/Wrongful Termination)We also went over the advantages of two other types of coverage including Employee Practice Liability Insurance (EPLI) and Data Breach Insurance.  EPLI is a coverage that is put in place in case an employee sues for wrongful termination, sexual harassment, or wage disputes.  It’s an important coverage that is often overlooked by many business owners because they don’t know about it or their agent never offered it.  There are actually more EPLI claims per year than General Liability claims per year in California.  Data BreachThe Data Breach Insurance coverage is a relatively new coverage that was created in order to pay damages caused by loss of client information due to a breach in security (online or offline).  Most data breach policies cover: notifying your customers of the breach, paying an organization to monitor clients’ credit, repairing damaged PR, and even paying government fines for non-compliance.   Take a look at California's penal code relating to a breach.MalpracticeMalpractice is for mistakes that the dentist makes when working on a patient.  An example would be doing a root canal on the wrong tooth.  Most dentists already have this coverage when we start working because it is often a requirement for working as a dentist, but there are many programs that can offer malpractice at competitive rates.  [...]

Sizzling Insurance Tips for Restaurants and Bars

Wed, 15 Jun 2011 23:39:00 +0000

What kind of insurance do restaurants need?Restaurants have unique risks that create some interesting exposures.  Depending on the size and services a restaurant may offer, there are different insurance products that the restaurant may consider purchasing. General LiabilityIf a customer trips and falls or even if a customer spills hot coffee on herself (review of famous McDonald's case here); liability insurance would pay for such a claim.  Other claims include: choking, food poisoning, burns, etc.Quick savings tip: To save on restaurant liability insurance, it's possible to find companies that rate on square footage instead of sales.  If you are a smaller restaurant that has a high volume of sales, then you could be paying too much.Don't let restaurant insurance upset your stomachProperty InsuranceThis is insurance for your equipment, improvements, and building if you own it.  If you are a tenant, then you need to review your lease to see what you are responsible for in case of a loss.  For example, maybe the last tenant installed a kitchen, but the lease may still state that the only thing the owner is responsible for is the four outside walls. If there is a total loss, you will have to pay to create an entirely new kitchen. Quick savings tip: It is often less expensive to rate tenant improvements and restaurant equipment (anything bolted down) separately from business personal property.  That way you get the building rate instead of the rate for the things that can be stolen easily.Business Income  If your restaurant has to shut down due to a fire or a covered loss, you need this coverage to cover your costs and to pay you what you would have made (minus expenses that you don't incur during the loss such as payroll).  It's important to have at least 12 months coverage, but 18 or 24 months is ideal.  In case of a total loss, you may need to wait for building permits, construction delays, and negotiations with the insurance companies to be settled.  For more info on this business interruption, see this blog I wrote on it.Quick tip:  Watch out for long delays in getting paid.  Often policies will include a 72 hour waiting period before this coverage can take affect.  Can you afford to lose three days of business?  What if that's a Friday or Saturday night?Workers' CompensationThis coverage is mandated by California law, meaning you have to buy it even if you only have one employee.  The premium is a percentage of total payroll.  Restaurant premiums are currently between 2% - 6% based on the size, loss experience, and other discount factors.  Click here for more information on workers' comp.Quick savings tip: In California tips are excluded from workers' compensation, so make sure you don't add them to your payroll report.Stay tuned for my next blog that will highlight some more advanced coverage for restaurants.  Here are some examples of some other coverages that restaurants should think about including: sexual harassment, assault and battery, delivery driver coverage, and more.[...]

How Insurance Helps Keep Your Business Going

Wed, 27 Apr 2011 19:27:00 +0000

Disability is important to many companies, especially one where the business owner is the main money maker. For example, a dentist or a doctor both may lose their practices if they were sick for six months. Many owners mistake Workers' Comp as a viable replacement, but workers' comp is only for on the job injuries or sicknesses.

If you come down with cancer and its not work related, then there is no coverage. under workers' comp. In addition, claims where an owner claims workers' comp against himself are looked at in greater scrutiny because there is more of a chance of fraud. Also, workers' comp only pays about 2/3 the wage you pay yourself. Many owners will pay themselves a low wage, but get most of their income from draws from company profits. Those draws won't be considered as part of the wage.

In addition, going without key coverages like workers' comp and liability insurance is a good way to get shut down as well. Workers' Comp is mandated by the state if you have employees, but many business owners tend to go with out it. If one is caught without it, your business could get shut down until you can prove you have it. Also, there is a fine for $1,000 per employee up to $100K.

Without the proper liability coverage, you can get sued once and lose everything on just paying legal bills. Insurance is the first defense from lawsuits. Even if you have an LLC to protect your personal assets, if the business is your main stream of income you could end up losing everything anyway.

Lastly, business income is a great way of protecting your company in case of a covered loss. Business Income is an important coverage that every company should have that can pay your lease, expenses, overhead, and even key employees in some cases. See my blog on business income for more information.

Make Sure Your Protective Systems Are Operational, or You May Get Hosed

Fri, 19 Nov 2010 18:15:00 +0000

Many policies have an endorsement that is placed on the policy if you claim that you have a protective safeguard i.e. alarm, fire sprinklers, etc. The protective safeguard endorsement is way a company can deny your claim.

For example, a company states on its application that it has a fire suppressant sprinkler system. The owner benefits by having a discount on his policy. Unfortunately, the system broke down and the owner didn't have the time or money to make the repairs. The owner never got around to telling the agent or the insurance company that the system wasn't working.

A few months went by and a tenant left a burning cigarette in a community trash can that started a fire. The owner is relieved that he has insurance for the $150,000 in damages. The insurance company finds that for a number of months the fire suppressant sprinklers were out and to the owners dismay, deny the claim.

The owner now must pay for the repairs and will get no payment for loss of rents.

Even if you don't own a building, this could apply to your office or even your home.
There is a similar endorsement that has to do with theft and burglary alarms.

Is your alarm armed every time you leave your office or house? Are you doing quarterly maintenance on your fire alarm systems? Are fire extinguishers tested? Are batteries replaced?

The company is giving a discount due to your protective safeguards, but if your system isn't operational then your claim could be denied. Make sure to ask your agent if you have this endorsement on your policy.

This is how the actual form on The Hartford policy reads.

We will not pay for loss or damage cause by or resulting from fire, if, prior to the fire, you:

a. Knew of any suspension or impairment of any protective system so described in the property choice - schedule of premises and Coverages and failed to notify us of that fact; or

b. Failed to maintain any protective safeguard so described in the Property Choice - Schedule of Premises and Coverages, and over which you had control, in complete working order.

If part of an Automatic Sprinkler System is shut off due to breakage, leakage, freezing conditions or opening of sprinkler heads, notification to us will not be necessary if you can restore full protection within 48 hours." - Hartford Form PC 40 01 01 09

Insurance 101 for a New Business

Tue, 05 Oct 2010 20:15:00 +0000

Insurance is there to get you back where you were in case of an accident. In this litigious society, insurance is your first layer of protection against a law suit arising from an unforeseen accident. There are many types of insurance. Depending on your business you may need one or more policies.

General Liability - This is sometimes called the “trip and fall” policy because it is for third party claims when some one is injured. A third party is anyone that is not involved in the company including customers and the general public.

This covers your business, your work, and your even products after the products are in your customers hands.

Generally, the first time a business gets insurance is because a vendor or a landlord is requiring it. The standard requirements
$1,000,000 per Occurrence
$2,000,000 General Aggregate
In English this means: $1,000,000 per accident and $2,000,000 per year.

One should ask to get the insurance requirements in writing, so you can make sure you fulfill all of them. Many times these requirements are written into the lease or contract in its own section. Give this information to your insurance agent so he can get you the correct coverage to fulfill your lease

Workers’ Compensation - This is the second most common policy as it is mandated by the State of California and most other states to any company with employees. If an employee gets hurt during the course of work, workers’ compensation pays for the workers’ injuries and lost wages.

Without workers’ compensation the employer can become personally liable for employees injuries. In addition, the Department of Industrial Relations can put a stop order on your business and fine you $1,000 per employee.

Professional Liability – This is an important coverage if you are a consulting or giving professional advice. This is also known as Errors & Omissions insurance and Malpractice in the medical field. Consultants, technology professionals, lawyers, accountants, bookkeepers, and other professionals should all carry this protection.

Make sure that you understand the insurance you are buying before signing anything. An insurance policy is a contract and may require you to have certain protections in place in order for you to be covered. Make sure to discuss with your agent your specific needs based on your specific risks in addition to contract requirements from your vendors.

General Liability is Not Enough

Thu, 12 Nov 2009 21:25:00 +0000

It happened without warning …
Everything went smoothly with the release of your latest software upgrade. Or so you thought. Soon after, customers complain that their computers crash when they install your product. To make matters worse, they sue your company for hundreds of thousands of dollars. The damage to your company’s reputation is bad enough. But your product liability insurance does not cover losses arising from faulty software or programming. How will you pay attorneys fees and damages to your customers?
(Hartford Brochure 2009: A Hands-On Approach to Insuring Innovation)

I never make mistakes...
An accountant audited financial statements which were relied upon by the creditors of 3 plumbing companies. The creditors lent $65,000,000 to the Insured’s client. The plumbing companies defaulted on the loans and fled for bankruptcy. The accountant’s audit procedures did not comply with GAAP. Cost to defendant: $4,175,000
(Philadelphia Brochure 2009: Claim Scenarios, Accountants Professional Liability)

Is General Liability enough?

The answer to that question depends on what business you are in and the services you provide.

Questions you should be asking yourself:
  • Do I offer a professional service?
  • Am I giving advice in addition to selling a service or product?
  • Am I doing any designing?
  • Could a glitch or error in my services cause my client a loss?

If you answered yes to one or more of these questions, then you need to look into Professional Liability or Errors and Omissions insurance. General Liability policies have an exclusion for professional services meaning that if someone sues you for something you advised them to do, then you are on the hook for legal fees, settlements, and protecting your good name.

Examples of people that need Professional Liability:

  • Doctors & Lawyers
  • Consultants & Inspectors
  • Web developers, software engineers
  • Technology Consultants
  • Insurance Agents
  • Real Estate Agents
  • Accountants, CPAs, Bookkeepers
  • Engineers, architects, landscape designers

Ways to protect yourself:

  • Have your contracts with clients reviewed by your attorney
  • Back up all data on a redundant server
  • Purchase a Professional Liability policy for your service

Things to look for in a Professional Liability policy:

  • Is defense inside or outside the limits? Often times legal fees can eat up most of the limits and you may not have enough money left in the policy if there is a settlement. When defense is outside the limits, you will have your entire limit to pay a settlement.
  • Does your policy exclude bodily injury? Some policies will exclude claims if someone gets hurt from something you advised. Example: An tree consultant may say a tree is healthy, then it falls on someone.
  • More exclusions. Make sure you are reading the small print and you address your concerns before binding the policy. Companies may change the wording in a policy if it means attaining your business.

Talk to your agent to see if you are covered correctly.

Business Income, do you have it?

Thu, 03 Sep 2009 21:54:00 +0000

(image) If a fire or other covered loss damages your building enough that you have to stop doing business, how are you going to recover from the lost income? How are you going to pay your key employees, so they don't go to the competition? How will you pay your fixed expenses like your loans, mortgages, and leases?

Business Income provides money for lost income due to a loss. Many companies overlook this coverage as an "extra" when this is one of the most important coverages.

Things to consider if you have a total loss and have to rebuild:

  • The time it takes to settle with the insurance company (0-3 months)
  • How long it will take to get permits to rebuild (6-12 months)
  • The actual time of construction, including delays (6-24 months)
Total time can be from 12-39 months before you are back in business. Most business owners policies offer around 12 months. Other property packages may leave off this coverage in order to show a cheaper overall price.

Make sure that you have a good amount of coverage in this area if you depend on your place of business to create your income. Look at the average time to get a permit in your area as well as the actual time of construction.

Other things to consider:

  • Waiting period - When something happens to your income, you want to be compensated from the moment. Make sure there is no waiting period, this is worth the extra few bucks.

  • Choose "Actual Loss Sustained" instead of a set number or percentage of income. This way you get reimbursed all your expenses throughout the period of the loss.

  • Dependent Properties - Are you subcontracting your production to a local factory. What if they have a loss and you don't have an alternative supplier? What if the store next door burns down, but passage to your store is blocked?

  • Extra Expense - This coverage will pay you the difference between the income after the loss and before the loss. It may take you 6 months to a year to get back to your prior income.

  • Make sure your books and sales figures are accurate. If you are used to making overly conservative estimates on your sales figures in order to pay a cheaper premium, this may come back to bite you. Business income is often based on a percentage of sales.

Photo Credit & Caption: Firemen standing at the burnt out shell of the Harley Davidson business in Blacktown.Photo: Dallas Kilponen

Welcome to my Insurance Blog

Fri, 08 May 2009 21:53:00 +0000

Thank you for coming to my blog. I have created this blog in order to provide important tips and information regarding insurance to you the consumer.

Insurance is complicated and many times insurance buyers only look at the final price when making their decision. The amount of coverage, exclusions of a policy, strength of the company and the little extras that an experienced and well trained agent offers can make an enormous difference in the case of a loss. I hope that you find that this information helpful.