Insurance Planning

Business Insurance Planning

•We provide complete business planning services ranging from property Insurance programs to disability, life, hospitalization, and long term care programs. We not only design Insurance protection plans tailored for each individual business to protect what is already built, but also develop Insurance programs that strengthen businesses through providing employee benefit and group programs. It is through this unique combination of skills that we have become a valuable resource for business owners and managers.

•We offer a full line of business planning solutions to protect businesses from catastrophic loss ranging from unexpected casualty loss to death or disability of a key employee. We help identify uncovered risks that can or have crippled other similar businesses and propose solutions to eliminating those risks, allowing businesses to concentrate on growth without unnecessary worry.

•We design business Insurance plans to strengthen employee relationships though employee benefit programs. We also design benefits and programs for business owners, such as Buy/Sell Continuation Planning, and Business Estate Planning.

INTRODUCTION

Business insurance is a complex subject, as diverse as business itself. Selecting an agent or broker experienced in business exposures and the commercial insurance market is extremely important. Interview several agents and ask for references. When shopping for coverages, get several quotes or proposals and have these in writing from a reputable Insurance Broker.

Contractual agreements that enable your business to operate, such as leases, merchandising, and finance contacts, may obligate you to insure beyond your immediate concern. Review them, if possible, with your agent.

As you shop for your insurance you will see special terms and concepts unique to business insurance. Ask your agent to explain anything you are not familiar with. Be sure you understand how your insurance premium will be calculated. It may be square feet area, or more frequently payroll or sales income.

Policy periods are generally yearly. Payment is due when coverage starts or as agreed upon. Premium financing is usually available, but be aware of the interest rate you will be paying, as well as the authority given to the financing organization and how any disruption in your payments will affect your coverage.

WORKERS COMPENSATION INSURANCE

An employee who has suffered an injury or illness resulting from employment is entitled to workers' compensation benefits provided at the employer's expense. Pennsylvania requires that every employer in Pennsylvania either buy workers' compensation insurance approved by the Pennsylvania Workers Compensation Bureay. Failure of an employer to secure Workers Compensation Coverage may result in imposition of both civil and criminal penalties! Because of the complex requirements and considerations with this insurance, it is recommended that business owners refer to Worker's Compensation guidelines available from the Department of Insurance.

COMMERCIAL AUTO

Commercial auto insurance largely contrasted from private auto insurance. For example, whenever your company or employees transport a client or move property by a motor vehicle, you should have full understanding of how your commercial auto insurance will work. Also, how will "non-owned" autos, newly acquired vehicles, or changes in drivers affect your coverage.

PROPERTY INSURANCE

Business insurance may cover property of all types that you own or is in your "care, custody, and control". It may be buildings, improvements, equipment, inventory, goods in transit, earnings, etc. Your contractual obligations may also require you to protect other people's property as well.

Coverages

Property coverage is addressed from two sides of the same idea. "Named Perils" names each peril to be insured against; such as fire, explosion, aircraft damage, windstorm, etc. Other perils may be added along the way. "All Risk" starts from the other side, assuming all perils are covered except those named in the "Exclusions" of the policy. Obviously, the exclusions are an important part of the All Risk policy. Perils often excluded are: theft, flood, and earthquake. Since the All Risk policy affords better protection, it is more expensive to purchase than the Named Perils policy. The difference between Named Perils and All Risk is a typical example of the kind of thinking and interpretation you must apply to understanding how your insurance policy will cover your business. Remember, your agent is instrumental to help you in understanding your coverages.

Insurance of property is based on its value, however that may be derived. There are "co-insurance" penalties for failing to insure to value. These penalties will be applied to any loss adjustment. Determination of value is also important for calculating the premium and compensating for a loss. Some terms often used are: "actual cash value" meaning market or depreciated value, "replacement cost", "selling price" for unsold inventory, and the many coverages of "business interruption".

Claims

Because of deductibles, dollar limits you agree to absorb in the event of a loss, and other ways of sharing the burden of coverage, you should be prepared for how the insurer will handle a claim. Large deductibles, although they afford a reduction in premium, can have a critical effect on your cash flow if you are operating on and have access to very little capital. Also, you cannot rely on insurance to always or completely cover your losses. A frequency of claims will have a definite and sometimes harsh effect on the insurer's willingness to continue to insure your business. Although business-owners generally purchase replacement cost coverage, insurers often limit their initial compensation payment for loss to actual cash value until such time as the owner has replaced the items lost. The policy, itself, will define the time-frame to start the process of replacing items, generally six months. This method of handling claims is prevalent and you should be prepared to make up whatever difference between the value of your loss and what the company legitimately pays. Obviously the best preparation includes taking necessary measures to minimize or eliminate losses in those areas where you have control.

LIABILITY INSURANCE

Good business practice dictates that you take adequate measures to protect other people and/or their property against any damage your company and/or its property may cause. This is the coverage afforded by business liability insurance. It may be required by government statute or by the threat of litigation.

Coverages Major types of business liability insurance you should be familiar with are: premises/operations, lessor's risk, contractual, products/completed operations, personal injury, non-owned auto, and professional liability. Discuss these thoroughly with your agent to determine appropriateness and limits for adequate protection.

Limits

Limits of liability are the maximum amount of the money the policy will pay on a single loss. They are generally set somewhere in relation to your assets, as your interest in compensating others diminishes once that compensation has exceeded your resources. Limits may be expressed as a single figure in a "combined single limit" or "split limits" which specify one amount for bodily injury and another for property damage.

Claims

Knowing whether claims are paid on a "per occurrence" or a "claims made" basis can mean the difference between a covered claim and no coverage. Ask your agent to explain these terms and find out how claims will be handled for your particular policies.

Premiums

Different exposures generate premium in different ways. Offices are one kind of exposure, factories with blast furnaces are another. Some factors that determine premium are: square footage, payroll, sales, expenses for independent contractors, number of employees, etc. You should know how your premium is derived. You should also be aware of how much you are committing to deposit premiums and what effect audits and changes in your business activities will have on your premium. Where possible, get complete explanations of premium terms and coverages in writing.

SMALL BUSINESS & COMMERCIAL INSURANCE

Operating a business is difficult enough without having to be concerned about suffering significant financial loss, or worse, due to unforeseen events occurring. Insurance is to protect against loss of your investment and financial impairment to your business. Some of the most commonly asked questions regarding commercial insurance are discussed below:

Q. How do I go about obtaining business insurance?
A. The first step in obtaining proper business insurance is to find and contact a reliable insurance agent or broker. Business contacts can often refer you to someone that they have had good experience with. When looking through the yellow pages, look for specialization in commercial insurance, and membership in one of the professional agents or brokers associations. When dealing with the agent initially, they should do their own analysis or survey of your exposures, and then ask to review any present coverages. To do otherwise could perpetuate any errors, gaps or overlaps that may exist in your present program.

Q. What kind of insurance do I need?
A. There are six broad areas of exposure:

• Property
• Time Element
• Crime
• Automobile
• Liability
• Workers' Compensation

Not every business will have exposures in every area, which is why an analysis must be done. The State requires Workers' Compensation insurance if there are any employees. Various governmental agencies may require certain types of insurance. For example, the Contractors State License Board may require bonds for contractors, and the Public Utilities Commission may require Commercial Automobile insurance. Many other insurance types are a business decision on your part. However, contracts you may enter into, such as leases, loans, etc., may contain, insurance requirements you have to comply with, and of which you should be aware.

Q. Can any exposures be reduced or eliminated?
A. You can order an inspection by a Loss Control Engineer to uncover hazardous conditions. Recommendations from this report can benefit you by helping to reduce premiums and making your business more attractive to insurers.

Q. What are some of the specific exposures and how are they covered?
A. Following is a table of common exposures and appropriate coverages:

Q. In Commercial Insurance, are there policies that provide or combine the various kinds of coverages like a Homeowners policy does with personal insurance?
A. Yes there are various "package" policies available. Programs such as the Business Owners Policy (BOP), Special Multi Peril (SMP) and insurance company designed packages are constantly being marketed. Many insurers design packages to meet specialized needs. Such as Auto Garages, Auto Dealers, Jewelers, Furriers, Barbers and Beauty Salons, and Apartment Buildings. Competent Commercial Agents and Brokers are prepared to offer these programs.

Q. Can I obtain Earthquake insurance for a business?
A. The insurance companies are not required to offer earthquake insurance on commercial property. The availability is therefore determined by the market place and individual company underwriting decisions. Here again, the agent can do the searching for you.

Q. How much does business insurance cost?
A. Your cost will be unique to your exposure; that is, it will be similar risks insured by the same company, but since this is a competitive market, different companies will have different premiums. You should know the basis for the premiums. Property insurance premiums are based on a rate per $100 coverage. Factors that go into making the rate are construction of building, occupancy and use, public protection, neighboring exposures and internal protection, such as sprinklers, etc.

The premium basis for liability insurance depends on the type of business. Stores and manufacturing are based on gross sales. Contracting and service businesses are based on payroll. Apartments are based on the number of units, hotels, on gross sales, and office space and property owned and leased to others are based on square footage area.

Anything based on sales or payroll is auditable and can result in additional or return premium. Companies have minimum and deposit premium requirements, which can and do vary, and should be considered when shopping.

Q. How can I find out about insurance companies that are presented to me?
A: First, ask the agent for background on the company. Then call the Department of Insurance Hotline to find out status in Pennsylvania, how long in the state etc. You may then want to go to the library and obtain detailed financial information and ratings by reviewing rating service reports published by A.M. Best, Standard & Poor’s, Moody’s or other rating services.

Q. After I agree to purchase insurance, complete the applications and pay money, how do I know I have insurance?
A. You should be given a "binder" signed by the agent, showing you as the insured, effective date of coverage, the insurance company, location and description of property insured, amounts of coverage, limits of liability and other pertinent information. A binder may be valid for up to 30 days pending issuance of the policy.

Q. Can an insurance company cancel my insurance?
A. A company usually has a 60-90 day underwriting period, during which they review the application and other information submitted, possibly have an inspection done, and verify the rating and premium calculation. The company may cancel your insurance within that 90 day period. They must give you notice of cancellation. After 90 days, the reasons a policy may be cancelled become more limited. The reason and a 30 day notice must be given for cancellation after that point. When the reason is nonpayment of premium or fraud, 10 days notice is required.

Q. When I receive my policy(s), how can I be sure they contain what I agreed to?
A. Ask your agent to deliver the policy(s) in person, review them with you and answer any questions you might have.

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