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The Basics of Commercial Insurance

THE BASICS OF COMMERCIAL INSURANCE

 

written by: Bill Voss, Attorney at Law (www.DeniedClaim.com)

Policyholder Insurance Claim Lawyer

 

 

 

This e-Book is provided as a FREE resource for those commercial property owners who have recently been impacted by a covered loss – Please read this BEFORE filing your commercial property insurance claim.

 

 

THE BASICS OF COMMERCIAL INSURANCE

 

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T~~able of Contents

 

 

Chapter 1^^. Introduction to Commercial Insuranc^^e ……………………………………………^^.^^4

Chapter 2^^. Understanding Commercial Insuranc^^e …………………………………………….^^.^^6

2^^.^^1 Definition of Term^^s …………………………………………………………………………………………………….^^.^^6

2^^.^^2 History of Insuranc^^e …………………………………………………………………………………………………..^^.^^7

2.3 General Policies of Commercial Ins^^uranc^^e^^. ……………………………………………………………^^.^^8

2.3.1 General Liability Insuranc^^e ………………………………………………………………..^^.^^9

2.3.2 Product Liability Insuranc^^e ………………………………………………………………^^.^^10

2.3.3 Professional Liability Insuranc^^e ………………………………………………………..^^.^^11

2.3.4 Commercial Property Insuranc^^e ………………………………………………………..^^.^^12

2.3.5 Home-based Business Insuranc^^e ………………………………………………………^^.^^13

2.4 Purchasing Commercial Insuranc^^e ……………………………………………………………………….^^.^^14

2.4.1 Steps in Purchasing Commercial Insuranc^^e …………………………………………^^.^^14

Chapter 3^^. Types of Commercial Insuranc^^e ……………………………………………………..^^.^^16

3^^.^^1 Property Insuranc^^e ……………………………………………………………………………………………………^^.^^16

3.1.2 Boiler and Machinery Insuranc^^e ………………………………………………………..^^.^^16

3.1.2 Debris Removal Insuranc^^e ……………………………………………………………….^^.^^17

3.1.3 Builder’s Risk Insuranc^^e ………………………………………………………………….^^.^^18

3.1.4 Glass Insuranc^^e ……………………………………………………………………………..^^.^^19

3.1.5 Inland Marine Insuranc^^e ………………………………………………………………….^^.^^20

3.1.5 Business Interruption Insuranc^^e ……………………………………………………….^^.^^20

3.1.5 Ordinance or Law Insuranc^^e …………………………………………………………….^^.^^21

3.1.6 Tenant’s Insuranc^^e …………………………………………………………………………^^.^^22

3.1.7 Crime Insuranc^^e …………………………………………………………………………….^^.^^23

3.1.8 Fidelity Bond^^s ……………………………………………………………………………….^^.^^23

3^^.^^2 Casualty Insuranc^^e ……………………………………………………………………………………………………^^.^^23

3^^.^^2 Liability Insuranc^^e …………………………………………………………………………………………………….^^.^^24

3.2.1 Errors and Omissions Insuranc^^e ……………………………………………………….^^.^^24

3.2.2 Malpractice Insuranc^^e ……………………………………………………………………..^^.^^24

3.2.3 Automobile Insuranc^^e …………………………………………………………………….^^.^^24

3.2.4 Directors’ and Officers’ Liability Insuranc^^e …………………………………………^^.^^26

3.3 Workers^^ Compensation Insuranc^^e ……………………………………………………………………….^^.^^26

3.3 Health Insuranc^^e ……………………………………………………………………………………………………….^^.^^27

3^^.^^4 Life and Disability Insuranc^^e ………………………………………………………………………………….^^.^^28

Chapter 4^^. Making a Commercial Insurance Clai^^m …………………………………………^^.^^29

4.1 Plan Ahead ………………………………………………………………………………………………………………….^^.^^29

4^^.^^2 Contact Key Peopl^^e …………………………………………………………………………………………………..^^.^^30

4.2.1 Contact the Polic^^e ………………………………………………………………………….^^.^^30

4.2.2 Contact the Insurance Company or the Insurance Agen^^t ……………………….^^.^^30

4.2.3 Contact a Lawyer, Professionals, and an Accountan^^t …………………………….^^.^^30

4^^.^^3 Document the Los^^s …………………………………………………………………………………………………..^^.^^31

4.4 Protect the Propert^^y …………………………………………………………………………………………………^^.^^31

4.5 Settle the Claim …………………………………………………………………………………………………………^^.^^31

Chapter 5^^. Disputing a Commercial Insurance Clai^^m …………………………………….^^.^^33

5.1 Talk With the Insurance Agent and the Adjusto^^r …………………………………….^^.^^33

5.2 Sit Down With a Lawyer and Read the Insurance Polic^^y ……………………………^^.^^33

5.3 Build your Cas^^e ………………………………………………………………………………..^^.^^34

5.4 Document All E^^ff^^ort^^s …………………………………………………………………………^^.^^34

5.5 Follow-Up ……………………………………………………………………………………….^^.^^34

5.6 Arbitratio^^n ………………………………………………………………………………………^^.^^34

Chapter 6. Conclusion …………………………………………………………………………………………….35

Chapter 1. Introduction to Commercial Insurance

 

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Commercial insurance is one of the foundations of a strong business. Also called business insurance, it protects a company by providing coverage against occurrences such as fire or theft, and damages and injuries to a customer.

 

Commercial insurance provides indemnity in cases where claims are made against a business in the form of lawsuits, or should a business provide setbacks to its property, inventory, and assets. In fact, it translates to risk management. Without insurance, consequences of such things to a business may be disastrous. Apart from financial losses and operational risks, a damaged reputation may never be restored. Business insurance gives businesses reprieve from liabilities and helps cover and recover the costs that could keep an enterprise in business.

 

During these times of globalized trade and industry, commercial insurance is no longer a luxury but a business necessity. It is indeed a strong foundation that can keep a business standing should unexpected events happen. Commercial insurance allows a business to look forward into the future and give solution to possible problems that arise from operations and business expansion.

 

Before signing the first insurance policy available, a business should take appropriate steps in determining the type of policy that will best suit its needs. This will be done through an insurance company or an insurance agent who understands the business’s bottom line. After meetings and discussions, a policy is then drafted, and a premium rate decided. The coverage will also be defined, and subsequently signed.

 

Whether businesses are small, medium, or large, the enterprise will benefit from commercial insurance. The business owner should take care not to add anything to the policy that does not really apply to the business. Additional perils will increase the cost of the premium. The business owner might afford it, but later on realize that additions to the policy were not needed anyway.

 

Even home-based businesses will benefit much from an insurance policy. As stated, insurance is a necessity, not a luxury. A hefty investment as it may seem, commercial insurance is worth every penny when it means that a home business’s property, equipment, and assets are fully protected.

 

Commercial insurance does not just protect a business it can also help grow your business by bringing in clients. Being insured is a positive addition to any business

portfolio. It sends the messages of strength, security, and stability that will entice any client to work with a company.

 

This e-book will take a business owner through the general policies of commercial insurance, and the types of insurance that will lead to proper protection for a business. The information will be essential for the business owner to have an introductory understanding to commercial insurance, helping him or her make informed decisions for future use. Some types of commercial insurance require businesses to have them under the law. These are with the purpose of protecting the business, the professional, the employees, and the customers.

 

Insurance planning is an essential part of obtaining insurance. A business should declare all information as honest as possible, and provide all necessary information in the drafting of an insurance policy. Failure to do so can render an insurance policy void, and that is a situation no one wants to find them in.

 

Once the insurance policy is finalized, it is now time for a business to put the focus on its processes and people. Safety and accountability build a culture that will benefit any company. The proper training will help employees perform better. And firm policies will help the business run like a well-oiled machine. These two in itself can mitigate or lower risks of accidents and injuries that will cause a company to make a claim on their insurance policy.

 

But despite the best preparations, the unexpected can happen. And during times when the insured faces a lawsuit or a claim, the full rewards of a commercial insurance policy will be reaped. However, it is important to note that an insurance company does not pay out all claims. And that is a reality.

 

Should a company feel that a denied claim was wrongful, it then has every right to dispute it. This e-book will detail steps on how to make an insurance claim and dispute a denied claim if needed. This is essential information that will help the insured prepare for the worst should its coverage not pull through.

 

Commercial insurance has helped global industries for centuries, and it will continue to do so for decades and centuries to come. Overall, commercial insurance is a necessary component of any business and a basic understanding of this form of insurance will carry many benefits to a business owner.

 

 

 

 

 

 

 

Chapter 2. Understanding Commercial Insurance

 

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A business can prepare for the future with sound feasibility studies and financial projections. But the truth is that it is almost impossible to predict the unthinkable. No matter how vacuum-sealed the preparations might be, one does not know when a business might face a lawsuit for injury or property damage, or encounter an emergency that might stop operations.

 

Commercial insurance is a necessary protection for any small, medium, or large business. Without insurance, a company leaves the door wide open for risk. Statistics show that in 2011 alone, fifteen million lawsuits were filed in the United States alone. While this is a general figure, there is a high assumption that a large percentage is business lawsuits.

 

While disasters and emergencies do not happen everyday, the instances that they happen can leave devastating effects to any business. Disasters can debilitate a business and wreak havoc on its cash flow. Insurance is a way to mitigate these risks at a premium agreed upon by the business and an insurance company.

 

2.1 Definition of Terms

 

There are many parties involved in fulfilling the purchase of insurance coverage. Below are terms for reference:

 

The Insured. The insured refers to the entity purchasing the commercial insurance. The insured is also the entity to be reimbursed should there be losses or damages claimed.

 

The Insurance Agent. The insurance agent is also called a broker. This person facilitates the purchase of an insurance policy by the insured. Insurance agents or brokers are professionals who earn income from commissions on their procured policies. Statistics say that the average range of earning starts at five percent of the policy price, and can go up to fifteen percent for various types of policies.

 

Insurance agents or brokers make a profession from analyzing the insurance policy, and advising the insured and the insurer if the said agreement is acceptable or not.

 

In situations where there are questions about the policy, or should an instance of a claim arise, the insured can request assistance from the insurance agent or broker.

 

The Insurer. The insurer is the company that will provide the insurance policy to the insured. At times, the insurer is also referred to by various terms. These are the following: a “company”, an “underwriter”, or a “carrier”.

 

The Insurance Adjuster. In the event of an insurance claim for a loss, Adjusters are individuals who become a part of the insurance process. Adjusters may be employed by the insurance company or hired by the insurance company on a per-need-basis. A third party insurance adjuster is usually called upon or hired by the company for major losses, damages, and claims. Meanwhile, in-house insurance adjusters are mostly tasked with claims for minor losses.

 

2.2 History of Insurance

 

Insurance is one of the oldest forms of trading the world knows today. But instead of trading goods or services, merchants were trading risk. The earliest businessmen placed loans on caravans that travelled through land and sea, and these loans would be repaid if the goods arrived safely to the destination. The practice was called bottomry, which was similar to gambling but is known as the earliest form of insurance. History pinpoints the earliest practice of this in Babylonia. And around 2100 B.C., bottomry was legalized under the Code of Hammurabi.

 

The history of commercial insurance is intertwined with the roots and evolution of maritime insurance. It so happened that in the ancient times commercial trade occurred largely at sea. The Phoenicians, Romans, and Greeks also applied similar laws to protect their goods while it travelled through seas.

 

Maritime insurance aimed to protect ships versus perils such as loss by fire, shipwreck, the threat of pirates, and other perils. By the 1400’s maritime insurance was already being carried out in Europe. In London, underwriters would get together in coffee houses to discuss all things related to insurance together with merchants and ship owners. Lloyd’s Coffee House in the 1600’s was the place to be and eventually progressed to be one of the first insurance companies. The 1600’s also boasted of another accomplishment in the field of premium rates and compounded interest. During this century, astronomer Edmond Halley developed the first mortality table derived from statistical laws of mortality and compounded interest. The table allowed the computation of insurance premium according to age, because prior this brokers assumed the same rate for all ages. Joseph Dodson subsequently corrected this mortality table in 1756.

 

Before there were insurance companies, there were groups of individuals who were willing to assume an amount of risk for an insurance proposal, thus the term “underwriters”. As business and industries continued to evolve in Europe in the 17th and

18th centuries, so did the development of insurance. The year 1735 saw the beginnings of the first insurance companies in England. While in the United States, fire insurance corporations were established in the late 1700’s. The concept of reinsurance also came to play whereby groups of companies would insure each other should one member

meet a fortuitous event, such as fire or disaster. Meanwhile, the 1800’s saw a boom in life insurance and the classification of insurable risks.

 

It was in 1835 that businesses in New York realized the large losses that businesses incur due to fire and disaster, and that there was a need to maintain reserves to see companies through large losses. Such example was in the great Chicago fire in 1871. Reinsurance played a big role in seeing that companies shared the losses.

 

In Britain, the Workmen’s Compensation Act of 1897 paved the way for requiring employers to insure employees versus accidents, injury, or death. Thus, the 1800’s was instrumental in pursuing legislation that would enforce public liability.

 

Fast-forward to the nineteenth and twentieth centuries when a movement began to provide all people safeguard from sickness, disability, retirement and death. Group insurance policies and individual insurances where beginning to take form, and it came to be that companies and their employees would both contribute to the cost of the premium.

 

During World War II, the US government began the practice of providing life insurance to the members of the army, which then set a precedent towards other benefits. The regulation of insurance companies came in the coming years. Until the 1950’s, insurance companies were limited to providing just one type of insurance. But legislation afterwards allowed them to provide fire and casualty insurance to companies, thus underwriting several types of insurance at one time.

 

2.3 General Policies of Commercial Insurance

 

What exactly does commercial insurance cover? Business face many kinds of risk, and there is a type of policy meant to address such risk. Policies with higher risk are, of course, higher in the amount of coverage.

 

Liability insurance is designed to protect the insured from risks of lawsuits rooting from injury, damage, loss, and other claims. And so in the event that the law will require the company to payout the accuser, the insurance company will assume the payment in behalf of the insured.

 

It is important to note that liability insurance is designed to protect against third party insurance claims. This means that the insurance company will not pay the insured, rather someone else who was previously unidentified in the insurance contract. When a claim arises, the insurance company has a duty to protect the insured, leaving the burden of proof on the end of the third party.

 

While insurance is meant to mitigate the risks of unplanned events, products liability, or liability from acts that employees committed or omitted, insurance does not cover that which result from intentional wrongdoing.

One can probably begin counting how many situations will need protection from risk. And so, here are five general policies to familiarize in the field of commercial insurance.

 

2.3.1 General Liability Insurance

 

General liability insurance covers a business for cases of injury, damage to someone’s property, or death that happens on a business’ premise. Usually, fortuitous events such as mentioned might hold a business legally liable to the third party. As an example, a restaurant’s shelving fell on top of customer’s head, causing the customer a head injury. General liability insurance is designed to cover medical costs and expenses. Offsite liability is another example, whereby an employee might have caused unintentional damage in a client’s home.

 

Needless to say, general liability insurance is one of the most common policies of insurance available today. It policies protect a business against payments of claims made from injury, property damage, medical costs, slander, and even legal defense expenses.

 

General liability insurance polices indemnify the insured for any amounts that the company might become liable to pay, for so long that these liabilities are not the result of intentional acts, such as crime or organized acts with the intention to make a claim.

 

When an insurance company enters into an insurance policy with the insured, it also agrees to indemnify and defend the insured against lawsuits filed versus the company that alleges bodily injury, damage to property, personal injury, and advertising injury. Depending on the policy, the legal costs related to defending a company versus a lawsuit may also be covered.

 

There are two ways in which general liability insurance is written. They can be written on an “occurrence” basis or a “claims-made” basis. For occurrence basis policies, the insurance policy provides coverage for a claim so long as it is within the policy period. Since businesses cannot predict the future, the insurance policy understands that a claim can be made against the insured at any time, so long as the claim was made during the effective period of the policy.

 

Meanwhile, a policy that is written on a “claims-made” basis responds to any claim made against the insured from injury or damage also as long as it is within the policy’s effective period. Because of its nature, a claims-made basis policy has a shorter period than an occurrence policy, and might not cover other types of damages. A business should always keep tabs on the policy’s date and make sure that it does not expire without appropriate renewal.

 

Economic losses are those which affect the income flow of a business are not covered by general insurance policy, except if it is caused by what are known in insurance terms as personal “injury” or advertising “injury”. An example of these economic losses that

are a result of advertising injury might be setbacks that are a result of ineffective advertising campaigns or defamation of the name of a business.

 

We will now discuss those that cannot be covered by general liability insurance. Pollution, intellectual property liability, and e-commerce liability are excluded from what general insurance liability covers. But should a company be primarily exposed to these risks, the insured can discuss with its insurance broker on how to give coverage to these risks through other means.

 

2.3.2 Product Liability Insurance

 

The wholesale and retail industry is a driving economic force the world over. Companies involved in the industry build their business from manufacturing and distributing retail products. Naturally, great concern is involved when products are involved.

 

Product liability insurance provides indemnity against claims of injury or loss that is a result of a defect related to the manufacture, distribution, and sale of products. It protects a company from claims of injury, damage, or death as a result of defective products. Product liability insurance encompasses food, medicine, garments, and any kind of products.

 

Below are the three most common types of claims a company may encounter:

 

Manufacturing defect. A manufacturing defect occurred during the production process. And as a result, an unsafe product was made. A recent case comes to mind as an example of manufacturing defect. Several Chinese infants died after ingesting tainted infant formula. Manufacturing defects are unfortunate, especially when they cost lives.

Design defect. A flaw in the product’s design can be claimed as a design defect.

An example would be the case of a popular footwear brand made completely of rubber. Reports began to surface that the design, shape, and material of the shoes made it susceptible to being stuck in escalators. In fact, several children had reported accidents involving the rubber shoe and escalators.

Instruction or warning defects. Products without proper labels and warnings are indeed liabilities. Consumers can get ill or hurt without clear instructions.

 

If a consumer makes a claim against a company, product liability insurance can cover medical expenses, compensation for damages, lost opportunities, punitive damages, and legal fees. Without proper insurance, paying for a claim can severely affect the operations of a business.

 

While a company might not manufacture products directly, traders and distributers can also be liable for claims. Instances have arisen that businessmen who did not manufacture the product also faced a lawsuit. And as courts rule in favor of the consumer, more and more companies are seeing the need for product liability insurance for their companies.

 

To save on money, companies might try to reduce the insurance premium by underreporting sales. This plan usually backfires because a lower premium will also lower the insured amount. And if underinsurance is proven, penalties will be imposed on a company.

 

General liability insurance will contain elements of product liability insurance. But to be certain, a company should always consult their broker or insurance agent to understand the coverage their insurance policy provides.

 

2.3.3 Professional Liability Insurance

 

Professional liability insurance is also called professional indemnity insurance or PII.

It is also known as errors and omissions or E & O. Professional liability insurance provides coverage for professionals and companies that provide services to clients, by bearing the costs of defending against negligence and damages claim by a client. Usually, a civil lawsuit will determine if a professional failed to perform due to negligence, resulting in financial loss, injury, and even death. This form of insurance also includes legal costs if the court of law finds the claim against the insured groundless. However it is important to note that professional liability insurance does not cover the costs of criminal prosecution.

 

Some states in the United States require individuals in the field of professional practice to have professional liability insurance. People who are mostly in the medical and legal fields have much to gain by having this type of protection covering them from such risks. Other fields also benefit from E & O insurance. These are those in the practices of accountancy, construction, maintenance, transport, and even charities.

 

There two main forms of professional liability insurance—occurrence or claims-made. Both have major differences, and both have its advantages and disadvantages. Occurrence coverage provides protection for an injury or damage that happens within the policy period, no matter when the claim is made. So let us say an incident happens in December 2010, which was during the policy period, but the insured was sued in December 2012. The insurance company will respond to the claim under occurrence coverage. Thus, an occurrence policy provides long-term protection for the insured.

 

On the other hand, claims-made coverage is a policy whereby there is indemnity for claims made against the insured within the policy period, or any extension thereof. Under a claims-made coverage, the insured needs to be aware of the policy period, making sure that it does not expire. Likewise, since the policy is renewable and continuous, the price of the premium may increase year on year depending on claims made during the previous year.

 

A clear advantage of the claims-made policy is the pricing. The insured can benefit from lower initial premiums and predictable price increases. On the downside, having a lapsed policy can be disastrous if the professional is sued. And since the policy is

renewable annually, the insured needs to read the fine print for changes that can be expected in a renewed policy.

 

Here are the benefits of professional liability insurance:

 

Fulfillment of legal requirements. Professionals involved in accountancy, architecture, engineering, law, and brokerages are regulated by law to have professional liability insurance.

Fulfillment of contractual obligations. Traders and service providers, particularly in China and Southeast Asia, have included professional liability insurance as a pre-requisite to any business contract.

Financial protection. Just one claim or lawsuit can inflict so much damage to a professional. The cost of litigation can be mitigated with professional liability insurance.

Reputation protection. The reputational risks involved in a lawsuit are as immeasurable as they are valuable. Professional liability insurance will not only protect finances, but the hard-earned name that a professional establishes.

Client protection: Professional liability insurance gives a professional the peace-of-mind to focus on what is really important—the customer.

 

2.3.4 Commercial Property Insurance

 

Commercial property insurance protects a business for damages to its buildings, real property, personal property, equipment, and other contents. It also includes a business’s inventory such as furniture, hardware, supplies, and the like.

 

Depending on the type of policy, a business can recover the actual cash value or the replacement cost of the lost and/or damaged property. It can also collect on lost income and extra expenses that are a result of the destruction of the company’s property. Some policies can also cover the loss of company paperwork and money, at a higher premium, of course. And an additional rider can compensate for employee crime and dishonesty.

 

Property insurance policies protect companies against perils such as fire, explosions, vandalisms, lightning strike, riots, structure collapse, etc. But most of the time, damages caused by natural disasters are excluded in commercial property insurance policies. This is indeed understandable as present-day society lives in a world of baffling weather and natural disasters.

 

It is important to note that commercial property insurance defines causes of losses differently. It basically comes in two forms, all-risk policies and peril-specific policies. All- risk policies cover a wide range of perils, except those specifically noted in the polic y. Peril-specific policies, meanwhile, cover losses that are listed in the policy

 

Commercial property insurance is important for any business, new or existing, small or large. In fact, it is no longer a luxury, but a necessity in the business world. Assets

equate to many, and any damage to assets will lead to financial losses and missed income opportunities.

 

If a business is renting a space, the business owner should check and double-check the landlord’s insurance policy and see the range of protection. If the current policy is lacking, a business owner can minimize risks by obtaining his or her own supplemental insurance.

 

So what cannot be covered by commercial property insurance? The injury, disability or death of workers due to property damages will fall under general liability insurance. Automobile insurance is also obtained separately. A building’s normal wear, tear, and depreciation are also not insurable. And when it comes to equipment, the failure of hardware is not insurable unless the loss of data becomes damaging to a business.

 

The bottom line is that a business works hard for its assets—whether they may be property or equipment. It is only right that a business protects what it owns before any unfortunate event happens. Commercial property insurance makes sure that happens.

 

2.3.5 Home-based Business Insurance

 

In the United States, statistics show that three out of ten homeowners run a home- based business. Howeve r, when it comes to insurance, the Independent Insurance Agents of America (IIAA) stated that almost half of self-employed, home-based entrepreneurs are not covered by any insurance policy.

 

Home-based businesses are not exempt from the perils that any business will face. Obtaining home-based business insurance is an important step in protecting one’s self, the business, and the home. It is recommended that home-based business insurance is acquired, much how a larger business would provide itself protection in order to mitigate risks.

 

As with any business, the following factors must be considered before finalizing what kind of home-based business insurance coverage a business needs:

 

Equipment. A business should list down all the equipment it needs to carry out its operations, and deliver its products and services. These are computers, printers, telephones, and any other machinery necessary for a business to run.

Inventory. If a home acts as a storage space for inventory, then it must be given protection against perils that could compromise the products and the physical structure that holds it.

Vehicles. Even personally owned vehicles should be insured if these are used for the home-based business.

Fidelity bond. A fidelity bond will pay for losses incurred due to theft. This is particularly advised if employees work from the business owner’s home as well.

Workers’ compensation. Consider appropriate coverage, such as general liability insurance, for employees. Even if a business is home-based, it does not free up the owner from liability to damages and losses incurred.

Liability. A home-based business should list down all its potential risks, and then consider general liability insurance, professional liability insurance, product liability insurance, and even property insurance.

 

2.4 Purchasing Commercial Insurance

 

Insurance has a long history. And over the last three hundred years, it has continually improved itself in terms of helping insurance companies calculating risks and premiums, and providing the insured the best coverage available.

 

Commercial insurance basically spreads and manages risk amongst many businesses. Over time, perils have been narrowed down to nine general categories that most commonly happen. An insurance company will take premium payments from many businesses on the estimated possibilities that not all these businesses will need to make a claim. Premium payments are then translated to investments that aim to grow the money and pay for future claims. Rest assured, the insurance industry is a well-oiled, precise, mathematical machine that ensures that all parties involved earn a profit.

 

As said earlier, commercial insurance is no longer a luxury but a necessity. The insurance industry now makes it possible for small to large businesses to obtain the right coverage it needs to mitigate business risks and prevent business losses in the short and long term.

 

2.4.1 Steps in Purchasing Commercial Insurance

 

In purchasing commercial insurance, the first step is for the business to analyze all its risks and discuss these in detail with the insurance company or an insurance agent. The specific kind of insurance will then be determined, the premium set, perils defined, and policy finalized. It is important to note that the cost and amount of a policy will vary amongst different insurers. So businesses are advised to take their time and check the competitive landscape of the type of insurance they would like to avail.

 

Here is a step-by-step guide in preparing to purchase commercial insurance:

 

Learn the general policies of commercial insurance. The previous section discussed the general policies of commercial insurance. A company would do well to learn these and determine which policies are most appropriate to their line of business. More so, the insured can discuss insurance with enough basic knowledge to start with.

Business analysis. Obtaining insurance is similar to engaging in risk analysis and management. By determining which kinds of risks a business faces and drilling down the sources of these risk, a business can make educated assumptions on which perils should be included in the insurance policy.

Choose an insurance company or an insurance agent. Choosing an insurance agent will involve a personal and professional relationship. A business will need someone whom they can trust and consult with honesty and integrity. At the same time, the insurance agent should understand the direction and vision of the business in order to service it properly.

Review the policy carefully. Once the policy arrives, a business should go through it line by line. Understanding the policy has so many advantages, and almost no drawbacks. Ask a lot of questions especially if anything in the policy does not seem clear. One cannot help but look at the premium price, so it is important to take a look at the policy date as well. Check the period covered and if it is an occurrence or claims-made policy.

Chapter 3. Types of Commercial Insurance

 

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General liability insurance, product liability insurance, professional liability insurance, commercial property insurance, and home-based business insurance are the most common policies of commercial insurance today.

 

General liability insurance covers a business for cases of injury, damage to someone’s property, or death that happens on a business’ premise.

Product liability insurance provides indemnity against claims of injury or loss that is a result of a defect related to the manufacture, distribution, and sale of products.

Professional liability insurance provides coverage for professionals and companies that provide services to clients, by bearing the costs of defending against negligence and damages claim by a client.

Commercial property insurance protects a business for damages to its buildings, real property, personal property, equipment, and other contents.

And home-based business insurance protects a small business from risks and possible perils as well.

 

Depending on the nature of the business, there is additional specialized coverage that can be obtained. Herewith are different types of commercial insurance that can benefit an insured company.

 

3.1 Property Insurance

 

Business property insurance is designed to protect a business’s property, inventory, assets, and damages from theft, accidents, and other losses. It also provides coverage even if the property or equipment is damaged away from the premises of one’s place of business. And most important, an insured business can be assured that it will be compensated for the repair or replacement of damaged property.

 

While the latter’s description is more general in nature, a business can purchase additional coverages specific to the nature of business it is in.

 

3.1.2 Boiler and Machinery Insurance

 

Boiler and machinery insurance is also called equipment breakdown or mechanical breakdown coverage. If a boiler and machinery are essential to a business, then this type of additional coverage should be a consideration.

Some think that if there is no boiler, then this form of insurance does not apply to them. That is simply not true, because the fact is that if there is electricity, then a boiler is part of the operational picture.

 

Boiler and machinery insurance provides coverage during the breakdown of boilers, equipment, and machinery. Should these happen, then the insurance company will reimburse for lost opportunity income, interruption losses, and property damage. However, this type of insurance does not cover losses from electrical arcing, mechanical breakdown, or ruptured boiler.

 

Apart from boilers and machinery, businesses do not know that the coverage can also include other mechanical and electrical equipment vital to a business’s operations. Refrigeration equipment, air conditioners, different kinds of piping, turbines, engines, pumps, compressors, shafting, blowers, gearing, generators, motors, transformers, and the like.

 

When faced with the information, most people begin to think that boiler and machinery insurance is not needed as service warranties and contracts will cover equipment breakdowns. But this is not the case. Maintenance contracts encompass routine services, and not damages due to operator error. Statistics show that thirty-five percent of equipment breakdowns are caused by operator error. Warranties also do not cover interruptions and income losses from equipment breakdown, spoilages of food inventory, and damage to surrounding property. On the other hand, boiler and machinery insurance will cover all these risks.

 

3.1.2 Debris Removal Insurance

 

Imagine this scenario. A tornado tears through a commercial area and wreaks debris havoc near a mini-mall. Materials are scattered all over, and operations are impossible to resume without clearing the business property of safety risks. Also, if something in the property structure had to be repaired, it would not be possible without clearing the area first. At this point, the insured, the broker or insurance company, and the adjuster are scrambling to determine the extent of coverage in the insured’s debris removal policy. While general property insurance will take care of repair costs to the structure, cleaning up debris is a different issue, and one that might not be covered without debris removal insurance.

 

Debris removal insurance protects the insured against costs that involve removing and clearing debris in a certain property after events such as fire, tornadoes, flood, storm, earthquake, and the like.

 

History pegs the beginnings of debris removal insurance in the twentieth century. Up until the 1943 New York Standard Fire Policy, there was no mention of debris removal insurance. This was until consumers and insuring companies began to argue that debris removal insurance should be a part of property insurance settlements. And so after that, a debris removal clause was added to the said Standard Fire Policy through a simple

clause that included the cost of removing debris to property loss. At this point, the premium did not go up despite the additional cost.

 

But later years saw the cost of disposing debris go higher and higher. Add to this that more environmental laws are in place, putting stricter requirements and additional costs to aspects of cleaning up. This forced insurance companies to rethink debris removal insurance and create separate polices for different kinds of debris, especially those environmental in nature.

 

3.1.3 Builder’s Risk Insurance

 

Project owners, architects, and contractors have much to benefit from builder’s risk insurance. Under this policy, natural and accidental damages to a building site are assured of coverage. But there are many considerations with regards to this type of the insurance. For example, the premium will depend on the size of the project and the amount of time the policy will cover. Builder’s risk insurance are usually project specific, and is an additional component of general liability insurance.

 

Builder’s risk insurance protects the insured against losses from fire, lightning, vandalism, and wind. And should there be accidental loss, damages, and even destruction, this type of insurance can assure the insured of compensation as well.

 

As with all types of insurance, builder’s risk insurance has its limitations. To start with, damages due to earthquake, war, flooding, and other intentional acts are not covered. Time is also a main factor. As said earlier, builder’s risk insurance is project specific and will be enforced during the construction period only. And because there should already be a general liability insurance policy in place, only key people are insurable under this additional coverage. These are the property owner, the contractors, the engineers, and the architects.

 

In builder’s risk insurance, there are only certain types of structures covered under the insurance policy during construction. These are:

 

New structures within the property.

Any additional structure being built within the project site.

Equipment that are considered a part of the building, such as the boiler, electrical systems, and piping.

Temporary structures like offices.

On-site materials that are for the purpose of building the structure.

 

We further define builder’s risk insurance with two types: specified peril and all risk. Under specified peril, the policy covers perils that are indicated in the policy. The policy will cover hazards that happen only to the building. All risk policies, on the other hand, covers all type of hazards and perils except those excluded from the policy. So covered perils are not listed, thus the policy becomes more expensive.

The law mandates builder’s risk insurance for most building projects that requires a contractor. In fact, certain permits will not be issued without proof of this type of insurance policy.

 

When applying for a builder’s risk policy, the insured should always check the full extent and content of the policy. The insured should be transparent in confirming costs, design errors, and other factors that will delay the project for two reasons. First, to make sure that the policy is compatible to the insured’s needs. And second, that the insurance company will find no point of contention should a claim be made.

 

3.1.4 Glass Insurance

 

A storeowner went to work one morning to find that his store’s glass window was vandalized and smashed. With damaged glass, it is almost impossible to operate without exposing himself, his employees, and his clients to operational and safety hazards. While replacing glass might seem inexpensive and fairly easy to do, it is shocking to discover the true costs of replacing glass. There are specialty glass that are extra sturdy, resilient, UV-resistant, and the like. Any printing of the logo or special decoration will also take time to replace. So come to think of it, every second that the glass is not repaired equates to income loss for a store.

 

Glass insurance is a policy that covers the costs of replacing broken or damaged glass. As we have seen in the previous example, broken glass is a lot of bad news to any business. Not only is it costly to replace, it is a tedious and often long process. Glass insurance will provide protection during these kinds of events.

 

There is also such a thing as auto glass insurance, whereby the special type of insurance is included in a comprehensive car insurance package. While not all events might be covered under this policy, it usually does include accidents, vandalisms, and certain fortuitous events such as a fallen tree that crashes into the insured’s glass.

 

It is good to know that even glass in private structures such as homes, buildings, condominiums and the like is insurable under glass insurance. Its function for private properties remain the same in that glass insurance will payout costs to replace damaged glass, depending on the terms of the policy.

 

Sold on glass insurance? Well, another consideration is the cost. The premium is determined by the type of glass to be insured and the general location. The more expensive the type of glass to be insured, the higher the premium; and the more high- risk the location is to vandalism and theft, the higher the premium as well.

 

As with any type of insurance, the business owner should get several quotations before signing on an insurance policy. Ask the insurance agent whether this additional type of insurance will affect the larger insurance policy. And if the worst should happen, the insured needs to know the timeline to replace the glass.

3.1.5 Inland Marine Insurance

 

Inland marine insurance is different from ocean marine insurance. The latter is designed for vessels and other property that are traveling the high seas, such as shipping vessels that transport goods through many miles. Meanwhile, inland marine insurance covers inland waters as well as property that are transported by land, such as those passing through bridges and tunnels.

 

To clarify further, inland marine insurance was created to provide protection for goods that travelled over water. But later on, it has begun to cover goods in transit on land as well. These include property that is being transported, buildings under construction, computer equipment and data, accounts receivable, and even fine artwork.

 

Inland marine insurance is essential in protecting a business and its property. It will cover losses of goods that happen in the insured’s premise or while being transported from the insured’s premise to another location. Businessmen are surprised to find out that most property policies do not include this in the coverage. And thus, inland marine insurance becomes an addition to the policy.

 

Consider items that are carried in vehicles day in and day out. These are valuable items like important documents, paperwork, and goods that will hinder a business should a fortuitous event happen. Or what about additional construction in an office? Inland marine insurance will also protect the building materials, tools, and equipment related to the project.

 

Inland marine insurance policies are also vital in protecting high value instruments and items that continue to increase in value. Examples of these are jewelry (gold and precious stones), fur, and the like. Construction equipment is also protected by inland marine insurance as it transfers from one location to another. The insurance policy protects the said items from perils such as lightning, windstorm, fire, flooding, earthquake, theft, collisions, derailment, collapse of bridges and tunnels, among others.

 

3.1.5 Business Interruption Insurance

 

Business interruption insurance keeps business doors open even in the face of fortuitous events. If operations cease due to fire or other unexpected happenings, the financial responsibilities of the company still continue. Expenses such as employees’ salaries, rent, loan payments and taxes will carry on as normal. And if a business is not earning the income, it will drain and deplete its resources with the burden of these financial responsibilities.

 

Business interruption insurance is also known as business income coverage and provides protection against fire, hail, windstorm, vandalism, and damages to equipment. It considers the profits the insured could have earned if the business was not affected by any unfortunate event. The insurance company is able to calculate the lost income based on financial records. It also covers the operating expenses even if the business is

temporarily closed, and can even reimburse the insured for expenses incurred while repairing the business site or moving to a temporary location.

 

In summary, the following are covered under a business interruption insurance policy:

 

Profits that a business could have earned.

Fixed costs and operating expenses of the business, based on historical operational costs.

Extra costs associated with the temporary relocation of a business.

Extra costs from reasonable expenses, beyond fixed costs, that allow a business to continue to operate while the property is being repaired.

 

Business interruption insurance is not a stand-alone policy. Instead it is purchased as an addition to property insurance. The insured should consult with the insurance agent and ensure the following:

 

That the policy period gives the insured sufficient time to rebuild his or business.

Depending on the severity of the event, businesses will need anywhere from a few weeks to a few months to resume normal operations, and the policy should consider this.

That after the unexpected event, the policy begins coverage after forty-eight hours that the said events occur.

That the policy is price is reasonable according to the coverage that it indemnifies and factors such as the nature of the business or its location.

 

3.1.5 Ordinance or Law Insurance

 

Ordinance or law insurance is an important policy for the home and business properties. It provides coverage by paying for increased costs needed to comply with ordinances and laws in the event of a loss. The said ordinances or laws are regulations for construction, repair, or demolition of a physical structure.

 

As an example, a fire swept through the insured’s property resulting in complete loss. If the insured will rebuild, he will have to comply with city regulations on spacing. It turns out that there is a new ordinance that the structure needs to be at least twenty feet away from the sidewalk however the existing damaged structure is only ten feet away from the sidewalk. The ordinance or law insurance will cover the costs of demolishing the area needed to push the structure back to twenty feet from the sidewalk.

 

Ordinance or law insurance gives protection by covering financial expenses associated with high repair and replacement costs from new building codes mandated by law. Without this insurance, a business will face many additional costs that can dig deep into already depleted funds. For any business that obtains additional ordinance or law insurance, it is important to read the fine print to make sure that everything is beneficial to the business.

Despite the coverage, ordinance or law insurance has two exclusions that the insured needs to be aware of: timeline exclusions and covered peril exclusions. Timeline exclusions only cover laws and ordinances in the time and the place where damage occurs. For example, a store is damaged by a tornado. Before repairs begin, building codes are changed to accommodate learnings from the previous disaster. The policy will not cover costs to accommodate new building costs as it will only consider laws and ordinances prior to the time the tornado hit.

 

Covered peril exclusion is a policy that will only cover property damages that are indicated in the policy. If the peril is not indicated, then the ordinance or law insurance will not take effect. Also, it only covers costs to damaged areas of the building. So for example, a fire destroyed just half of a structure, the insured needs to renovate the entire structure to comply with new building codes. But the ordinance or law insurance will only compensate the insured for the damaged portions of the structure.

 

3.1.6 Tenant’s Insurance

 

In most cases, a business will need to lease a commercial space in order to operate a business. Tenant’s insurance is designed to protect businesses with commercial leases. The insurance policy will cover expenses related to improvements made in the rental space due to the negligence of employees. This includes events of theft, vandalism, fire, and malfunctions with regards to the structure itself.

 

By signing into a lease agreement with the building owner, the insured becomes liable for any harm the company and its employees cause the physical structure, or the other tenants of the building. So apart from the insured giving protection to his business, property, and employees, the insured also needs tenant’s insurance. As an example, a faulty oven causes a fire that damages a portion of the building; tenant’s insurance will cover this.

 

There are two types of tenant’s insurance. Here are the following:

 

Actual cash value is a type of tenant’s insurance that will pay for the cost of the item at the time of the loss. So for example, a four-year old oven costs less today that it did during time of purchase. An actual cash value policy will pay for the current value.

Replacement cost, on the other hand, will pay for the replacement of equipment that was lost or stolen. So going back to the example about the oven, a replacement cost policy will simply replace the oven with a new one. Because of this, replacement cost policies are more expensive than actual cash value policies.

 

Tenant’s insurance always falls within liability insurance. Its premium is determined by several factors such as the amount of coverage, the place and nature of business, and the like. The premium can also go down with safety considerations such as more fire alarms and fire extinguishers, deadbolt locks on doors, etc.

3.1.7 Crime Insurance

 

All over the world, the incidents and statistics of crime are on the rise. That is why crime insurance has become an integral component of any commercial insurance policy. Crime insurance provides coverage for employee dishonesty, forgery or alteration, theft, robbery, embezzlement, forgery, counterfeiting, general acts of crime, and computer fraud.

 

Property liability insurance might not payout for cash or checks that were destroyed due to a criminal act. Crime insurance can protect these assets for a company. It will assure the insured of indemnity for losses from victimization.

 

3.1.8 Fidelity Bonds

 

Fidelity bonds cover a company’s losses due to fraudulent acts by specific individuals. It involves compensation for losses from employee’s theft and dishonest acts. While similar to crime insurance, fidelity bonds are designed to protect the insured against employee dishonesty losses.

 

Many times, fraudulent acts by key people are more damaging to a company’s finances and reputation due to bigger losses in the form of money, securities, and major equipment. The development of fidelity bonds is a response to this very real scenario.

 

3.2 Casualty Insurance

 

Casualty insurance is a popular addition to property insurance. That is why most policies are read as property and casualty insurance. But despite the interchangeability of the terms, the concepts of property and casualty insurance have stark differences. Property insurances covers the location of the business, while casualty insurance covers the business itself.

 

As an example, a four-story building had a fire on its fourth floor. After the fire was controlled, it turns out that the first to the third floor have little and no damage to them. Property insurance would not kick in because there was no direct loss to the business’s location. But with casualty insurance, a business can claim for indirect losses to the business.

 

There are many types of coverage under casualty insurance. These are the following:

 

Terrorism coverage. The tragedy of the attacks on September 11, 2001 in the United States resulted in over $30 billion in claims. As such, insurance companies have now excluded terrorism, and is instead purchased as an additional policy.

Flood insurance. With the advent of climate change, extreme and unpredictable weather is now a way of life. A typical property insurance will need additional flood insurance to protect against flooding.

Political risk. For a company that has a numerous amount of government contracts, then political risk is a coverage a company might want to look into. History tells the story of many unpaid government contracts at the dire expense of private companies.

Employee theft and dishonesty. This type of additional coverage protects a business from theft by employees. A company can minimize risk by insuring itself from employees who handle huge sums of money.

Surety bonds. This type of coverage applies to businesses that need to contract someone. Surety bonds will insure that person until the completion of the contract. It is a good idea to insure key people who can make or break a project.

 

3.2 Liability Insurance

 

Liability insurance provides protection to a business when it needs it the most. Liability insurance protects the insured against injuries a business causes third parties. It is designed to protect the insured from risks of lawsuits rooting from injury, damage, loss, and other claims. And so in the event that the law will require the company to payout the accuser, the insurance company will assume the payment in behalf of the insured.

 

What is covered? Lawsuits against a company and the costs of defending and resolving it, medical expenses related to customer injuries, and the like. This next section will discuss more specialized types of liability insurance.

 

3.2.1 Errors and Omissions Insurance

 

Errors and omissions insurance or E & O insurance provides coverage for acts arising from mistakes and failures that cause injury, damage, or death to a third party. However, the act must not be intentional, rather a result of an error.

 

3.2.2 Malpractice Insurance

 

Malpractice insurance is also known as professional liability insurance, which was discussed lengthily in the previous chapter. When a professional falls below the standard of care, and makes a mistake at the cost of the client, then malpractice insurance will provide coverage for this. Malpractice is most commonly followed by a lawsuit. Thus, the insured can be assured that the malpractice insurance will cover legal defense costs and subsequent settlements. One can just imagine that doctors, dentists, agents, architects, and all imaginable fields of profession will benefit from malpractice insurance.

 

3.2.3 Automobile Insurance

 

Transport is an integral part of any business. Vehicles transport goods and assets from one place to another. The previous chapter discussed insurance for the goods being transported through inland marine insurance. Now, automobile insurance focuses specifically on protecting the vehicle itself.

 

Automobile insurance does not just protect a business financially, it is also socially responsible as it considers the welfare of both the company and other parties involved in the incident. In the United States, automobile insurance has become a prerequisite in most states.

 

There are six types of coverage under basic auto insurance:

 

Bodily injury liability

Property damage liability

Medical payments or personal injury protection

Collision

Comprehensive

Uninsured motorists coverage

Roadside assistance

 

Automobile liability is usually written as three numbers, such as 40/40/20, to represent percentages. So let us say that the insurable amount is $100,000, $40,000 would be allocated to bodily injury coverage per person, $40,000 would be for bodily injury coverage per accident, and $20,000 would go to property damage per accident.

 

Bodily injury liability refers to damages that the insured’s vehicle causes others. This includes medical expenses, opportunity costs, and lost wages. Much too often, there are so many injuries and death associated with vehicle accidents. And should an unfortunate accident happen, the focus should be on the welfare of the involved parties, and not on worries concerning the expenses that the company will incur. Meanwhile, property damage liability is insurance that protects the insured by paying for costs related to repairing or replacing property that is destroyed. It also covers legal bills.

 

Collision coverage takes effect by compensating the insured to repair its own vehicle in case of an accident. Assuming that an unforeseen event damages the property of the third party and the vehicle of the business. An insurance policy will take care of third party liability, while collision coverage will take care of the insured’s costs—from towing away the wreckage to replacing the car.

 

Comprehension coverage will protect the insured for damages to the vehicle that is not caused by an accident. This includes theft, fire, vandalism, disasters, collisions with animals, and the like. Some policies also include the windshield in the coverage. After all, a broken windshield makes it almost impossible to drive safely.

 

Medical payments type of vehicle insurance protects the insured whether he or she is driving his or her own car or not, and if this car becomes involved in an accident, and if injuries were sustained during the mishap. Medical payments will payout no matter who caused the accident.

Vehicle accidents can cause injuries to the driver and his or her passengers. Personal injury protection, meanwhile, will payout medical expenses and lost wages for the insured and his or her passengers. Funeral costs are also included in most policies.

 

But what if a car whose driver is uninsured hits the insured? Uninsured or underinsured motorists coverage will make sure that the insured’s medical bills are paid for. This type of automobile insurance will also take effect should the insurance of the other motorist is not sufficient to cover all costs.

 

When purchasing automobile insurance, it is always important to read the fine print and discuss them with the insurance agent. The insured can also try to negotiate for extras to the policy by having services such as towing and roadside assistance included in the coverage.

 

3.2.4 Directors’ and Officers’ Liability Insurance

 

Directors and officers are key people in an organizational. As such, directors’ and officers’ liability insurance is usually purchased by companies and organizations to provide coverage for costs involved in lawsuits filed against their directors and officers.

 

3.3 Workers’ Compensation Insurance

 

Workers’ compensation insurance is also known as workman’s compensation insurance. And it does what its name implies—it covers employees’ medical expenses and lost wages should they be injured while on duty.

 

Unfortunately, we still live in a world where sick leaves are not enough to cover recovery time for major injuries and illnesses. Workers’ compensation insurance provides an employee protection and reprieve by guaranteeing the income flow of an injured worker at the insurance company’s expense.

 

Most states in America require companies to provide this type of insurance for their employees. Workers’ compensation insurance is not an expense rather it is an investment. And a good move to make if a company is serious in protecting the welfare of its employees.

 

For reference, here are aspects of workers’ compensation insurance that will determine the cost of the premium of a company’s policy:

 

In the section that details the employers’ liability, it will state that legal expenses will be covered by the policy only if the employee makes a wrongful claim on work-related illnesses or injuries. A company can opt for an amount of liability coverage that will bear impact on the premium.

Coverage for employees in areas, cities, or states outside where the company operates.

Coverage for various types of illnesses and injuries.

Coverage for funeral expenses and monetary support to the bereaved family.

Reimbursement percentages for lost wages. The higher the percentage the employee will be compensated, the higher the premium.

 

Before signing onto a workers’ compensation insurance policy, the insured should check what the state requires in obtaining protection for its employees.

 

3.3 Health Insurance

 

Health insurance is a benefit given by a company to its employees. In most cases, law mandates health insurance, and employees too consider health care as a major factor in choosing a company.

 

Majority of Americans have access to health care through commercial health insurance provided by their employer. Commercial health insurance is also called group insurance, whereby the employer enrolls employees who meet several requirements into the group insurance. Most of the time, the company shoulders health care insurance. But should this not be the case, employees shoulder a percentage of the premium through payroll deduction, and the company pays out the rest.

 

There are three types of commercial health care insurance to consider. The first is known as point of service plan. Employees enrolled under the group insurance are given a list of doctors that are carried by the insurance company. Health care professionals can refer medical procedures and treatments that will still be covered by the point of service plan. Employees can also see doctors who are not on the list at a reduced price.

 

Another type of plan is the health maintenance organization or HMO. Like the point of service plan, employees can choice their primary care doctor with a supplied list. But if a specialist is needed, the primary care doctor must refer the patient to a specialist. This plan does not cover doctors outside the listed network.

 

The third model is the fee-for-service or indemnity model. This type of health insurance covers specific healthcare procedures. Employees can see any doctor they want so long as it is within the policy’s listed range. Hospitalization is also covered in the said insurance policy.

 

There are many steps to take before a company signs onto a health insurance plan. All the needs of its employees should be considered, carefully reviewing terms and stipulations concerning check-ups, outpatient procedures, confinement, mental health treatments, and payment of the premium.

 

 

 

 

3.4 Life and Disability Insurance

 

Life insurance is a great incentive to attract skilled professional to join a company. Life insurance provides coverage for the life of the employee or policyholder, and allocates a benefit to the beneficiary.

 

There are two types of life insurance policies: term insurance and whole life insurance. Term insurance pays out death and disability within the term of the policy. After the said term, the policy is null and void.

 

Whole life insurance on the other hand continues so long as the premium is paid. The insurance company looks at the policy holder’s age, level of health, and predicts the length of life to determine the premium.

Chapter 4. Making a Commercial Insurance Claim

 

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Insurance prepares a business for the worst. Once the policy is in place, the insured company can breath a sigh of relief, and view growth and expansion with peace of mind. But in the event that a business needs to make an insurance claim, here are steps to take.

 

4.1 Plan Ahead

 

Planning should begin even before disaster strikes. Responsible management entails having a detailed contingency plan that will help prepare employees for emergencies. Drills in cases of typhoons, earthquakes, tornadoes, flooding, robbery, riots, and other applicable emergencies help a company be prepared to face the worst. And giving basic first aid training to staff can help them treat their fellow staff and customers should anyone need medical attention. The human resource group of a company makes sure to document all these efforts and formalize them through policies that will enforce the operational efficiency of a company.

 

Risk management can also be done by installing CCTVs and digital cameras in the place of business. If a claim is made, then the company is sure that it has video and image capture of the said event. This is crucial if the insured decides to thresh out a legal battle with the one who filed a lawsuit against it. In doing this, the company must make sure that all electronics are properly charged and running during business hours. And then have them placed in key areas to be able to document important transactions. Finally, the insured should appoint a trusted employee to maintain the cameras and store footage.

 

Incident reports are also a good way to mitigate risks. Requiring staff to write down and formally report incidents gives a company proper documentation of possible events that can trigger a lawsuit. The filing and record keeping of these incident reports are equally important. And add to this proof contained in videos and photos, and the insured has all that it needs to determine if a claim against it is valid or not.

 

Lastly, the best way to prepare a company for any eventuality is to make sure that it complies with all safety and regulatory laws set by the state that it operates in. By doing all these, the insured can have airtight operations that is ready for any eventuality.

 

 

 

 

4.2 Contact Key People

 

And then the impossible happens, and the insured is faced in the situation where it has to make a claim on its policy. Relax, keep calm, and follow this checklist in contacting key authorities:

 

4.2.1 Contact the Police

 

The first thing to be done is to contact the police and report the incident. This may seem like a simple task, however many people underestimate the value of a police report in filing an insurance claim. If needed, contact the medic or ambulatory services and secure that report as well. For employees’ reference, the company should make sure that important telephone numbers are displayed in prominent areas.

 

 

4.2.2 Contact the Insurance Company or the Insurance Agent

 

Now, it is time to get on the phone with the insurance agent. Prepare to give the agent details such as the name, address, policy number, and date and time of the loss. If the insurance agent is not contactable, make sure to leave a message and ask for a return call. Leave contact numbers to make it easy for the agent to call back.

 

Once the insured is able to speak with the insurance agent, the agent will take down all necessary information. He will then contact the insurance company, who will assign the case to an adjuster to visit the property and assess the damage. In-house adjusters are for small claims, while outsourced adjusters are for larger claims. The adjuster will request for evidence of the claim, and so the insured must begin the task of compiling all relevant documentation.

 

Here is where the preparation is of benefit. The insured should pull out all video footage and photos available that document the incident. Incident reports, police reports, medical reports will also be vital. The insured should make copies for himself, the adjustor, the agent, and the insurance agency.

 

4.2.3 Contact a Lawyer, Professionals, and an Accountant

 

While the process is ongoing, it is advised that the insured seek his own legal counsel in order to help him assess his claim. The company can also contact professionals to make their own costing and assessments on repairs. Three estimates are a good figure to start with. These processes help the insured have an idea of how much he can claim for, and compare the actual offer to the figure that his team has come up with.

This is also a good time to sit down with an accountant to discuss a claim, especially if the claim is a loss of income or business interruption claim. Have the accountant focus on the case from the beginning until the claim is made.

 

4.3 Document the Loss

 

It was earlier discussed that proper documentation will help the insured build a strong case. Here are a few things to gather for documentation:

 

Video footage or digital photos

Incident reports of sta~~f~~f

Police reports, medical reports, and the like

A list of all lost or damaged property

A list of lost documents with corresponding value, such as bills of sale, check, cash, charge account records.

Operational expense bills to document the business’s regular expenses.

Owners’ manuals and warranties of purchased equipment.

 

Most of the items above can be obtained by entering the business premise. Make sure that all proper safety precautions are taken, especially if the structure was badly damages. And keep in mind not to throw anything without first showing the police or the insurance agent.

 

4.4 Protect the Property

 

A business owner can take measures to protect his property from further damage or theft. First, cover roofs and broken windows with board or plastic to prevent illegal entry, and protect the interior from the elements. Then, salvage what equipment or furniture you can. If removing them from the premise is not possible, then make sure they are protected from the elements. And remember not to move or dispose anything without informing the proper authorities.

 

 

4.5 Settle the Claim

 

The insured is burdened with the task of following-up the insurance agent for the claim. He should document all actions to follow-up with the corresponding result of the attempt. And if he does speak with the agent, ask for concrete feedback and set deadlines and timetables for the next set of action points.

 

The adjustor’s main task is to determine how much the claim will be, so obviously, the adjustor plays an important role in the claims equation. Once an adjustor is assigned, check for his license. The insured can also hire is own team of professionals to see if the adjustor’s assessment are in-line to his actual losses.

When the adjustor’s work is done, he will have calculated the value of items lost and the cost of the repairs. This is where the insured and the adjustor need to come to an agreement as to an actual figure.

 

Once the final payout figure is finalized, the insured can now settle his insurance claim. The insured may seek the insurance agent’s advice on which claims should be filed first, or if all claims should be filed together. It is vital not to rush the claims process. Doing so may result in the revelation of more damages later on as some damages become apparent after a few weeks.

Chapter 5. Disputing a Commercial Insurance Claim

 

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Going through a fortuitous event is stressful enough, and then add to this the tedious claims process, and we have one very jittery business owner. A denied commercial insurance claim can be crippling to the business owner and to his operations. After all, the primary reason for obtaining insurance is to have protection for the times when the unexpected happens.

 

Settlement can go wrong through a number of ways:

First, if the claim is denied entirely. Commercial insurance provides coverage on the premise that the act was not caused intentionally. If it was proven that the accident was intentional, then the insurance company gets basis for denying a claim.

Second, if the check is much lower that the expected amount. If a business does not have enough to recover losses and rebuild, then it leads to disastrous consequences to the business future growth.

 

This chapter details the recommended steps in disputing a denied commercial insurance claim.

 

5.1 Talk With the Insurance Agent and the Adjustor

 

First thing is first, sit down with the insurance agent and the adjustor and backtrack on the claims process. Ask specific questions and get concrete reasons why the claim was denied.

 

5.2 Sit Down With a Lawyer and Read the Insurance Policy

 

Next step is to read the insurance policy line by line. Grab a cup of coffee and treat it like a good read, except that the insured will have to go through the limits, deductibles, terms and conditions of the policy.

 

Understanding the policy is key to figuring out how the insurance company computed for the claims amount. The worst thing a business owner can do is be up-and-arms and charge the insurance company without knowing the ins and outs of his own policy.

 

Reading through the policy can render many surprises, especially of the insured was not aware of coinsurance clauses and excluded perils. Finally figuring out the meaning of the insurance policy at this stage is too late.

5.3 Build your Case

 

Earlier it was advised that the insured should work get his own estimates for losses and damages. Having these reports will prove useful in a denied claim. Having three consistent estimates will help build a case in defending a claim. The insured can also request for a copy of the adjustor’s findings.

 

 

 

If the insurance company is claiming intent in the event that happened, then it is time to get a lawyer (together with all the previously prepared documentation) to prove otherwise.

 

5.4 Document All Efforts

 

All follow-ups with the insurance company should be documented. Many insurance companies have also facilitated the claims process by providing online claims reporting. Thus, it is easier to track and document all correspondence. A paper trail is for the claimant’s benefit. It shows that in now way was the insured amiss in his responsibilities and actions.

 

5.5 Follow-Up

 

By now it is clear that the claim is being disputed. The claimant should keep in contact with the adjustor, the agent, and the insurance company. Allot time to get in touch and attempt to elevate your concerns to authorities with every call.

 

It takes a lot of effort not to be dragged onto the path of frustration when disputing a claim. Keep a schedule for follow-ups and document each interaction accordingly.

 

5.6 Arbitration

 

If negotiations and follow-ups do not result in anything with regards to claims, then it is time to go to court. Most insurance policies have an arbitration clause that brings in an unbiased third party to settle the dispute. It is important to remember that third parties, although effective, come at a cost.

Chapter 6. Conclusion

 

  • * *

 

Running a business takes time, effort, resources, and a lot of planning. A successful business is founded on sound strategies for operations, growth, and risk management. So when risks are involved, commercial insurance steps in as a way to mitigate the risks arising from income and opportunity losses from unfortunate events. Thus, in this day and age, insurance is not a luxury rather it is a necessary investment. And, as this e-book has shown, is one of the best investments a business can make.

 

As the global landscape changes, so much more factors now have the power to affect small, medium, and large business. There are threats of war and terrorism, the forces of nature, and the like. In the same way the world changes, so does insurance. More policies are being developed as the business horizon evolves. But one thing is certain; it is all for the purpose of benefit—benefit for business, and benefit for the insurance industry.

 

A business needs insurance, but more important than that, it needs to understand the insurance policy fully it is entering before signing any document. This e-book gave a run through of the different kinds of commercial insurance policy that a business can enter into. It cannot be stressed enough the need to read the fine print, clauses, and exclusions. So when a claim is made, there is full understanding of what is and what is not covered.

 

The claims process is tedious as well. The best-case scenario is to walk away with a claim that will guarantee the business to get back on its feet. But sometimes, the claim is not enough to cover costs, or might be denied entirely. It is a good thing that with the development of commercial insurance policies come the advent of third parties who will be key in the arbitration of disputed claims.

 

written by: Bill Voss, The Voss Law Firm, P.C., Attorney at Law Policyholder Insurance Claim Lawyer w.DeniedClaim.com

 

 

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The Basics of Commercial Insurance |


The Basics of Commercial Insurance

You never know when some mishap will threaten your company. For that reason, every business, whether it is large or small, needs to have commercial insurance. This insurance will provide financial security in the event of a natural disaster, fire, or injury lawsuit. If you do not purchase business insurance or do not have a clear understanding of your policy benefits, your company may be forced to shut down in when the unthinkable happens. If you are a commercial property owner, it is imperative that you read this FREE e-book before you file a business insurance claim. In this book, you will learn everything you need to know about commercial insurance claims and how to take full advantage of the benefits in your commercial insurance policy. Fill out this form to receive your FREE copy of this e-book today! This book will help you understand the various types of business insurance including commercial insurance, general liability insurance, product liability insurance, professional liability insurance, business interruption insurance, tenant’s insurance, casualty insurance, workers’ compensation insurance and additional specialized coverage. In addition, it will provide you with information you need to: -Prepare for the unexpected -Reduce insurance claim risks -Provide strong evidence of your losses -Navigate the insurance claim process -Dispute a wrongfully denied claim Insurance companies are in the business to make money—often at your expense. They regularly delay, undervalue, and deny valid business insurance claims. Reading this book will help you to understand how they operate and give you the knowledge and tools to push back when they treat you unfairly. It will also help you to understand why you should take the time to fully understand your business insurance policy—even the fine print. Finally, the book will help you to determine when you need to seek the help of an experienced Texas business insurance claim lawyer. Read this book or contact the Voss Law Firm if you are a business owner and feel that your insurance company is treating you unfairly. We can help you understand your commercial insurance policy and fight to get the benefits you are due so that you can get your business up and running again. Contact a knowledgeable Texas commercial insurance claim attorney at 888-614-7730 to discuss your case during a free consultation.

  • Author: TheVossLawFirm
  • Published: 2016-07-25 20:05:30
  • Words: 12432
The Basics of Commercial Insurance The Basics of Commercial Insurance