Corporate Insurance Plans
A. There are six broad areas of business (insurance) exposure:
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 aren't any employees.
- Property Insurance
- Time Element
- Crime Insurance
- Automobile Insurance
- Liability Insurance
- Workers Compensation Insurance
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, with your agent.
Insurance Policy Premiums:
The insurance premium may be based on, square footage of the
floor area or, more frequently, payroll or sales receipts. In any case, your
cooperation for access to your books, records, and/or premises is
Policy periods are generally annual. 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
Workers Compensation Insurance:
An employee who has suffered an injury or illness resulting from employment
is entitled to workers’ compensation benefits. California Labor Code
Section 3700 requires that every employer in California either buy
workers’ compensation insurance from a licensed insurance company, or
obtain a certificate of self insurance from the California Department of
Industrial Relations. Failure of an employer to follow this law may result in
imposition of both civil and criminal penalties.
Because of the complexity of the issues involving this insurance, it is
recommended that business owners review to Workers’ Compensation
brochures available from the Department of Insurance and the Department
of Industrial Relations.
Fleet Car Insurance
Commercial auto insurance largely parallels private auto insurance. You
should read your policy and understand the terms proper and conditions.
Whenever you transport a client or move property by a motor vehicle,
you should have an understanding of how your commercial auto insurance
will work. You should also consider how non-owned autos, newly
acquired vehicles, or changes in drivers affect your coverage.
Business insurance may cover property of all types that you own or maybe
in your “care, custody, and control”. Such property may be buildings,
personal property, equipment, inventory, goods in transit, earnings, etc.
The nature of your business may also require you to protect other people’s
property as well.
Casualty Insurance Coverage
Property insurance 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: flood, and earthquake. Since the All Risk policy affords better
protection, it is more expensive to purchase than the Named Perils policy.
Remember, your agent is there to help you to understand your coverages.
Insurance of property is based on its value. There may be “co-insurance”
penalties for failing to insure to value. These penalties may be applied to
a loss settlement. Determination of value is important for calculating the
premium and settling for a loss. Some terms often used are: “actual cash
value” meaning fair value market, “replacement cost”, “selling price” for
unsold inventory, and “business interruption”.
Large deductibles, although they afford a reduction in premium, can have
a critical affect on your cash flow if you are operating with or have access
to very little capital. You cannot rely on insurance to always or completely
cover your losses. A frequency of claims will have a definite affect on the
insurer’s willingness to continue to insure your business. Although
business-owners generally purchase replacement cost coverage, insurers
often limit their initial settlement for the loss to actual cash value until such
time as the owner has replaced the items lost.
Liability insurance - In general, liability insurance protects you from claims presented against
your business for unintentional negligent acts. Additionally, this coverage
provides a defense if a lawsuit is filed against your business. Example:
someone slips and falls on your business premises;
2) your covered truck
is involved in an auto accident.
In order to protect the assets of your business, it is very important to
purchase both adequate coverage and limits of liability insurance when you purchase
your business insurance. You should discuss liability insurance in detail
with your insurance agent.
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.
Different exposures generate premium in different ways. Offices where no
customers visit 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.
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.
What kind of insurance do I need?
Can any exposures be reduced or eliminated?
A. You can request 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