Most businesses don’t understand the liability losses they face because they are not common claims but when they do occur they have the greatest potential to shut down a business. Below is a list of the most common exposures, and can be used as a tool to identify and then limit your business’s exposure. 

1) Premise liability: created by having visitors to an organization’s premise. 

2) Operations liability: created by conducting operations on an organizations premise. 

3) Product liability: created by manufacturing products. In some cases just putting your brand on a product not manufactured by you will create the same exposure as if you were the manufacture. 

4) Worker’s Compensation liability: created by state statutes to cover employees for related injuries and illness. In Texas workers comp is typically optional.
Rules from Texas Department of Insurance: If you do not buy workers’ compensation insurance, you are considered a “non-subscriber,” and you must notify your employees that you do not have workers’ compensation insurance. You are required to notify your employees by posting Notice 5, Notice to Employees Concerning Workers Compensation in Texas, at your work place, providing a telephone number to the Safety Violations Hotline for reporting unsafe work conditions. This notice must be placed in your personnel office and/or in a prominent place where employees can see it regularly.
You are also required to notify TDI-DWC that you choose to be a non-subscriber, or if you allow your coverage to lapse and you become a non-subscriber. Further, you must report your status as a non-subscriber each year. You are required to notify TDI-DWC by filing DWC Form-005, Employer’s Notice of No Coverage or Termination of Coverage. 

5) Professional liability: created by common law, which imposes a higher duty of care on professionals. A professional owes a duty of care to refrain from an action that carries undue risk of causing harm to someone else. 

6) Completed operations: created because organization is responsible for bodily injury or property damage caused by completed work when the work is completed away from organization’s premise. 

7) Automobile liability: created because of drivers and owners of autos owe a duty to others to use their autos in a reasonable, prudent manner and to exercise care for the safety of others. 

Management liability: created by the various duties that those in position of trust owe to those they serve. Directors, officers, and managers hold such positions. 

Most likely your  business has most of the risk listed above, but each business is unique in the degree and weight of a certain exposure their business face. For example you might have a mobile auto fleet making your auto liability large. Or you might be a CPA with a large exposure to professional liability. It’s important to look at your business with a risk and insurance professional to identify exposures that you can transfer to insurance or setup funding methods for the exposures you cant.

So what exclusions surprise some people? Below is a list of common exclusions. 

Vacant homes: If you leave your home vacant for 30 days or more most likely will lose coverage for vandalism, and possibly water damage to the home. Vacant homes are targets for vandalism and water losses that would be a couple thousand in an occupied home can balloon if no one is there to catch them. 

The definition of a vacant home can vary by policy, but typically a home is vacant if it is moved out of and the predominant amount of personal property has been removed. You can find the definition in your policy under the definition section of the policy. 

Wear and tear, neglect, lack of maintenance, or failure to repair are other areas  homeowners (especially new owners) often overlook as exclusions.  An insurance policy isn’t designed to address maintaining the home, and therefore excludes these losses. For example if the roof is leaking an immediate repair is necessary vs. letting it get worse and worse until the problem can’t be ignored. This keeps insurance cost down for the majority of consumers who do maintain their home. 

It’s important to read your policy and ask any questions to agent that you don’t understand. Going off gut feelings or intuition on what is and isn’t covered can lead to surprises come time to file a claim.

While I understand the source of questioning and frustration trying to manage risk there are a few steps you can take to be your own risk manager.

What is risk? :

First risk in insurance (typically) is the possibility of a negative outcome, or no loss. This is known as pure risk. For example your house  burns, and you have a financial loss or it doesn’t burn and your financial gain is zero. You cannot not gain profit from insurance. This is important to note as most people think of risk as either gaining or losing money, as is with the financial risk a home’s market value has of the value going up or down.

Ask yourself how do you measure the risk you face from owning a car, a home, a boat?

There are two methods to figure this out. The first is subjective risk, where one perceives the amount of risk based on an individual’s opinion and experience. The second is objective risk that is measurable variation on uncertain outcomes based on facts and data. Most individuals use subjective risk to say measure the risk of an auto accident. That’s were common phrase, it won’t happen to me, or I never make claims. Based on their experience, they are right however, it’s easy to see this isn’t an accurate way of judging one’s risk. To top it off study after study shows that people almost always guess wrong at the risk, and by large margins. You might know a teenager with an out of control subjective risk, but we continue some of those habits into adulthood especially measuring catastrophic risk.

 Now, contrast that to most businesses use objective risk to manage their risk. They use tools and data to judge and manage risk. Would you invest in a company that didn’t use objective risk management?

What you get back, even if you don’t make claims:

 Insurance is an unfamiliar product, you spend lots of money and if nothing happens you have nothing to show for it. I could get into why that is and how it works, but I would rather cover what you are still getting!  The benefit is residual certainty, or the benefit of not worrying about unforeseen property or liability losses. Without the certainty of transferring the risk, banks would not loan money, teenager’s parents might not let them drive, landlords wouldn’t buy and rent property and the list goes on… but it allows organizations and individuals to pursue a variety of risky activities that offer substantial rewards, to themselves and society.

By the time your employees arrive for work, you have realized you are living a worst-case scenario. The office has been gutted by thieves, and there’s no way your business can be operational any time soon. When you consider your insurance you need to be in this mindset so you can plan for the worst. Below are a few topics and points to consider.

Coverages:

 For business with moderate risk and common type of business a business owner policy will be available. A business owner policy is known as a BOP in the insurance world. A BOP comes with a package of coverages that include types of property and types of liability coverages. Too many to list here, but we will touch on a few of the most beneficial ones in my mind.

1)      Business Income: this coverage protects you from the loss of income. For example if a fire occurs and you can’t open your doors for 2 months.  The loss of income during that time can be a very large loss, and with this coverage it will be covered.

2)      Glass deductible buy back: Most policies will come with a 1K or higher deductible, you might know that, but did you know that most leases you sign make you responsible for the exterior glass? So if some throws a rock thru the window you are left footing the bill. With this coverage there is a zero deductible.

3)      Outdoor sign coverage: On a BOP sign coverage is a lined item and not part of your personal property so it’s very important to address the coverage for your signs.

4)      You business property and your improvements need to be covered and often the greatest exposure businesses face.

5)      Liability: Advertising, Products completed operations, Personal injury, Medical, and Premise and operations, to name some of the coverages. A loss without coverage here can close a business down so it’s important to consider your risks and coverages.

Common Mistakes:

1)      Not distinguishing between business property and tenant improvements. The business properties are items that can move and aren’t built into the building. They are more likely to be stolen and cost more per thousand to insure. The tenant improvements like walls, built in shelving, etc. have lower cost per thousand and should be broken apart.

2)      The insurance company insures the location and 100 feet away. If you start moving things to a warehouse, new location, at your home, or transporting items you are at risk and need to let the insurance company know so it can be covered properly.

3)      Update changes with the insurance company. A small change in your business can sometimes mean big changes needed on the policy to be covered properly.

Cost:
 There are many factors that drive the cost of coverage or even if particular company will write your policy for you. Below are a few of the biggest factors.

1)      The type of business plays a major role in cost and eligibility. Insurance companies like businesses that are common so they can pool risk and understand the business. They use Sic codes to accomplish this.

2)      Number of employees helps gauge the exposure for the insurance company and influences cost.

3)      Total receipts, just like number employees, gauges the exposure and cost.

4)      If a big part of sales is alcohol, you can expect to pay more.

5)      If you are a direct importer from oversees and then you sell wholesale, it’s going to cost. Since it’s hard to sue back to the real wholesaler you bear almost all the risk and so in turn the insurance company does too.

The above items are just the tip of the iceberg for Business insurance and for this reason business insurance shouldn’t be treated like commodity item. Not all policies are the same and a good agent is important to partner with the business, and develop a relationship. From there they can guide you to coverages and foresee issues.

It’s expensive.  Do you need it?  Well … it depends.

Immediate red flags:

 Using the Car for Business?
If you’re using the car for business while on your trip, chances are your personal auto policy will not cover you.  You definitely want to check with us BEFORE you rent a car for business purposes.

Outside The US or Canada?
 Most policies will only cover you in the United States and Canada. Typically a limitation of 25 miles into Mexico is covered . If Canada we can provide a Canadian Id card free of charge from your Tx policy. If Mexico, we can offer  mexico insurance policies for your trip for additional premium.

Renting a large vehicle or moving truck?
If it weighs more than 10K lbs then its excluded from coverage on the Texas auto policy. FYI: a 16 foot moving truck weighs 11.5K and would not be covered under the auto policy. When renting a truck typically you can find vehicle’s weight on the rental company’s website.

Coverages:

Damage to the Rental Car:

  On a Texas auto policy coverage is extended from your liability property damage. This can vary from 25K to 100K in coverage. There is no deductible. Insurance policies for other states subject you to the comprehensive or collision deductibles.

     NOTE: Your property damage liability covers the rental car damage and the other person’s car under one limit. So if you carry 25K, you can see two cars could easily exhaust the limit. It’s just one of many reasons to up your coverage to at least 100K for property damage.

Damage to Other Property or People:

Liability coverage you carry on your auto policy kicks in if you damage another vehicle or other property, or hurt other people.  Your personal auto insurance policy will cover you in your rental car at the same level of liability protection you carry on your policy.

What do Credit cards cover? 

With other states insurance policies that apply a deductible, it will cover that cost.

The coverage can be beneficial when traveling outside the US and Canada to protect from collision and theft. However it still does not cover comprehensive losses or liability. So you will need to still purchase some insurance. The below link can get you started in the right direction.

http://www.creditcards.com/credit-card-news/compare-credit-cards-rental-car-insurance-policies-1273.php

Hidden Fees!

 Rental car companies can sometimes charge fees beyond the cost of the accident itself. Most large insurance companies pre-negotiate with rental car companies to not charge these items. BUT, you are always to some extent at risk of these costs.

Loss Of Use:
  The rental car company receives income by renting their cars.  If you wreck their car, they can’t rent it to anybody else until it’s fixed.  In theory they’re losing money and they’ll charge you for that “loss of use.”

But your insurance company won’t pay it!  Here’s why … In theory, it makes sense.  But insurance companies don’t pay for theories.  They only pay for actual economic loss.  Essentially, the rental car company must prove that every single vehicle in their fleet was rented, and they had to actually turn away customers because the car that you wrecked was out of service.

Admin Fees:
Second, the rental car company will charge you an administrative fee –depending on how high the repair cost these average 50-150 dollars. Again, your insurance company isn’t going to pay that fee.  It’s not an insurance loss.

Own a boat, read on?

 However if you own a boat and have it insured, in most cases the rental boat is covered from that policy.

Coverages:

 Coverages on a boat policy are listed just like an auto policy. You have liability, uninsured/underinsured boater, medical, comprehensive, collision, and towing.  

Optional coverages:

 Personal property – for skis, life jackets, etc.

Trailer – covers the value of the trailer. Note: when pulling a trailer the liability to others comes from the auto insurance policy of the car pulling it. The damage to the trailer is picked up under trailer coverage, on a boat policy.

You can get Actual Cash Value or Agreed Amount Coverage on the boat’s value. Actual cash value pays you what the boat could be bought for in the used market. Agreed Amount pays at the stated value on the policy.  Agreed value cost more but can provide better coverage.

If you own a boat larger then 26 ft, your are probably better served by an insurance policy called a Yacht policy.

Exclusions on a boat policy:

Boating outside U.S. and Canada waters (Lakes and coastal waters).

Mold, mildew, and Fungi

Lack of reasonable care and maintenance

Racing, unless a sailboat

Ice while boat is moored or laid up afloat

Insects, animals and marine life

Policy is Void if boat is used for business or rented to others.

WHY?:
Suppose that you had a machine in the living room of your home, that every month “spit out” about  $ 4,000.  Would you consider insuring that machine?  Sure you would.  You wouldn’t want someone to come and steal that machine from you as you would lose what that machine produces, $ 48,000 each year.  Well a “bread winner” is such a “money machine”.  A  family will need to replace this income and life insurance is the solution. 

RISK                                                      ODDS                               COST
 
Fire                                                      1 in 1200                  $ 200,000
Auto w/Liability                            1 in   240                   $ 355,000
Major Medical                                 1 in     15                    $   50,000
Long Term Disability                   1 in       9                     $ 160,000
Long Term Care                              1 in       2                    $ 100,000+
Death before age 65               1 in      5.5                 $ 500,000+ 

 What?: Life insurance is the solution, but the questions that stumps most is what amount and what type of  life insurance. 

The amount is called the face value of the life policy. Face values can range from 10K on up. The face amount for working adults with dependent spouses and children should look at replacing their annual income.  Most people’s incomes are generated to age 65 when they hit retirement age. For this reason we need to first focus on this time period of earning years, and not for the whole life. 

There are different methods for coming up with a face amount to replace the income. 

1) Live off the interest of the face amount and not touch the principal amount to replace the income. (Most conservative)
2) Do 5-8 times income face amount to provide an adjustment period for spouse and children. (More Flexible)
3) Just buying what is affordable as any life insurance is much better than nothing in the event of a tragedy.
You might already have some life insurance and you can subtract that out and the resulting number is your life insurance need or gap. 

Types of policies: 

1) Term policies that expire 10,20, or 30 years out from issuing. (good to cover just your earning years to age 65)
2) Annual renewal terms, these policies are typical of work group policies and can change premium year to year or lapse if job is lost. (easy but not permanent)
3) Whole life policy, never expires, and are the most costly. Can be used in some circumstances for tax deferment. 

WHO?: Any person that has dependents they want to protect, such as children, spouses, elderly parents in your care, etc. should have life insurance. 

WHEN?: Life policies are easier to qualify and a better rates when at a younger age (65 and younger). but can be obtained at almost any age for a price. 

 HOW?: To apply for a life policy personally versus being part of a group you must take a paramedical exam. The exam is paid for by the insurance company and includes health history questions, urine, and blood sample. It takes place at your home or office at your convenience. From there the insurance company determines a tier for pricing. Typically premier, preferred, or standard. 

How much?, a lot depends on age, term, and face amount, but for example policies can be had at 13 dollars a month for 150K 10-year term for a 30 year old.

 How to get proper coverage:

  To get proper coverage on a jewelry item it needs to be scheduled on the home or renters policy with a jewelry floater. In order to do so the insurance company will require an appraisal or a receipt dated within the last 2 years to verify the value. They will also ask for some extra premium! This rate is typically 1.75-3.00 dollars per 100 insured. For example the cost for a 10K item, would cost 200 per year at a rate of $2 per 100. Seems expensive but consider you are walking around with the value of some cars on

Benefits of scheduling jewelry:

Beyond the proper coverage limits, two other very important factors come into play.

1)     Floaters typically have a zero deductible. This is important as the average home policies deductible is 2000. So even for less expensive jewelry items it can make sense to “buy back” the deductible in this way.

2)     Floaters cover mysterious disappearances. This means it doesn’t have to be a theft like it does under the home policy. You could just accidently lose it in the lake, at the gym, etc.

Other Sub-limits catagories to be aware of:

1)      Firearms

2)      Fine arts

3)      Silverware, Goldware, Platinumware, and Pewterware

4)      Imported Rugs and Tapestries

5)      Money, Securities, Deeds, Valuable Papers

6)      Comic Books, Collectable

7)      Business Property

8)      Computers

The following is an article from Insurance Headlines on the study conducted for teenage drivers.

Driving after dark is the single most-dangerous risk a teenage driver can take and is more likely to result in death than drinking, speeding or disregarding a seat belt, according to a national 10-year study of highway fatalities released Thursday.

The report, conducted by the Texas Transportation Institute, used federal traffic fatality data from 1999 to 2008, a period in which the number of traffic deaths declined nationwide.

Safer cars, safer highways, seat-belt laws and drunken-driving enforcement have been linked to the drop in fatalities — all factors in darkness and daylight alike.

The Texas research indicates that nighttime driving was the No. 1 risk for fatalities among teenage drivers, followed by speed, distractions, failure to wear a seat belt and alcohol use.
Maryland, Virginia and the District have graduated licensing laws that limit driving privileges until teenagers gain experience, as do most states. The laws restrict hours for nighttime driving and the number of passengers that a teen can have in the car.

“If you add one kid in a car [driven by a teenager], you double the risk of crash,” Fette said. “With two kids, you triple it, and with three kids, it goes up by a factor of six.”

End of article.

As you can see night time driving presents many risk to come into play like  fatigue, driving in groups of teens, cell calls, texting, underage drinking, and  inexperience behind the wheel. Its perfect storm of risk that can happen in the night hours.

An inventory of your household goods, in both words and pictures, is essential to getting all the benefits that are due you.

Here some tips on how to do this:

 1) Photographs and videotape: You don’t have to be a professional photographer or cameraperson to do an inventory. Just take pictures or video of every room, wall to wall, floor to ceiling. Then take close ups of valuable items. Don’t forget the closets! When you are finished we are happy to keep electronic versions of clients records or you can keep then with a trusted friend or family member. Review the above every 2-3 years.

2) Sales receipts and appraisals: Keeping records such as these for high value or major purchases will insure you get the proper amount for these items. NOTE: jewelry, fine arts, firearms, and collectables have limited values unless the policy is endorsed.

3) Get organized: You could use a spreadsheet with serial numbers, purchase date, cost and item details, or if you are ready to take control of your inventory, Insurance Information Institute offers a free home inventory software that is wonderful.  It walks you through the whole process, keeps it organized and backs it up. You can get it here .

4) Avoid the claim: One way to avoid a theft claim is to mark your items with an engraving pen with an identifying number or drivers license number. This is great for high theft items such as electronics, power tools, appliances, computers, etc. We can mail a pen to you for free and it will allow you engrave your items on hard surfaces permanently and quickly. It’s as easy to use as a pen! Burglars will not want marked items, and we provide stickers so they are aware its marked.

 Taking these steps can make filing a claim mush less stressful and can speed up the time it takes to get paid on your claim.