Some common phrases I hear when talking to clients.
1) That wont happen to me.
2) I never make claims.
3) I pay so much premium and get nothing back.

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.

First, start by imagining a disaster. One day, you get to work — the first one there as usual. You find the door already unlocked, which sends up a big red flag in your mind because you know you locked the door the previous night. (You are last to leave as well.) You open the door and find . . . desk drawers open, file cabinets overturned . . . and the personal computers on each desktop — where are the PCs?

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.

You’ve just started your vacation.  You’ve arrived at your destination, collected your luggage, and are in the process of renting a car. You’ve given the person behind the counter your drivers license and credit card, and now you’re being asked if you want to buy their insurance.

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.