What Does Your Business Insurance Plan Really Say?

Business insurance plans cover you in three primary areas: worker's compensation, property and liability. All 50 states require worker's compensation insurance which provide coverage if an employee is injured on the job. Property insurance covers all losses incurred by damage to the building, assets or property of the company. Liability insurance is more difficult to define. This portion of your business insurance plan will cover losses due to legal suits which may include wrongful termination, sexual harassment or any harmful advice provided to a client. Insurance is nuanced. Knowing a few key terms will help you understand your policy

Insurance Premium
Your premium is the amount you pay to an insurer in order to have your policy placed. Some premiums already include a markup for an insurance agent; this fee structure is called a gross fee. Ask if your premium is gross or net. If you are not working with an agent or broker, you may be able to secure a lower cost by paying net fees. Premium is the factor most people focus on because it directly affects a balance sheet. Remember: low business insurance plan premiums are only valuable if they indeed cover your losses.

Deductible is the term used for a portion of your loss that is covered on the policy but not paid by the insurer. In a business insurance plan, there may be many types of deductibles. For example, a per-occurrence deductible is the amount you must pay on a single covered loss before the insurance company pays. Aggregate or yearly deductibles may be applicable. This form of deductible means you must cover a certain amount per year prior to the insurer paying a claim.

Self-Insured Retention
A self-insured retention (SIR) expresses the amount you owe on a policy prior to an insurance company paying. An SIR may seem like a deductible, but they vary in two key ways. First, the deductible is subtracted from the policy limit. Your policy limit is added on top of your SIR. Second, your insurance company typically pays your deductible then seeks reimbursement. You are responsible for directly paying your SIR. Structuring your SIR appropriately can allow you to cover small claims to lower your premium. Your insurance policy will only be used in case of a catastrophic claim.

Be wary of exclusions in your business insurance plan. Exclusions express specific hazards or circumstances not covered. Typically exclusions are provided in situations where you face a catastrophic loss due to your location or industry. You will not qualify for general property or liability insurance in that case. For example, if you are located on a fault line, Earthquake coverage may be excluded. You may have to purchase an add-on clause to cover any losses.

Coverage Form
Your business insurance plan will start with a coverage form. This usually includes the insuring agreement, conditions of coverage, any exclusions and all definitions needed to understand your policy. If you are confused about a line of coverage, look at your coverage form. Take time to meet with your insurance company or agent to discuss the coverage form and any outstanding questions. Insurance agents are used to receiving a lot of questions. Do not be afraid to ask.


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