Business Interruption Insurance

Business Interruption Insurance is the key when disaster strikes your business.

Business Interruption Insurance is the key to protect your business when disaster strikes.

Having good commercial insurance is essential to the long term stability of your business. It is a product that is necessary for you business, but a product you hope you never have to use. When there is a disaster that strikes your business, the quality of your coverage can mean the difference between a bump in the road and the end of your business. One key policy to help your business whether the storm when a disaster strikes is business interruption insurance.

According to the Insurance Information Institute, “Business interruption insurance compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the revenue you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt”.

This policy is normally offered as part of a Business Owners’ Package, but not always. It is important to confirm with your agent if this is included in your package. If it is not they will more than likely bring it to your attention as an add-on. It is a policy to strongly consider for your business. This business can help you pay necessary bills, retain key employees and may just be the difference between success and failure when a claim occurs.

In most states general liability and workers compensation insurance is required by law, but those are the bare minimum coverages any business should secure. Most businesses need several additional coverages to properly protect the organization. If you own property or vehicles their is a need for commercial property and auto coverage. If you own specialized equipment there may be a need for inland marine coverage. The one frequently forgotten coverage is business interruption coverage. Many small business owners fail to anticipate how they will pay their bills in the event a claim causes their business to be closed for a period of time. When this occurs the bills keep coming and payroll has to be met. If you are a cash strapped company, failing to secure this coverage may cause the ultimate failure of your business.

Communication is key!!!

Communication is key to limiting the workers compensation cost when you have an injured employee.

Communication is key when you have an injured employee.

Unless you have been living under a rock for the past decade or two, you probably realize that healthcare in America is a bit complicated. Add in an additional bureaucracy in the workers compensation system and the process can become down right frustrating for your injured worker to get the benefits they deserve. Dealing with this while also dealing with an injury is not exactly what your employee wants to be dealing with while trying to recover from an injury at work. Communicating with your employee throughout the entire workers compensation process is crucial to getting the worker the benefits the deserve, limiting the cost to your business and to getting the worker back on the job as soon as possible.

Communication should start as soon as the employee informs you there has been an injury. Who ever is the manager on duty when this occurs should inform the injured employee that the business is on their side and wants to see them get the care and benefits they deserve. Also the manager should let them know that the process to get your medical care paid for by the workers compensation system is a tad different than going to their local doctor. It adds a layer of bureaucracy to the situation, but the more likely you are to let them know you are there to help and then follow through with that message, the more likely the injured employee is to trust your business and eventually return to full time employment.

Communicating with not only the injured worker, but with the carrier is crucial as well. It is also important to keep your agent in the loop, but the carrier is the business that is equipped and responsible for helping you through this process. The main thing they can help you with is directing you to the proper facilities that are equipped to handle the workers compensation process. Speaking with the carrier about this and relaying the message to the injured employee is crucial to the ultimate success of your business.

Humans are creatures of habit. When people come to work they tend to create a habit related to that process. The longer they stay away from work, the more likely they are to develop new habits. When this occurs and the longer it occurs, the less likely the injured worker is to return to full time employment. This is when a claim can turn in to an extremely large cost to your insurance carrier and will be a part of your businesses loss cost ratio. The loss cost ratio is one of a few main factors carriers use to determine whether they are going to offer you coverage and how much to charge your business for premium. limiting the severity of any claim is crucial to keeping this ratio low.

5 Ways to Save $$$ on commercial insurance

5 Ways to save on Commercial Insurance

Partner with an independent insurance agent.

The first and foremost way to save money when you are purchasing commercial insurance for your small business is to partner with an independent insurance agent. Independent agents have the ability to shop your policy around to a number of carriers who are actively quoting policies in your industry and classification code. Carriers appetites for particular coverages and class codes can vary dramatically from carrier to carrier. If you use an agency who partners with only one carrier or a select few, you are putting your business at the mercy of those few carriers. If you are in a high risk classification code it may result in you only have the choice of one carrier. Independent agents can prevent this policy by shopping your policy around so you don’t have to.

Consider bundling your coverages

Carriers offer the ability to bundle policies in the form of a Business Owners Package (BOP) or Commercial Package Policy (CPP). The carriers do this as a way to save money for small businesses and the carrier benefits by securing more commercial insurance coverages from the small business owner. This benefits the small business community in many ways. First, it saves on premium because carriers are more willing to give a credit or discount if they know they are collecting on several policies. Also, and possibly more important, it prevents gaps in coverage. If a business owner purchases several policies from a number of carriers their may be a grey area in between the two policies that causes the incident to not be covered by the policies. Even if the occurrence is covered it usually takes a longer amount of time to get a pay out because the two carriers debate who is actually liable for the claim.

Set up a Safety Program

Safety Programs are a great way to limit your commercial insurance cost without a lot of time or effort from your business. Safety Programs can help you get coverage if you are in a hi-risk industry that many carriers are hesitant to quote coverage. It can also help you prevent a carrier from raising your rates due to a large or frequent claims in one term. On top of saving money on insurance premium, safety programs help your workforce stay healthy and productive which is good for your productivity.

Request a policy review.

A policy review can be asked for at any time on all commercial insurance policies. Periodically it is important to do this for a few reasons. One the review may identify you are in the incorrect classification code that is costing you unnecessary premium. This is especially important if you change something about the operations of your business. A great example of this would be if you are a landscaping company that has decided to add snow removal services to your business. Most insurance agents will exclude this part of the policy unless you specifically tell them you do snow removal. A policy review can either prevent an uncovered loss or lower what you pay in premium throughout the year.

Ask for available credits and debits.

Insurance agents interact with a lot of customers throughout a typical business day. These customers are usually from diverse backgrounds and they each have their own priorities when shopping for commercial insurance. Some just want to get the process over quickly so they can get back to running their business. Other business owners want to make sure they have their business insured to the fullest capabilities possible. Other business owners do not mind if it takes them an entire business day if they can save 5-10% on premium. Expressing your priorities to your agent is important to help them serve your needs. Additional credits or debits may be available for your business, you may just have to ask.

Illinois Contractor Surety Bonds

As a contractor in the state of Illinois, you will most likely run into a few, if not several, Surety Bond requirements. This should not worry you. While Surety Bonds can be a confusing line of insurance, for Illinois Contractors it can be quite a straightforward process. Many city and county municipalities will require the Surety Bond in order for you to obtain a license or permit to do work in that specific city or county. This means that you could possibly run into multiple cities or counties that have this as a requirement. One might think that you just buy one Surety Bond and you can use it for all of them right? Unfortunately that is not the case, as the Bonds are specific to each municipality that requires them, so the Bond you bought for The Village of Forest Park, will not be accepted by the City of North Chicago. When this happens, you should not worry too much. Even though for most contractors there is not a statewide Contractors Surety Bond, the Bonds for the municipalities are generally very inexpensive.

That takes us into the meat and potatoes of what everyone wants to know, how much will this cost me? As stated above they are usually very affordable, a policy will typically run around $50 to $125 for a one-year term. They generally do not require a credit check like other Surety Bonds, this is commonly referred to as “freely written,” meaning it does not go through underwriting. If you plan on doing work in a specific city/county for more than one year, you can usually purchase the Bond on a multiple year term and you will see some cost savings for extending the term.

These bonds can be taken care of over the phone in less than a ten minute conversation. You will just want to make sure you have the basic company information such as legal business name, address and contact information. Accuracy of the company information on your Bond is very important, if you do not match the name exactly how you filed your business name legally and how you are applying for the license/permit it could be denied by the municipality. The bonds are usually emailed and the electronic copy can be utilized to provide documentation to the municipality, but some do require original documentation. I always recommend asking how they would like you to file the Surety Bond to ensure there will not be any unexpected delays.

If you have an Illinois Contractors Surety Bond requirement or if you have questions, about Bonds feel free to call our agency and we will be happy to assist you with your Bonding needs.

Difference between “actual cash value” and “replacement cost”

There are many ways your insurance company can go about calculating the amount you will get paid in the unfortunate circumstance that you have an insurance claim. The two most common ways are referred to as ‘actual cash value’ and ‘replacement cost’. The price you pay in premium is dramatically different between the two coverages and so is the amount the insurer will pay out when a claim does occur.

Actual Cash Value

Actual cash value refers to an insurance policy that covers your property and some possessions for and agreed upon fair market price at the time they are lost or stolen. Since the items are damaged in the claim are used, “market value” means that depreciation will be factored in when your insurance company pays you for your claim.

Replacement Cost

Replacement cost refers to the amount it costs to replace what is destroyed. This policy will pay out a substantially larger amount than an actual cash value policy. This is because a replacement cost policy will pay to tear down a piece of property, haul off the damaged material and repair or rebuild the property to its original state. If the construction costs are higher now the policy will pay for the difference.

When a catastrophe happens, many business owners are happy they secured a replacement cost policy. For some business owners, the difference between the two policies can be the difference between keeping the business open and being for to close the doors for good. I strongly recommend you consider purchasing a replacement cost policy. At the very least you should have an honest conversation with your insurance professional about what risks your business faces and how much risk you are comfortable taking on.

Now a replacement cost policy does come at a substantial cost. The premium is substantially more for a replacement cost policy compared to an actual cash value policy. For new businesses just getting on their feet, an actual cash value policy is the only option because of their financial situation. This can also be the case for seasonal or cash strapped businesses. If this is the case, do not just settle for a lesser policy. Talk with your insurance professional about the difficulties you are facing to properly in sure your business. Many times they can find find a different policy or a different payment method to benefit you unique needs.

5 facts about insurance

5 little known facts about insurance, every small business owner should know.

General Liability covers my employees if they are injured at work

This is false. General Liability Insurance covers your businesses liability to third parties injured by the actions of your business. This goes for both property damage and bodily injuries. One thing a general liability policy does not cover is the injuries that occur to your employees. For these injuries you need a separate workers compensation insurance policy. Workers comp will cover your employees for medical care and some lost wages when they are hurt on the job and not able to work.

The only thing that determines your rate for insurance is your loss ratio.

There are many things that go in to how a carrier determines what you pay in premium for coverage. First is your classification code. It is pretty easy to understand that an accounting firm is taking on a lot less risk compared to a roofing company. The level of risk is going to be represented in the amount those businesses pay for premium.

Your personal auto insurance will cover your car when you are using it for business purposes.

You may need Hired and Non-owned Auto Insurance. This statement is not true. If you are using your car for business purposes, it is not completely covered under your personal insurance policy. The personal insurance policy will pay to cover the damages to your car, but it will not cover your liability to third parties. That liability falls on the shoulders of the business. For that reason, you will need to secure either a commercial auto policy or a hired and non owned auto policy.

You must pay your insurance premium in full up-front.

This is not true. Most commercial policies require 25% or more of the premium in order to get coverage in place than you pay 9 monthly payments over the last 9 months of the policy period. There are also options the insurance industry has developed to help cash strapped companies. This is the Pay as You Go option. Pay as you go can get coverage in place for only a few hundred dollars and then you pay premium each month based upon the monthly payroll. This is an excellent option for seasonal or cash straped businesses.

There is no need for Business Insurance if you work out of your home.

This is absolutely not correct. The liability needs you face are different if you work from home, but there are still risks you need to cover. If you drive to clients houses you need some form of commercial auto. If you have specialized equipment you may need inland marine coverage and if you offer professional advice you more than likely need professional liability. These are just a few coverages you may need for a home office and an experienced insurance professional can help you make sure your business is protected with just a short conversation. It is important to be thorough and honest during these conversations.

Drone Technology

How Drone Technology impacts the Insurance Industry.

Many new technologies impact many different industries on a daily basis. As long as there has been commerce taking place, there have been new and better technologies that have come along to shake up things for most industries. No matter if it was Benjamin Franklin discovering electricity in the 1700’s, Alexander Graham Bell inventing the telephone in the 1800’s, the Wright brothers inventing the airplane in the 1900’s or Mark Zuckerberg inventing Facebook new technology has been developed longer than the United States of America has been a country. Companies that adapt to technological change are the companies that succeed in the long term. Today, many technologies are changing our lives at a dramatic pace. None more apparent than drone technology.

Drone technology is advancing at a very rapid pace. As the technology advances the capability of the drone is growing and the price to enter the market place is dropping dramatically. Because of this people are buying up drones at an enormous pace. What far too many of these drone owners do not realize at this time is the type and amount of risk they are taking by operating a drone. This applies whether the drone is being used for commercial or personal use and whether the person is on their own property or on the property of a third party. Here are a few ways that drones will impact the insurance industry now and in the future.

What industries are using drones to do business?

Construction Industry – In the Construction Industry business owners can use drones to analyze a property in ways that were not imaginable just a decade ago. They also can aide construction companies in the repair of facilities after an accident or natural disaster.

Insurance Industry – The Insurance Industry is using the technology to examine properties after a natural disaster to get a jump start on which properties need the most examination and at what part of the property. In the future drone technology may be able to aide in the prevention of fraudulent insurance claims by taking pictures of insurable assets periodically throughout the policy period.

Real Estate – Real Estate agencies are able to get an in-depth look a the properties they are working with in new ways. They can use this technology to give their clients an even better idea of the property they are purchasing or selling.

TV Media – Drones will give the television industry the ability to get to even more places when covering live footage or it can allow a camera to get to a new place that was not possible before. Laws and legislation over the next few years will determine how much this technology will be allowed in the media.

Search and Rescue – Search and Rescue groups can use drones in some scenarios instead of helicopters. This will put the operator of the helicopter in danger less often and will allow the search and rescue teams to get to new places that a helicopter cannot access.

Beneficial impacts of the drone industry on insurance.

Drones and aerial photography can speed up the processing time for claims. With the use of drones the time to process a claim may move from a few weeks to a few days to eventually a few hours. Because of this quick turn around in processing, companies in the insurance industry will be able to hire less employees or it can free up more employees to service customers in different ways. This will increase the level of service they are able to provide and lower the price they are forced to charge customers for coverage.

Fraud Prevention is another beneficial part of the use of drone technology on the insurance industry. The main way drones can aide in preventing fraud is by allowing insurance carriers to more easily monitor what a property looks like throughout the period of the policy. If they can fly a drone out to observe your property once a month or even once a quarter it is more likely to be able to prevent people from filing fraudulent claims after a natural disaster like a hurricane or a tornado. This is a prime time for property owners to claim damage to their property was caused by the natural disaster when in reality the damage occurred much sooner and was not a covered loss.

Challenges drones present for the Insurance Industry

Start-ups will pop up that challenge the current business model. A few businesses have already poppped up to serve drone users in ways the traditional insurance industry is not able or prepared to.

Verfily and Dart Drones are two such companies that have already formed to fill a void in the drone market. Verifly is a that offers drone users the opportunity to buy insurance coverage for a small amount of time when they will be using the technology. When the drone is not in use they do not have to pay for coverage of the product. This is especially beneficial to businesses who want to use the technology, but may use the drone only a few times a month or even only a few times a year. Dart Drones is a business that sprung up because there currently is no industry standardized license for operating a drone. This business offers classes and certifications on the proper use of a drone. This will allow a business owner to show his insurance company the people using the drones are trained professionals and it is a way for the employee to show they are prepared to operate the drone for the needs of the business.

Like many things in life, every problem presents an opportunity. This is very much the case in the drone industry. Successful insurance industries in the future will be the companies that can harness technologies like drones for their benefit and use the technology to gain a new share of the market they did not have previously. The companies who are the quickest to adopt this technology and offer coverage for it users will position themselves to be the leaders in this potentially high growth portion of the insurance sector.

Work Comp Premium

How Your Workers Compensation Premium Is Calculated

No matter the size of your company, one of the most basic costs of doing business is insuring your employees against injury on the job. This makes your workers compensation premium one of the most precious fixed costs any business owner can make.

How Workers’ Comp Premiums are calculated:

Workers compensation premium is calculated according to how employees are classified (with regards to the specific type of work they perform) and the rate assigned to each employee classification. The premium rate itself is expressed as dollars and cents per $100 dollars of payroll for each class code. In most states, the NCCI determines the classification rate and experience modification factor (MOD).

Factors that Go into Setting Workers Compensation Premium:

Size of the employer’s payroll
Employee job classifications
Company’s claims experience

Premiums for work comp insurance are calculated by the formula below…

Payroll (per $100) X Classification Rate X Experience Modifier = Premium

How Your Payroll Affects Your Workers’ Comp Rate

The basis for an employer’s workers’ compensation premium is your payroll. For each $100 dollars of your payroll, there is a specific rate, which is determined by the classification codes of your employees. If you can keep detailed records for what employees are doing on multiple jobs or in different aspects of their job, you may be able to break out that portion of payroll and potentially save on premium.

Another huge thing to keep in mind is sub-contracted labor and 1099 employees. Many business owners make the mistake or think that if they have employees in this manner it does not affect their premium. If you are paying an employee as a 1099 instead of a W2 and they do not have their own work comp coverage then you are responsible for paying premium on those payroll dollars. There is not a week that goes by that I do not field this question or see this situation and I always have to educate business owners on it. The same thing applies to sub contracted labor. If you are not collecting certificates of insurance and verifying, they actually have coverage then you are responsible for the premium as well. Our goal is to help you understand everything possible that could end up costing you money at audit time. We do not want you to have a huge audit balance just as much as you do, so we do our best to let you know everything on the front side of getting a policy in place.

How Your Employer Classification Affects Your Insurance Rate

Businesses are separated into groups according to the type of work they do. The classification system identifies which type of work presents more risk to the employees performing these tasks.

How Your Experience Modification Factor Affects Your Premium

Your experience modifier – typically referred to as your Ex Mod – is a numeric representation of your company’s claim experience. Ex Mods are based on how your business compares to others in your industry with similarly classified employees. An average Ex Mod starts at 1.00. Employers with fewer and less severe accidents than average have a MOD of less than 1.00. This will generally take a few years of consecutive coverage to be effected one way or the other.

Flood Insurance

Anywhere it rains, it can flood. Most of us, when we hear the word “flood” think of overflowing rivers. But for most homeowners, a flood following a heavy rainfall is more along the lines of water spilling in through a window well or coming in through a lower-floor door. This can cause very much a grey area when it comes to flood insurance.

Flooding is the #1 natural hazard in the US. Even an inch of water can cause thousands of dollars in damage.

The situations that cause flooding—heavy rain, groundwater, or new development —can happen anywhere. In fact, one in five flood insurance claims comes from someone in a low- or medium-risk area. This is why, for many homeowners, flood insurance is an essential layer of protection. Adding flood insurance to your home-insurance package means you’re covered if a water main ruptures or a swimming pool collapses, and your home floods – situations not usually covered by standard policies.

That’s right, most basic homeowner policies don’t protect against flood damage. Neither do most business-owner policies. Only flood insurance can cover damage caused by a water accumulating in your subdivision or a drain burst.

FEMA

FEMA, the Federal Emergency Management Agency, recommends flood insurance to everyone. “There are still millions of Americans at significant risk of a flood damaging or destroying their homes. To protect against flooding and its consequences, all at-risk homeowners need to buy and maintain a flood-insurance policy.”

As you can imagine, there are rules and restrictions. For example, damage caused by moisture, mildew or mold may not be covered. Damage to your basement’s contents may not be covered. Especially susceptible things like fire arms or currency may not be covered. The good news is, those coverages are available. The cost of premiums vary based on the amount of coverage you need, what’s covered and your property’s risk. Check with us to find out more.

If you decide to purchase flood insurance, a federal flood policy would cover rebuilding costs up to $250,000. You can also get a NFIP (National Flood Insurance Program) policy to cover up to $100,000 in possessions. If your home would cost more than $250,000 to rebuild, you need private flood insurance called excess coverage.

Consider purchasing flood coverage sooner rather than later. Keep in mind there’s often a 30-day wait after purchase for a policy to take effect. So call me today about flood insurance. It’s rainy day protection that could help save your most valuable investment: your home or business.

5 blogs small business owners should be reading.

If you are a successful small business owner, you probably realized along your journey, you cannot do everything yourself. Who you surround yourself with and who you go to for guidance are as important to your success as your own personal attributes. One activity that many successful business owners have is reading. Reading the newspaper, reading books, even reading small nice blogs about your industry. Here are 5 small business blogs that all successful small business owners can benefit from.

MyInsuranceQuestion.com offers their list of the best Small Business Blogs.

The Harvard Business Review is one of the most well respected voices for small business advice in the country. It is one of the best places to find new ideas and classic advice on strategy, innovation and leadership, for global leaders from the world’s best business and management experts. HBR is generally a management magazine published by Harvard Business Publishing, which is a subsidiary of Harvard University. The magazine is published 6 times a year and the small business blogs are an area for more frequent advice.

Staples: Small Business Network The Small Business Network Blog from Staples.com focuses on a variety of topics including technology, marketing, risk management, human resources, disaster preparedness and operations.

The My Corporation Blog is another small business advice blog that many small business owners from many different industries can benefit from. My Corporation is a business that helps people during the initial phases of setting up your business. They can help businesses fill out the proper paperwork to incorporate and consult the business owner on which type of structure is best for your goals as a small business owner.

Moz is a company that operates in the industry of Search Engine Optimization. Moz is a group of the industry’s top experts who offer their best advice, research, how-tos, and insights to help you develop your SEO and online marketing skills.

Small Biz Trends offers advice in the areas of technology, management, marketing, social media, finance and general advice. It is an online publication focused on providing advice for small business owners, entrepreneurs and the people who interact with them. The blog solicits the advice of hundreds of expert contributors who bring up to date news, advice and resources you need to succeed no matter what industry you operate in.