Category: Liability

What Factors Influence Malpractice Premiums?

Posted on by shasha insurance

According to a November 2005 article published in the Insurance Journal entitled, “How to Write the Diverse Business of Lawyers Professional Liability,” between $1.5 and $2 billion is spent annually on Professional Liability coverage. With numbers such as these, it is important that any firm in the market for this insurance understand the factors affecting coverage rates.

Determining premium rates is a complex matter based on a combination of factors. However, there are two main factors insurers review when underwriting an insurance application. The first is your geographic location, because each state has a different risk assumption.  The level of risk is measured by the number of suits brought against other lawyers in your area. The second important factor is your practice area(s). You can expect to pay more for coverage if you specialize in high-risk areas such as securities, banking and/or real estate.

Other factors that insurers consider include:

·                                Liability limits and deductibles selected

·                                Breadth of coverage desired (prior acts, extended reporting, etc.)

·                                Number of attorneys covered

·                                Personal claims history of your firm’s attorneys

·                                Length of time covered attorneys have been associated with your firm

·                                Number of malpractice prevention controls utilized by your firm

The length of time covered attorneys have been associated with your firm is important, because insurers typically use step rates to calculate premiums for a new attorney.  Risk exposure increases during the initial years that an attorney practices as the number of potential plaintiffs increases with every new case. After a certain point, this risk flattens out.  So premium rates on a new attorney will automatically increase in set steps until the risk exposure matures.

It is also important to realize the significance reinsurance holds in determining premiums. Insurance is a way of transferring risk. You transfer risks to an insurance carrier, and the carrier will often transfer some of that risk to another company. By reinsuring, a carrier increases its capacity to underwrite more policies.  When reinsurance rates rise, the increased cost can be transferred to you in the form of higher rates.

Self-Insuring Workers’ Compensation Plans May Produce Premium Savings

Posted on by shasha insurance

Joining a workers’ compensation group self-insurance program may be a significant means for small and mid-sized employers to reduce operating costs. Such plans deliver savings by providing employers with considerable control over losses, medical care and rehabilitation, plus improving cash flow.

While some companies self-insure workers’ compensation programs individually, these are usually best suited for larger corporations with immense assets. For smaller and medium-sized businesses, a Group Self-Insurance (GSI) workers’ compensation plan is more suitable. A GSI is a non-profit association of employers formed for the specific purpose of providing workers’ compensation coverage. A GSI enables employers to assume a major portion of their risk and provides group purchasing power for excess insurance to cover individual losses or in the aggregate in excess of a specified amount.

Workers’ compensation is well suited for self-insurance plans because claims are typically of low severity but high frequency, which allows losses to be predicted with some accuracy. Further, payment for large claims can be spread over several years, which benefits a company’s cash flow. GSI programs enable companies to better manage safety programs and have more direct involvement in seeing that employees receive prompt medical care when injured, and employers are able to exercise closer monitoring of the return of the employee to work.

Requirements for joining or forming a GSI vary considerably from state to state. Some states do not allow GSIs and in other states, companies must meet certain solvency standards and provide financial and loss data to be considered. Also, if a company has operations in more than one state, GSIs must be setup in each state. A GSI in one state will not cover losses in another state.

Besides improved cash flow, the major benefits that come from joining or creating a GSI are enhanced loss experience through more effective loss prevention, loss control and managed care programs; reduced administrative costs, and interest income earned on premiums. GSIs in most states do not have to pay premium taxes and or be assessed for residual workers’ compensation market losses.

Members of a GSI pay a premium to the group based on their exposures, classification codes, payroll, experience modifications, and rates developed by a state’s workers’ compensation rate making bureau. At the end of the contract year, any surpluses from both the claims fund and the administrative expense fund can be returned as dividends to group members.

GSIs handle claims following guidelines of the state workers’ compensation laws. Often, third-party administrators handle loss prevention and control, case management, accounting, investment and actuarial services.

An agent can provide guidance to employers wanting to explore joining a GSI. An interested company should first seek management commitment as joining a GSI requires careful attention to the entire workers’ compensation program rather than shifting these responsibilities and duties to a private insurer. Also, an employer has to be willing to disclose detailed information regarding its finances, support systems and ongoing risks.

While GSIs offer important advantages, there are some disadvantages. Members of the group are usually jointly and severally liable for losses incurred by the entire membership. A bankruptcy or dissolution of a member does not release the remaining members from liability. If the GSI’s retention and excess insurance are exhausted by a catastrophic event, the group members must contribute their pro rata share of the total loss. And, if a GSI has a pattern of liberal underwriting for new members, it’s possible it will have financial deficiencies in the future.

If an employer understands the additional risks it assumes as well as the added reporting and administrative duties when it joins a GSI program, the end result could be a significant reduction in overall costs for workers’ compensation.

State Minimum Auto Liability Coverage is Inadequate

Posted on by shasha insurance

Sure, you’re a responsible driver. But is your state-minimum, bare bones auto insurance coverage really sufficient to cover your risks?

Yes, every state imposes a minimum on liability insurance coverage. This coverage not only protects you against having creditors forcibly seize your assets and land you in bankruptcy court; it also helps protect others around you, by ensuring that no matter what their medical issue or damages, there is enough liquidity on the table to make sure they are economically protected.

But state minimums aren’t designed for most individuals, especially the affluent and do not provide them with the real protection they need. State legislatures must set liability minimums low enough so that insurance coverage is affordable even for poor families – so at least they’ll get something rather than drive completely uninsured. State minimums are not designed to provide really adequate protection for drivers who have assets or make a decent income and are those who are targets for legal action.

The Owner is At Risk

Remember, even if you lent your car to someone else for the weekend – if he or she crashes it, and causes damage, it’s you, as the car owner, who is ultimately responsible. Owners are first in line, ahead of drivers, when plaintiffs’ lawyers start looking to collect on damages not covered by auto insurance.

How Big Can Judgments Be?

Judgments for damages in auto accidents are very frequently $50,000 and over and can range into the millions. We looked at actual judgments obtained by just one small law firm in Las Vegas, Nevada, and found instances like these:

  • $200,000 in liability for just one accident involving a motorcycle.
  • $265,000 for a T-bone auto accident.
  • $300,000 for a leg injury to a pedestrian.
  • $750,000 for a rear end accident with injury.
  • $2,000,000 for another rear-end accident with serious injury.
  • 2,900,000 for a wrongful death claim.

Your state-mandated minimum of $15,000 to $100,000 per accident should cover most fenderbenders, but it is woefully inadequate for the real risk. If you are sued, and the plaintiff wins, you will be held responsible for the whole judgment over the amount of your coverage.

Asset Protection

If someone involved in an accident sues you and wins, he will receive a payment from your insurance company, up to the limit of coverage.  When the payment is inadequate, they may take additional action. They may sue to seize your personal assets – your bank account, your vehicles, property, business and even your home in some jurisdictions. They may also file to garnish your wages. The fallout could easily force you into bankruptcy – and severely disrupt your life.

If you have any kind of hard-earned assets that are at risk of creditor action, you may want to consider buying extra liability coverage. The more assets you have, the more likely you are to be targeted. After all, plaintiffs’ lawyers know that judgments are easier to collect from the affluent than the poor. But even middle class people have a lot to lose by carrying inadequate liability insurance coverage.

Liability Insurance

You may consider two kinds of insurance: additional liability insurance for your car, over and above the state-mandated minimum, and umbrella coverage, which helps protect your assets against losses from a wider variety of sources. This can be especially important for parents of teenagers who are risky drivers and who may drive someone else’s car, or have a party at the house while you and other adults are out of town. When a youngster leaves the party at your house after drinking, and has a wreck, you could be held liable.

To assess your exposure, sit down with a licensed insurance professional, your attorney, or both. It’s easy to tailor a remarkably affordable plan to provide more realistic protection against the actual risks of liability – but you have to do it before the accident.

  • Fill your gas tank. Many times, gas stations
    run out of fuel in the day or so before a storm. If you can’t fuel your
    vehicle, you can’t evacuate. And you may not be able to function.
  • Get a battery-operated radio. Don’t
    count on cell phones working for a number of days after a storm.
  • You may be without power for as long as two
    weeks and sometimes longer. Keep nonperishables, batteries and flashlights.
  • Keep your generator outdoors. Every year, people
    die from carbon monoxide poisoning because they moved their generator indoors
    to protect it from theft.
  • Understand your generator’s capacity. Generators
    have a limited load. This is especially important to know when you start up
    electrical items connected to the generator, because startups cause a spike in
    electrical demand.
  • Know your neighbors. Your neighbors may have a
    harder time preparing or evacuating from storms than you do, because of
    frailty, disability, young children, poverty or lack of reliable
    transportation.
  • Look out for family members of emergency
    responders. Police, fire department, National Guard members and medical
    personnel often have to concentrate on preparing for the mission, and have less
    time to attend to their own homes and families.
  • Know your community emergency management contacts.
    You can find an online listing at https://www.ready.gov/community-state-info
  • Don’t underestimate tropical storms. Just
    because it’s not a hurricane doesn’t mean it can’t do a lot of damage locally.
    Tropical storms can dump as much rain as a hurricane.

    • By understanding these guidelines, you can be an asset to
    your community in the event of a hurricane, instead of a drain on emergency
    resources. You will also have an easier time getting reimbursed by your
    insurance company for any damage done, and be doing your part to keep overall
    hurricane insurance premiums down.

    Certificates of Insurance – A Prudent Means to Avoid Costly Claims

    Posted on by shasha insurance

    More and more companies are hiring independent contractors to handle not only administrative matters, such as benefits and human resources, but also sales and distribution. With this delegation of authority to third-party suppliers comes less direct control over these operations, and greater becomes the need for clients to demand that vendors provide them with timely Certificates of Insurance (COI).

    The COI proves that the insured (the third party) has purchased the insurance coverages as required by the outsourcing client. But, the COI also states that the holder of the certificate has no legal right to be covered by the insurance described in the COI, nor does it amend, extend or alter the represented coverage. The COI only shows that the outside contractor has the insurance coverage as explained on the certificate. This protects the business that has contracted with the third party against liability for negligence caused by the independent contractor up to the limits of the policy.

    It is the responsibility of the independent contractor to provide the COI to the client that has hired the firm. Usually a COI is prepared by an agent/broker with a copy sent to the insurance company and the client for whom the third party has contracted to perform certain functions.

    The COI contains the name of the insured, the name of the insurance companies issuing the policies as stated on the COI, what specific coverages are contained in the insurance policies issued to the insured, and various descriptions of normal policy terms, exclusions and conditions.

    Most often COIs are obtained for commercial general liability to provide protection from liability arising out of the insured’s premises or operations, products and completed operations. Usually, a general form will provide broad, standardized coverage terms. In cases, where the coverage is more complex and of a higher risk, manuscript forms of a COI can be written specifically by or for an insurance company. These manuscript COIs should be reviewed carefully for the scope of coverage being provided.

    There are two types of general liability forms — claims-made and occurrence. The trigger that compels the policy to respond is the main difference between the two forms. In the occurrence policy, occurrences are covered that take place during the policy period, no matter when a claim is reported. A claims-made policy requires that the occurrence take place during the policy period and the claim be reported during the policy period. Most COIs use the occurrence form for all independent contractors as claims-made policies limit coverage.

    But simply having a COI in hand does not always mean that the independent contractor has the insurance coverage. A prudent practice is to have a system to audit, review and correct the certificates to reflect the provisions in the contracts. Some clients establish an auditing program in house, while others have the insurance agent or broker manage the program as part of their fee arrangement. This cost depends greatly on the workload.

    The consequences of not monitoring COIs of a third party can be costly for the firm that hired the contractor. Consider this sobering example. A business hired an independent contractor to provide distribution service for the company. An employee of the vendor had a serious car accident, and soon afterwards, the contractor ceased business. When the employee began submitting workers’ compensation claims, there was no coverage — the contractor had never maintained that insurance. Unfortunately, the company had not insisted on a COI from the independent contractor to verify this coverage. Casting about for payment of the claim, the court ruled that the vendor’s employee was a statutory employee of the company that hired the contractor. The workers’ compensation claims have totaled more than $100,000 with more to come.

    This is just one of many chilling cases of companies that have been caught with unexpected losses that came from not requiring proper COIs from independent contractors and auditing them to make sure they remain current and reflect the actual coverages held by the insured.

    Understanding How Bicycles Are Insured

    Posted on by shasha insurance

    When the warm weather arrives, many bike owners dust off their bicycles and hit the road. Whether bike owners plan to participate in competitions or just take a ride around the block with the family, it is important for them to understand the rules of the road. It is also important to be adequately insured.

    Insuring A Bicycle
    Bicycles vary greatly in price these days. A simple model may cost several hundred dollars, and a racing bike may cost several thousand dollars. Personal property provisions in a homeowners or renters policy cover bicycles. This means bikes that are damaged or stolen are usually covered. Bikes stolen from cars are also covered under many policies. For personal property coverage, there are two options: Replacement cost coverage and actual cash value.

    Replacement Cost Coverage
    This type of insurance provides reimbursement for the cost of replacing a bicycle with a similar one at the current cost. Replacement cost coverage usually costs about 10 percent more than its alternative. However, it is still a wise investment.

    Actual Cash Value
    This option provides reimbursement for the actual value of the bicycle at its current age. This means a bicycle that is five years old would be valued at the cost of a comparable product. However, depreciation for the bike’s age would be calculated and deducted from that value.

    Liability protection is also granted in a homeowners or renters policy, so harm caused to others on their property will be covered. For example, if a policyholder crashes into a person on that person’s property and causes injuries, the policyholder’s insurance company will cover up to a specific dollar amount. It is important for all policyholders to know what their maximum coverage amount per incident is.

    Most people are insured for an amount between $300,000 and $500,000. However, some people purchase umbrella policies to expand that amount. The umbrella policy’s benefits kick in when the homeowners policy is maxed out. There is also no-fault medical coverage on a homeowners policy. This coverage usually ranges between $1,000 and $5,000. In the event of an injury, the injured party can simply submit a medical claim to the policyholder’s insurance company for hospital bills. Keeping a policy updated is the best way to avoid an expensive lawsuit.

    After purchasing a new bicycle, save the receipt. Call an agent immediately to notify him or her about the new purchase. Keep in mind that helmets, pumps, saddle bags, lights and special clothing should be included on insurance. People who own very expensive bicycles should purchase endorsements for their renters or homeowners policies. Many insurers have special endorsements for sporting equipment, and some even have specific endorsements for bicycles.

    Insurance is certainly one of the most important aspects of bicycle ownership. However, safety is equally crucial. To stay safe on the road this year, consider the following tips:

    – Always wear a helmet.
    – Make sure the bike fits properly and does not have any unsecured parts.
    – Ride on the correct side of the road, watch for traffic and use hand signals.
    – Learn and follow all the rules of the road.
    – Always stay alert, and be aware of surroundings at all times.
    – Avoid wearing headphones or a cellular headset while riding.
    – If necessary, take safety classes before hitting the road.
    – Be more visible by wearing bright colors, using lights and wearing reflective gear after dark.

    CERCLA Rights to Sue for Clean Up Costs Reinstated

    Posted on by shasha insurance
    In the case of United States v. Atlantic Research Corporation, the Supreme Court ruled that potentially responsible parties (PRPs) that voluntarily clean up contaminated sites may sue other PRPs to recover their cleanup costs under section 107 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The reinstatement of this right comes after many years of federal court battles over the issues of authority and methodology for recovering cleanup costs from other PRPs.
    When CERCLA was originally enacted, the courts interpreted section 107(a) as providing a method for PRPs to recover their costs from other PRPs. However, in 1986, Congress enacted the Superfund Amendments and Reauthorization Act (SARA). Section 113(f) of this law outlined explicit means for PRPs to pursue contribution from other PRPs. After the enactment of SARA, some federal courts held that section 113 was the only remedy for cleanup cost recovery. Other courts prevented PRPs from suing under section 107 of CERCLA and expanded section 113 to allow PRPs’ contributions without the need for a suit.
    Section 107 makes PRPs liable for “all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe” and “any other necessary costs of response incurred by any other person.” In Atlantic Research, the United States argued that the section 107 use of “any other person” was limited to suits brought by “non-PRPs.”  That meant that Atlantic Research, a PRP, was barred from filing suit. The Supreme Court held that all the words of the statute must be “read as a whole.” They added that using the United States’ reading of the language would decrease the number of plaintiffs permitted to sue to almost zero, which would make Section 107 worthless.
    Section 113 prohibits claims against PRPs who have satisfied their liability to the United States or a state in an administrative or court approved settlement. In Atlantic Research, the United States argued that permitting PRPs to seek recovery under section 107 negates the protection offered to PRPs who have settled under section 113. The Supreme Court conceded this. However, the Court stated that this “supposed loophole” would not discourage settlements because district courts would take into account any earlier settlements when assigning the level of liability to the various PRPs involved.
    The Supreme Court also ruled that section 107 and 113 provide two “clearly distinct” remedies. Section 107 permits PRPs to recover cleanup costs they have incurred from other PRPs. A PRP that has satisfied a settlement agreement or court judgment under CERCLA may pursue contribution from other PRPs through section 113. The Court made clear that simultaneous recovery under section 107 and section 113 is not allowed. PRPs can’t choose their method of recovery. The appropriate remedy will depend on the circumstances in each case.

    In the case of United States v. Atlantic Research Corporation, the Supreme Court ruled that potentially responsible parties (PRPs) that voluntarily clean up contaminated sites may sue other PRPs to recover their cleanup costs under section 107 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The reinstatement of this right comes after many years of federal court battles over the issues of authority and methodology for recovering cleanup costs from other PRPs.When CERCLA was originally enacted, the courts interpreted section 107(a) as providing a method for PRPs to recover their costs from other PRPs. However, in 1986, Congress enacted the Superfund Amendments and Reauthorization Act (SARA). Section 113(f) of this law outlined explicit means for PRPs to pursue contribution from other PRPs. After the enactment of SARA, some federal courts held that section 113 was the only remedy for cleanup cost recovery. Other courts prevented PRPs from suing under section 107 of CERCLA and expanded section 113 to allow PRPs’ contributions without the need for a suit.Section 107 makes PRPs liable for “all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe” and “any other necessary costs of response incurred by any other person.” In Atlantic Research, the United States argued that the section 107 use of “any other person” was limited to suits brought by “non-PRPs.”  That meant that Atlantic Research, a PRP, was barred from filing suit. The Supreme Court held that all the words of the statute must be “read as a whole.” They added that using the United States’ reading of the language would decrease the number of plaintiffs permitted to sue to almost zero, which would make Section 107 worthless.Section 113 prohibits claims against PRPs who have satisfied their liability to the United States or a state in an administrative or court approved settlement. In Atlantic Research, the United States argued that permitting PRPs to seek recovery under section 107 negates the protection offered to PRPs who have settled under section 113. The Supreme Court conceded this. However, the Court stated that this “supposed loophole” would not discourage settlements because district courts would take into account any earlier settlements when assigning the level of liability to the various PRPs involved.The Supreme Court also ruled that section 107 and 113 provide two “clearly distinct” remedies. Section 107 permits PRPs to recover cleanup costs they have incurred from other PRPs. A PRP that has satisfied a settlement agreement or court judgment under CERCLA may pursue contribution from other PRPs through section 113. The Court made clear that simultaneous recovery under section 107 and section 113 is not allowed. PRPs can’t choose their method of recovery. The appropriate remedy will depend on the circumstances in each case.

    When It Rains, It Pours: Why You Need a Personal Umbrella Policy

    Posted on by shasha insurance

    In recent years, our society has become what some people call “lawsuit happy.” In other words, an increasing number of people are filing lawsuits for everything from emotional injury to property damage-and they’re suing for larger amounts than ever before. If someone were to file a lawsuit against you, you could end up losing hundreds of thousands of dollars or more, even if you won.

    While you may have some personal liability coverage through your homeowner’s or auto insurance policy, it’s probably not nearly enough to cover a major lawsuit. Fortunately, you can further protect yourself with what’s known as an umbrella policy. This type of policy offers a higher level of liability coverage and ensures that you and your family will be protected if someone sues you for damages.

    Read on to learn more about these valuable policies:

    Umbrella policies: A liability coverage “extension”

    When it comes to lawsuits, the more assets you own, the more you stand to lose. A personal umbrella liability policy can protect you from these potentially devastating losses. These policies act as an extension to the current liability protection you probably have through your homeowner’s or auto insurance policy.

    Umbrella policies are typically sold in million dollar increments, and you can obtain a policy once your home and auto insurance policies meet a minimum “attachment point”-typically a liability limit of $250,000 or $500,000.

    What does it cover?

    Most umbrella policies covers the following:

    • Personal injury, including false arrest, mental anguish, malicious prosecution, libel, slander, defamation of character, wrongful entry or eviction, negligent infliction of emotional distress or invasion of privacy.
    • Bodily injury, such as physical injury or death. In some jurisdictions, this also includes emotional injury.
    • Property damage, including destruction of the property of others, cost of recreation and loss of use. However, it does not cover damages done to your own property.
    • Defense coverage, including groundless, false and fraudulent suits, bail bond costs, loss of earning and other “reasonable” expenses.

    Of course, it’s probably easier to understand exactly what an umbrella policy covers by putting it into real-life terms. Here are a few examples of what this type of policy could cover:

    • A deliveryman is hauling your new washing machine into your home when he trips on your door mat, falls and breaks his neck. Your umbrella policy would likely cover the hundreds of thousands of dollars worth of damages.
    • You’re driving down the road when an important corporate CEO steps into the crosswalk in front of your car. He sues you for millions of dollars in medical costs, lost earning and damages. Your umbrella policy can cover you for these damages.
    • Your daughter invites a friend over to play on her swing set. Her friend falls off the slide and suffers from serious injuries. When her parents sue you, your umbrella policy will cover the medical costs.

    How much does is it cost?

    The price of an umbrella policy depends on how much coverage you want, the number of properties you rent or own and the number of automobiles or watercraft you own. The cost associated with cars and watercraft are much higher than those associated with properties.

    Let’s say you are single, you own one home and one car, and you want to purchase a $5 million umbrella policy. You’ll probably pay somewhere between $270 and $550 a year. On the other hand, if you are married with two children, you own two homes, a rental property and three cars, and you want a $10 million umbrella, you’ll probably pay a good deal more-anywhere between $970 or $1,750 a year.

    Talk to your insurance agent to discuss whether or not an umbrella policy is right for you. In the long run, by paying a few hundred dollars per year, you could save millions.

    Duke Study Says Obese Workers File More Worker Compensation Claims

    Posted on by shasha insurance

    A Duke University Medical Center study revealed that obese workers filed twice the number of workers’ compensation claims as non-obese workers. In addition the over-weight workers had 7 times higher medical costs from those claims and lost 13 times more days of work from work injury or work illness than did non-obese workers.

    The results of the study were published April 23, 2007, in the Archives of Internal Medicine.

    The researchers looked at the records of 11,728 employees of Duke University who received health risk appraisals between 1997 and 2004. Duke ordinarily gathers this information anonymously as a way of identifying potential areas of occupational risk in order to develop plans to reduce that risk. The analysis covered a variety of occupational titles, such as administrative assistants, groundskeepers, nurses and professors.

    The study compared the relationship between body mass index (BMI) and the rate of workers’ compensation claims. BMI assesses a person’s weight in relationship to their height, which is why it is considered the most accurate measure of obesity. For Americans, a BMI of 18.5 to 24.9 is considered normal; 25 to 29.9 is considered overweight, and 30 and above is considered obese.

    The researchers discovered that workers with a BMI greater than 40 had 11.65 claims per 100 workers, compared with 5.8 claims per 100 workers for employees with a normal weight. They also found that obese workers averaged 183.63 lost days of work per 100 workers, compared with 14.19 per 100 workers for employees of normal weight. The average medical claims costs per 100 workers was $51,019 for the obese and $7,503 for the non-obese.

    The study showed that the body parts most susceptible to injury among obese workers were the lower extremities, wrist or hand, and back. The most common causes of these injuries were falls or slips, and lifting.

    The researchers concluded that their findings were applicable to the community as a whole, since the demographics of Duke closely reflect the local area. They plan to use the Duke population to help the community, so the solutions they devise can benefit the community as a whole.

    However, the primary message they hoped to deliver is that the solution to reducing the burden on workers’ compensation involves eliminating both individual risk factors such as obesity and the risk factors within the workplace that cause injury. By targeting obesity and workplace risks simultaneously, businesses can reduce absenteeism, increase the overall health of workers, and decrease the cost of health care.

    Do You Need an Umbrella? Here Are Some Things to Consider

    Posted on by shasha insurance

    Standard auto, homeowner’s and boat insurance policies cover liability a person may have for injuries or property damage suffered by someone else. Insurance companies design them to cover accidents for which the insured person may owe tens or even hundreds of thousands of dollars. However, sometimes the person may be responsible for an accident so catastrophic that the damages are $1,000,000 or more. To cover financially devastating events like these, insurance companies offer personal umbrella policies. These policies provide additional protection when an accident uses up the amounts of insurance provided by the other policies. They may also cover some types of losses these other policies do not cover.

    There is not a “standard” umbrella policy; each company’s offering will be different. Therefore, it helps to have a checklist of considerations when evaluating a policy.

    First, identify those things that could expose you to a catastrophic loss. How many cars do you own? Do you have inexperienced drivers in your household? Household attractions like swimming pools, trampolines, and swing-sets present an exposure to severe losses. Boats, like cars, can cause serious injuries and damage if the operators are inattentive, intoxicated, or inexperienced.

    Next, identify other exposures you may have that do not involve potential physical injury or illness or property damage or that might require different coverage. Do you or any members of your family participate in social media Web sites or online discussion forums? Does anyone coach a youth sports team, belong to the governing board of a non-profit organization, write computer code as a hobby, or give music lessons? These activities present different exposures to legal liability.

    Review your insurance policies. How much will your auto insurance pay for injuries to one other person? How much will it pay collectively for injuries to more than one? How much will it pay for property damage? How much will your homeowners policy pay for your personal liability for an accident? Does it cover any business activities? Does it cover family members accused of slander, libel, or defamation of character in online postings? Does it cover you for allegedly causing mental anguish to a kid who didn’t get much playing time on a team you coached, or trouble caused by a computer program you wrote? How much will your boat-owners policy pay for your liability for boating accidents? The answers to these questions will tell you where an umbrella policy can help.

    For example, if your auto policy will pay up to $250,000 for injuries to one person and $500,000 for injuries to multiple people, an umbrella with a $1,000,000 limit will give you insurance equaling $1,500,000 for injuries to two or more people. If your homeowners policy will pay up to $300,000 for your liability, the same umbrella will afford $1,300,000 if someone gets seriously hurt at your home. The umbrella limit of insurance also applies on top of the limit on the boat policy.

    In addition, the umbrella may cover things like volunteer activities, statements made online, and certain business activities that a homeowner’s or auto policy might not cover. Normally, the insurance company will require you to pay a deductible amount (such as $250 or $500) before it will pay for a loss that one of these other policies does not cover.

    A professional insurance agent can help you sort out what your current insurance does and does not cover and what additional coverages an umbrella will provide. It is important to compare all the coverages the policies provide and not just their prices. Fortunately, catastrophic accidents are extremely rare, but having an umbrella policy when they happen can make it easier to get through them.

    Six Reasons Your Home-Based Business Needs a Small Business Policy

    Posted on by shasha insurance

    Like most new home-based business owners, you believe your homeowner or renter’s insurance coverage offers sufficient protection.  That is unfortunate, because in most instances these policies offer little to no coverage for business-related losses.

    Homeowner’s policies are not designed to cover business losses.  Most offer a small amount of business property coverage, meant to cover incidental items, such as a computer used for office work. 

    Depending on your business, you may be able to purchase a homeowner’s endorsement to cover your business property.  Your insurer is naturally going to want to know more about your business.  Questions such as what type of business, how long you have been in business and how many employees are common.

    If your business is small with a low risk profile, and with limited client visits to your home, your homeowner’s insurer may offer limited liability protection. This protection would cover slips and falls when a client visits your office, which otherwise would not be covered.

    If this option is not available, you may want to consider a small business policy.  Your homeowner’s insurer might offer a home-based business package for a reasonable premium, or another insurer can offer a package policy to cover the liability and property of your business.

    Take a look at the following list.  If one or more of the items below apply, you may want to consider a business policy for your business:

    o                   Business Property, Stock or Equipment over $10,000 in value

    A business policy will allow you to insure your office contents, equipment, and stock. A homeowner’s policy will likely have little, if any, coverage for business-related items.

    o                   Clients visit your office/use your product/depend on your service

    Liability insurance can help cover your exposure to lawsuits resulting from slip and falls, product liability claims, personal injury claims, etc.  Perhaps even more importantly, it will provide defense costs for such actions.  Homeowner’s policies do not have coverage for business liability.  In a few instances, you may be able to purchase an endorsement to allow coverage for slip and falls due to customer visits, depending on your type of business.

    o                   Damage to your office/workspace would require you to relocate/find a temporary substitute

    Extra Expense coverage in a business policy will provide funds for a temporary office/workspace or cost of a mobile trailer near your damaged office site.

    o                   An Error or Omission could result in a lawsuit that would need to be defended/could seriously damage your business

    Errors and Omissions coverage will protect you from judgments and defense costs resulting from past mistakes. 

    o                   Damage to your workplace could cause you to lose business, perhaps even lose some customers permanently

    Business Interruption Coverage will help pay for expenses until your property is repaired or sales return to normal (depending on the policy form)

    o                   Your employees use their vehicles to make deliveries or run errands for your business

    Non-owned automobile liability will protect your business in the event that your employee has a serious accident during the course of running an errand for your business.