Shubert & Associates Insurance Blog

What impact would the death or disability of an owner or key employee have on the continued success of your business?

Friday, June 25th, 2010 | Commerical Insurance | No Comments

“Business Interruption Insurance”

Tuesday, June 15th, 2010 | Commerical Insurance | 2 Comments

“Business Interruption Insurance”

It is estimated that between one-third and one-half of all businesses have no business interruption insurance. Almost half of businesses that experience a serious loss never reopen…over one-fourth of those that do, close within 3 years. A major reason that many businesses don’t survive a serious loss is the lack of business interruption insurance or inadequate limits of that coverage.

 Most businesses carry “fire insurance,” as it is commonly called (though fire is just one of many perils covered by business insurance policies. Such insurance is usually required in order to get a mortgage on a building or to secure a loan using property as collateral. However, it is estimated that between one-third and one-half of all businesses have no business interruption insurance.

 A major reason that many businesses don’t survive a serious loss is the lack of business interruption insurance. What is business interruption insurance and why is it needed? As an analogy, most individuals need at least three types of personal insurance. First, they need life insurance in case they meet an untimely demise. Second, they need medical insurance in case they have an extended illness or injury. Third, they need disability income insurance to offset their lost income while ill or recuperating from injury.

A business also needs these same three types of insurance coverages. The first two are provided by commercial property insurance which, like life insurance, pays for direct damage to property if it is totally destroyed by a covered peril. Like medical insurance, commercial property insurance also pays for the cost to repair the property if it is only damaged and not completely destroyed.

 The insurance coverage that is often overlooked is business interruption insurance which is comparable to disability insurance in that it pays for the business’s loss of profit and expenses that continue while the business is not fully operational during repair or relocation following a loss. Almost half of all businesses that experience a serious loss never reopen their doors and over one-fourth of those that do, close within 3 years. Again, a major factor in such business failures is the lack of adequate business interruption insurance.

Business income insurance covers three types of losses or expenses that occur while the business’s operations are interrupted or curtailed: (1) loss of profits, (2) continuing expenses, and (3) extra expenses. In addition to its loss of profits, a business must continue to pay some bills whether its doors are open or not. Some businesses will incur extra expenses in order to remain open at a temporary location. Business interruption insurance pays for these losses and costs.

Business interruption insurance is offered within two major types of business insurance packages. First, half or more of all businesses are eligible for “Businessowners” policies. These are package policies that incorporate many of the most commonly needed insurance coverages. Most “BOP” policies, as they are often called, include business interruption insurance without any specific dollar limit, but rather a time limit which is typically 12 months. Following major disasters, a year’s worth of virtually unlimited coverage can mean the difference between survival and business failure. Unfortunately, not all businesses are eligible for a BOP policy, not is it appropriate for all businesses.

BOP policies are typically limited to smaller, low-hazard retail or service businesses. Other businesses are usually insured under a Commercial Package Policy, or “CPP.” These packages are much more flexible than BOPs because they include many optional coverages not available under a BOP policy. A downside, though, is that the coverages built into a BOP policy must be added separately in a CPP.

Business interruption insurance is a good example of such a coverage. Unlike a BOP policy where there is a time limit rather than a dollar limit, under a CPP, there is a dollar limit but no time limit for business interruption insurance. The biggest problem with this approach is that many business owners grossly underestimate the amount of coverage they need during the coming year.

To determine the proper limit, the business owner must determine, in the event of a total loss, how long it would take to rebuild or relocate and restore operations to their pre-loss level. Next, he or she must determine what would be the worst time of year for such a loss to occur, how much profit would be lost, and what expenses would continue or increase during that specific time period.

If the business is new or rapidly growing, the business owner can easily underestimate the amount of insurance needed and, as a result, incur penalties for underinsurance built into the policy. For situations like this, business interruption insurance often includes options that eliminate to some extent, and for a price, the underinsurance penalties in the policy, though the limit itself may still be inadequate.

Also, keep in mind that, after the business reopens its doors after several months, the level of business will almost certainly not be the same. However, business income insurance normally stops as soon as the business is fully operational again, regardless of the income stream at that time. Therefore, the business owner may need to purchase what is called an “extended period of indemnity” coverage. This pays the difference between what the business would have earned if it had never had a loss and its actual depressed income stream while it rebuilds its customer base.

One of the reasons some business owners don’t purchase this coverage is because, as you can see, it can get rather complicated. That’s why it is important to seek the counsel of a good independent insurance agent who is experienced in placing commercial insurance.

Certificates Of Insurance

Monday, May 3rd, 2010 | Commerical Insurance | 1 Comment

Business transactions frequently require insurance coverage. A Certificate of Insurance is a document that is often requested as proof that adequate insurance exists. A certificate is not the same as a policy and certificates do not affect the coverage provided by a particular insurance policy. Therefore, requests to “endorse the certificate of insurance” are inappropriate and misleading. A certificate is a separate document used to comply with a common contract requirement to verify certain types and amounts of insurance.

Certificate holders, the entity or party requiring the certificate, often demand that they appear as “additional insureds.” This requires an endorsement (change) to the policy and it gives them coverage for injury or damage resulting from the contract.

Example: Tenant A leases a building from Property Owner B. Property Owner B demands that the tenant changes its insurance policy to also show the property owner as an additional insured. If a tenant’s customer is injured on the premises and sues both the property owner and the tenant, the tenant’s liability policy would provide coverage for both parties.

Construction contracts require certain forms of insurance, certain insurance limits, a hold harmless agreement and additional insured requirements. A “hold harmless” agreement is a contract provision that states how much responsibility each party accepts for damages arising out of the agreement.

A Certificate of Insurance can confirm that the appropriate policies were issued and that the other requirements were also met. It is important to have a system for monitoring receipt of the Certificates of Insurance BEFORE any sub-contractors are allowed to begin work. If Certificates are not obtained or kept up-to-date, when the contractor’s Workers Compensation and General Liability policies are audited, the payroll for the sub-contractors without Certificates will be included with the contractor’s resulting in an additional premium charge.

Ask your insurance agent to help determine if you should be obtaining Certificates of Insurance from your business relationships. In addition, when you’re required to provide a Certificate, send your agent a copy of the contract. The contract allows the agent to assist you in determining what liabilities you are accepting and what can be done to modify your insurance program to best protect your financial well-being.

Small Businesses: Don’t Let Business Risk Share Your Home

Thursday, April 29th, 2010 | Commerical Insurance | No Comments

The diversification of the U.S. economy over the past generation has meant that millions of Americans have started their own businesses. Americans still chase the dream of being their own boss by starting their own business—and the trend may pick up during the economic slump of 2009 because of hiring slowdowns and spikes in corporate layoffs.

Small businesses are the biggest driver of job growth, generating 60 to 80 percent of net new jobs annually over the last decade, according to the U.S. Department of Commerce. Small firms employ half of U.S. workers.

And the sole proprietor is alive and well: In 2005, there were six million firms with employees but a whopping 20.4 million firms who had no employees other than the owner, according to the Small Business Administration.

Of all small businesses, 52 percent are home-based. That means millions of Americans are earning their business income where they live. But business owner beware: Don’t expect homeowners insurance to cover business risks.

Business insurance offers protection from liability and property risks. Often these coverages are combined into a package policy called a BOP or business owner’s policy. Millions of small and mid-sized business owners purchase or renew their BOP every year.

Typically, a BOP includes the following coverages:
Property insurance for buildings and contents of the business. Home-based business might not need coverage for their property, since it’s already insured against risks of fire, lightning and windstorm. But if there are additional risks to the structure because of the presence of business operations, those won’t necessarily be covered by homeowners insurance. Your Trusted Choice® insurance agent can help determine if a special endorsement or a separate policy are most appropriate.

Shon Messer, MSFS,RFC
Senior Partner/Your lifetime Insurance Partner

http://www.shubertinsurance.com

Phone: 205-640-5892

Managing your commerical insurance cost

Thursday, March 11th, 2010 | Commerical Insurance | 2 Comments

As a business owner, you’re accustomed to taking some risks, but taking risks with the insurance that covers your business vehicles is never a good idea.

You might think the right coverage can be pricey but, believe it or not, you can control some of your insurance costs. Leading commercial auto insurer Progressive offers these tips:

Monitor Your Employees’ Driving Records — Driving records influence rates, so business owners should notify potential hires that they could review their Motor Vehicle Records (MVRs). Ask your local independent insurance agent for help with this. While a Commercial Driver’s License (CDL) may not be required to operate your vehicle(s), you may find drivers who have them are more skilled and could qualify for pricing discounts.

Make Sure You Have Continuous Coverage — Never let your insurance lapse; if you do, you most certainly will pay more for your next policy because most insurers want to see proof of prior coverage.

Ask Your Agent About Discounts — There are a lot of them out there. For example, Progressive offers discounts to companies who pay in full, have been in business for more than three years, and more.

Keep an Eye on Your Credit — Some insurance companies use information about your credit history in helping to determine your rate. Ask your agent specifically what information each company looks at so that you understand what’s influencing your premium — positively and negatively.

Look for a Bill Plan to Fit your Budget — Some insurance companies have significant finance charges associated with their bill plans, or they have few pay plan options. When considering the total cost of insurance, look for companies with flexible pay plans, including low down pays and no finance charges.

Bottom line: regularly reviewing business expenses like insurance costs can save you money. And with commercial insurance from Progressive, your policy will be backed by superior claims service and 24/7 customer service.

For more information, Call Shon Messer 205 640 5892

Is Your Business Properly Insured? Find out by Asking Your Insurer the Four Most Important Questions

Sunday, February 21st, 2010 | Commerical Insurance | 3 Comments

NEW YORK, February 9, 2010 — Running a successful business in today’s economy is no easy feat. In addition to typical risks such as theft and fire, there are a host of other risks that are unique to each particular type of business. So it is essential that businessowners, now more than ever, make sure they buy the right type and amount of insurance and update their policies annually to include improvements, major purchases and increased rebuilding costs as well as any liability risks, according to the Insurance Information Institute (I.I.I.).

“One of the biggest mistakes business owners make is that they don’t buy the right type of insurance and often have gaps in their coverage,” said Loretta Worters, vice president, I.I.I. “Businessowners should contact their insurance agent or company representative annually to make sure that their insurance is adequate.”

A Businessowners Policy (BOP) is recommended for most small businesses (usually 100 employees or less), as it is often the most affordable way to obtain broad coverage. BOPs are sort of “off the shelf” policies combining many of the basic coverages needed by a typical small business into a standard package at a premium that is generally less than would be required to purchase these coverages separately. Combining both property and liability insurance, a BOP will cover your business in the event of property damage, suspended operations, lawsuits resulting from bodily injury or property damage to others, etc.

BOPs do NOT cover professional liability, auto insurance, workers compensation or health and disability insurance. You will need separate insurance policies to cover professional services, vehicles and your employees.

For medium-sized and larger businesses, there are more comprehensive commercial policies. To properly insure your business, the I.I.I. suggests that you ask your agent or company representative these four important questions to determine the right type of policy and amount of coverage:

1. Do I have enough insurance to rebuild my business property and replace all of my merchandise and possessions?

A Building and Personal Property coverage (BPP) policy is commonly used to cover any combination of the following three broad categories: the building, your business personal property and the personal property of others. Usually the covered building is owned by the insured. However, a lessee might insure a leased building when required to do so by the terms of the lease.

Your Business Personal Property coverage includes seven specific categories:
1.Furniture and fixtures
2.Machinery and equipment
3.Stock (i.e., merchandise held in storage, including raw materials, work in-progress and finished goods)
4.All other personal property owned by you and used in your business
5.Labor, materials or services furnished or arranged by you on the personal property of others
6.If a tenant, the improvements or betterments you have made
7.Leased personal property which you have a contractual responsibility to insure
It is vital that the value of your property be accurately reported and updated annually to reflect inflation and other increases in cost.

2. Do I have enough insurance to protect the personal property of my employees?

In order to protect the property of your employees, you will need to add Personal Effects and Property of Others coverage to your policy. This coverage permits the insured to extend up to $2,500 worth of its business personal property coverage to personal effects of the insured and its officers, partners or employees and personal property of others in the insured’s care, custody or control. The personal effects coverage does not include theft, even if theft is a covered cause of loss under the policy.

If the $2,500 limit is inadequate to cover personal property to others in the insured’s possession, a higher limit can be purchased.

3. Do I have enough insurance to keep my business open?

A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential. That is why business interruption insurance is so important.

“Make sure the policy limits are sufficient to cover your company for more than a few days,” said Worters. “After a major disaster, it can take more time than many people anticipate to get a business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in,” she added. “Too many businessowners fail to think about how they would manage if a fire or other disaster damaged their business premises so that it was temporarily unusable.”

The price of the policy is related to the risk of a fire or other disaster damaging your premises. All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fire. Also a real estate agency can more easily operate out of another location.

There are typically three types of business interruption insurance. You can purchase any one of these or any combination of them that would make sense for your business:
■Business income coverage – Compensates you for lost income if your company has to vacate its premises due to disaster-related damage that is covered under your property insurance policy. Business income insurance covers the profits you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, such as electricity, that continue even though business activities have come to a temporary halt.

Review your annual financial records with your accountant to determine your annual net profit (total revenue minus total expenses). You should also have an approximate idea of how much profit you make (and would therefore lose) during a typical year. Purchase enough business income coverage to protect at least this amount of revenue.)

■Extra income coverage – Reimburses your company for a reasonable sum of money that it spends, over and above normal operating expenses, to avoid having to shut down during the restoration period.

In order to calculate how much extra expense coverage you will need, an appraisal of your office building or any other operating locations should be made as well as a detailed inventory, not only of your product stock but also of your existing office equipment.

■Contingent business interruption insurance – Protects a business owner’s earnings following physical loss or damage to the property of the insured’s suppliers or customers, as opposed to its own property. Companies today are heavily dependent on raw materials from key suppliers to make the products they sell. What happens if the supplier suffers a loss and cannot continue to deliver the product?
Make sure to determine how much revenue would be lost if you were unable to receive your product from your main supplier or if your main customers were unable to buy from you.

4. Do I have enough insurance to protect my assets from a lawsuit?

The only way to protect your assets is to carry adequate business liability insurance. A Commercial General Liability (CGL) insurance policy is the first line of defense against many common claims. CGL policies cover claims in four basic categories of business liability:

■Bodily injury
■Property damage
■Personal injury (including slander or libel)
■Advertising injury (damage from slander or false advertising)
In addition to covering the claims listed above, CGL policies also cover the cost of defending or settling claims. General liability insurance policies always state a maximum amount that the insurer will pay during the policy period. There are two major forms of liability insurance policies that can be purchased: occurrence and claims paid.

■An occurrence policy covers you for a specific dollar amount for each individual year. For example, if you carry an occurrence policy for $100,000/$300,000* in 1999 and a claim is made against you in 2010 when you have a $1 million/$3 million policy, the insurance company is liable for no more than a $100,000 for that particular claim. So, if you are successfully sued for $250,000, you will be personally responsible for the $150,000 beyond your coverage. Despite inflation, rising jury awards and the increasing amount of money being asked for in lawsuits, the insurance company is still only responsible for the limits you carried at the time the injury occurred, not when the claim was made.
■A claims-made policy covers you for the policy amount you have when the claim is made. This is an advantage because every time you increase your policy limits, you are now covered for the higher limits for every year you have carried the claims-made policy. This increased coverage keeps pace with inflation and rising awards.
For related audio, go to I.I.I. Provides Tips to Make Sure Your Business is Not Underinsured.

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*The first number ($100,000) is the maximum amount your policy will pay to each person involved in an insurance claim. The second number ($300,000) is the maximum total dollar amount your policy will pay for a single accident regardless of the number of people filing claims.
The I.I.I. is a nonprofit, communications organization supported by the insurance industry.

Protect your business in three easy steps by Shon Messer

Friday, February 19th, 2010 | Commerical Insurance | No Comments

A business is only as safe as the tools it uses. One of the best tools a business can use to protect its assets is commercial auto insurance. 

Understanding insurance can be tricky. One of the first steps toward making an informed decision is to understand coverage and service options. Here are three easy steps to help figure out your commercial auto insurance needs:

1. Choose an insurer with the right combination of price and service. Insurance isn’t just about price. It’s about service, too. How are claims handled? How long will it take to get your vehicle back on the road? Can you get questions answered outside of business hours or online? Know the answers to these questions. Your time is money.

2. Research your policy options. Having the right coverage is important. A standard commercial auto policy generally includes coverage for: 

•injuries or damage that you cause;

•your driver’s injuries;

•injuries and damages caused by uninsured or underinsured drivers; and

•damage to or theft of your vehicle(s).

 When it comes to damage that you cause, you may be required to purchase certain limits based on who you work for. For instance, if you work for certain home builders, you may be required to carry $1 million in liability limits. Consider how much you are willing to pay out of pocket if your liability in an accident is more than your policy limits.

 3.Know how the policy is priced. You can control your insurance costs. To get the best rates, run motor vehicle reports on potential drivers. If you let your insurance lapse, you’ll probably pay more for your next policy. Ask about discounts, including paid-in-full and renewal discounts.

 Just like your customers rely on your professional skills, call a professional independent insurance agent who will be in your corner, researching and recommending the best options.

 Shon Messer, MSFS,RFC

Senior Partner/Independent Insurance Agent

http://www.shubertinsurance.com

Phone: 205-640-5892

Toll Free 866 291-011

Fax: 205-378-1683

Turned Your Hobby Into A Business? Check Your Insurance

Monday, February 15th, 2010 | Commerical Insurance | No Comments

By simply adding a snowplow, you transformed your pickup into a source of extra winter income. Your side business baking cakes has grown and you now pay someone to deliver your tasty treats.

Congratulations! But remember that starting a new business means a whole new set of rules when it comes to insurance.

People who haven’t been in business for long might not be aware that vehicles used for business require different insurance.

We can help you understand the unique needs of your business and put together a package that offers the best protection.

When should someone consider a commercial auto policy? Generally speaking, when a vehicle is:

Don’t get into an accident only to discover that your claim won’t be covered because it happened while you were clearing snow from your neighbor’s driveway, and you didn’t have the right coverage.

Commercial auto policies generally provide a higher level of liability limits. Let’s face it — larger vehicles cause more damage.

Time is money. We can find tailored coverages to meet your needs. Specialized claims reps can get your business vehicle back in service as quickly as possible.  Call Shon Messer at 205 640 5892