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The Benefits of Commercial Umbrella Policy Insurance

February 21st 2010 Posted at Advanced Commercial Insurance Tips
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All commercial business policies, including property, casualty and commercial liability insurance policies, have upper limits on payouts beyond which they will not pay for damage or loss.  Commercial umbrella insurance provides additional coverage for claims that exceed the upper limits of these policies.  In other words, they provide coverage over and above your other coverages. Umbrella Policies are formulated to protect a business against extraordinarily  high losses, when the upper policy limits of one of the basic  policies have been exhausted. For the average business, an Umbrella Policy would supply insurance protection over and above basic liability and auto liability coverage. If you happen to have have Employment Practices Liability Insurance, Directors and Officers Liability or other kinds of liability insurance, the Umbrella Policy would give you additional protection over and above those upper policy limits as well.

The are many different types of Umbrella Policies available from a host of commercial insurance companies.  Some offer blanket coverage for several underlying policies or packages, while others are more specific to certain commercial insurance coverages.  In order to accurately determine what kinds of commercial umbrella policy coverage you actually need, you and your agent need to do a serious and thorough risk assessment of your business, its nature, its inherent risks in day to day operations, and then thoughtfully consider the likelihood of truly disastrous claims that would exhaust the underlying policies’ upper limits of payouts.  These vary widely and differ according to the type of business in which you are engaged.

Fortunately, most Umbrella Policies are reasonably priced because the likelihood, or risk, of exhausting of the upper limits of underlying policies is usually quite low.  Even so, most business people sleep better at night knowing that if the worst indeed happened, they have more than adequate coverage with the benefits available through their Umbrella Policies.

The amount of Umbrella Policy coverage you obtain is determined by you, and while cheap commercial insurance is certainly available, this is an area where you get what you pay for.  Usually umbrella coverage is available in increments of $1 million, $3 million and $5 million and the premiums are typically only a few hundred dollars per million dollars of coverage.  The sensible thing to do with Umbrella Policies is to buy as much as you can afford because of the litigious habits of the suit-happy public.  Juries can make awards of $20 million or more and your insurance coverage could be quickly exhausted, leaving you to foot the bill for the remaining balance on the award.  Also buying your Umbrella Policy from the same insurance company that you obtain the underlying coverage from makes good sense as well, for it prevents quarrels and delaying tactics as one insurance company vies against another trying to force the other to pick up the costs of a claim.

As the saying goes, “When it rains, it pours.”  It’s best to be prepared for truly horrendous  disasters with a big, strong Umbrella Policy!

What To Know About the Commercial Insurance Industry in the US

February 21st 2010 Posted at Basics of Commercial Insurance
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The commercial insurance industry in the US is large and thriving. According to Hoover’s Business Information (online), “About 130,000 insurance agency and broker offices in the US generate annual revenues of $85 billion. Large companies include Marsh & McLennan, Arthur J. Gallagher, and Aon. Despite the prominence of large companies in the commercial segment, the industry remains highly fragmented: the largest 50 firms only hold a 20 percent share of the total market. The average office has five employees and generates less than a million dollars in annual revenue. An insurance agent works on the insurance company’s behalf; an insurance broker on the customer’s behalf. Many companies on the commercial side function mainly as brokers.”

Relying on the 2002 Census Bureau Economic Census for its data, Hoover’s has generated an industry financial summary for the Commercial Insurance industry. Its report says there are 12,951 commercial insurers with annual sales (premium) receipts of $366 billion, an annual payroll of $32 billion and 607 million employees.

Interestingly, and good news for the consumer, is the fact that since the largest commercial insurance companies together hold less than a 20% market share, the commercial insurance market is highly fragmented and very competitive, a situation that should hold actual commercial insurance rates down for the average business.

Among the important trends Hoover finds in the US commercial insurance agents industry today are:

  • A diminishing number of life insurance agents
  • The reduced importance of contingent commissions to agents and brokers
  • The consolidation of insurance companies
  • The increasing use of the internet for commercial insurance research by consumers
  • The decreasing importance of telemarketing and call centers for sales of commercial insurance policies

The reduction in the number of life insurance agents is attributable to stagnant growth in new premium revenue, and the Bureau of Labor Statistics outlook says the total number of life insurance agents should dwindle by 30 percent by 2010 when compared with 2000 levels. Legal challenges to the practice of compensating agents and brokers by commissions on the sales of policies are causing many brokers to raise client fees or to use other compensation arrangements with insurers for business placed with them.

Consolidation among agencies appears to be the result of the broader insurance needs of business customers. The total number of independent agencies has diminished, but the average size of the agency revenue appears to have increased. Business consumers of commercial insurance are resorting to the internet in greater numbers today, but mostly for initial research on insurance companies and policies and not for buying commercial insurance online, because the actual purchasing of policies from agents and brokers is unchanged. The use of telemarketing and call centers by agencies is being replaced by Interactive Voice Response Centers and internet marketing as a cost reduction measure.

Its unclear at this point what effect the recession is having on the commercial insurance industry in the US, but as it is so closely tied to the health and growth of business in general, it is certain to have been impacted somewhat by the overall contraction of businesses of all kinds since mid-2008.

Coverage Not Included in the Typical BOP That You Might Want to Consider

February 21st 2010 Posted at Advanced Commercial Insurance Tips
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While the general language of a Business Owners Policy on the surface seems to be fairly inclusive, it pays to read the fine print, especially the exclusions. There you will often find, to your surprise, that some things you assumed were covered, actually were not. If these happen to be important to the operation and life of your business, it will be necessary for you to obtain additional coverage to protect yourself. Some of the common exclusions which could have a serious impact on a business are listed below according to the kind of insurance coverage necessary to include them under your commercial insurance.

Commercial fleet insurance is very often not included in BOP’s and requires a separate policy. Obviously vehicles are expensive items and damage to them or total loss of them could seriously impact the conduct of business, particularly if they were integral to the conduct of day to day business operations, as would be with the case if a florist business, for instance, experienced damage to or loss of its delivery vans. Liability insurance with respect to business owned cars and trucks also would not ordinarily be included in a BOP, so commercial van insurance, in this case, should be considered. An accident involving serious damage to another vehicle or vehicles, and perhaps personal injury as well, could result in an enormous liability to a business and should be covered by additional commercial auto insurance insurance.

Often designated as “equipment breakdown” or “mechanical breakdown coverage,” boiler and machinery insurance is normally not included in a BOP. This category of commercial insurance covers the accidental breakdown of boilers, machinery, and equipment, and will reimburse the business for property damage and revenue foregone due to business interruption as a result of the property damage. As an example, this type of commercial business insurance would cover fire damage to such critical assets as office equipment, computers, bulldozers or steam cleaning equipment.

If you live in an area subject to severe weather such as hurricanes, tornadoes or floods, you may want to obtain debris removal insurance as a separate policy or rider to your BOP. Debris removal insurance covers the cost of removing debris after a storm, tornado, fire, flood and so forth. Before construction on a demolished building could begin, storm and damage debris would have to be removed. The typical BOP does not provide for this coverage and it could be quite expensive if the debris is widespread and extensive. If, for example, a hurricane damaged your business premises to the point it had to be rebuilt, before you can start rebuilding, the remains of the old building and storm debris would have to be removed. Property insurance will cover the costs of rebuilding the actual building, but not the cost of removing the debris.

These are only a few of the important risk areas normally not included in a Business Owners Policy. Many more exist, depending on the particular business and its normal operations. The best way to discover your risk exposure exclusive of your BOP is to study your policy carefully, read the fine print thoroughly and have your agent discuss with you the options available. When it comes to commercial insurance, an ounce of foresight is worth its weight in gold.

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