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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.

Business Owners Policies on Commercial Insurance

February 21st 2010 Posted at Basics of Commercial Insurance
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To efficiently package the various kinds of commonly needed coverages for medium to small businesses, most large commercial insurance companies offer Business Owners Policies. A Business Owners Policy (BOP) includes coverage for all of the most important property and liability insurance hazards and risks, and several other coverages, into a single policy appropriate for most medium to small sized businesses.

A customary BOP includes business loss of income insurance. This insurance will compensate the business owner for the business income lost as a result of a disaster. Disasters often halt or disrupt business operations and may cause the business owner to have to shut down or leave the business premises. The BOP also pays for the additional expense the business owner may have if he or she is forced to move to and operate out of another temporary location.

However, a business owner should not assume a BOP includes blanket coverage for all of his or her commercial insurance needs. Only a careful reading of the policy will reveal which critical areas to his or her individual business have been omitted. In order to have adequate coverage of the particular risks involved with a business, other coverages or riders may be necessary to tack onto the BOP. For instance, the typical BOP will not cover signage physically separate from the business premises itself, so if a business has a sign independent and free standing from the main premises, additional coverage may be necessary to insure it, requiring the payment of an additional premium.

Also, and more important today than ever before, interruption of internet service is not usually covered. If a business is engaged in electronic commerce, this would be an important extra coverage to obtain above and beyond the typical BOP. Interruption of internet service and electronic commerce for such a business could result in considerable lost income. If a business relies heavily on electronic commerce for revenue, the business owner may want to look into commercial insurance rates and add coverage for lost income and extra expenses incurred in the event e-commerce is obstructed temporarily or entirely stopped for one reason or another. Look for commercial insurance quotes from several different commercial insurers to get the best value for your business money.

While BOP’s can be an economical solution to a business owner’s insurance requirements, not all businesses are eligible for such insurance. BOP insurance is restricted to small- to medium-sized businesses that meet certain explicit criteria. Among the many factors involved in determining a business’s eligibility for BOP’s are the size of the premises, the requested liability coverage, the nature of the business and its operations and the amount of business it conducts away from its premises.

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