Virtually every business today needs a vehicle of some type: private passenger, van, bus or tractor trailer. A business needs to insure against damage to their own vehicles, injuries to third parties, damage to cargo and injuries to persons riding in their vehicles. The minimum limits are 30/60/25 and certain commercial auto limits are much higher. Rating of commercial auto policies is different from your personal auto. There is no standardization of policies, rates or rating procedures. Most insurers will consider the driving history of all parties with regard to traffic safety and obeying traffic laws. Other factors include condition of vehicles, driver experience, driver training, driver supervision, hazards of the route, loading and unloading, motor vehicle records, use of non-owned vehicles and vehicle security.
Workers’ compensation and employers liability is a form of no-fault insurance provided by the employer for the employee. The employee gives up certain rights to sue in exchange for protection from injuries incurred on the job. Insurance rates are developed by taking all losses from similar employers and aggregating them. There are approximately 600 classifications of employers in North Carolina and the classification your company falls under will effect the rates your business is eligible for. Rates can and do vary from one insurance company to another. Insurance companies would look at such issues as employee selection and training, first aid, medical evaluation, safety promotion, housekeeping and maintenance, material handling and protective clothing and equipment. Those businesses that employ three or more employees are required to carry workers compensation insurance except agricultural employment with fewer than 10 employees, certain sawmill and logging operations and all domestic employees are exempt.
Fire and Extended Coverage
Real and business personal property may need to be protected from physical loss. Such protection is normally acquired from a fire and extended coverage insurance policy. There are two types of policies extending coverage: named peril or all risks. any specialty endorsements exist for different businesses. The type of construction, fire protection available, use of the premises, the likelihood of someone causing their own loss, contents, equipment (including electrical and mechanical) and emergency planning are important considerations from the insurance companies standpoint.
When a business is damaged from an insured peril, it suffers more than a physical loss to its property. Employees may not be able to work and may quit and go to work for a competitor. Customers shift to other sources. Income from operations is lost. Expenses for such things as taxes, insurance, electricity, phone, debt service and contractual obligations may continue. To protect against financial loss, a business may wish to insure its income.
Commercial general liability insurance covers a wide range of liability exposures, generally grouped under premises and operations liability, products and completed operations liability, and liability for various intentional torts. There are currently two types of policy triggers which generate coverage: claims made and occurrence. Before purchasing general liability, be sure to understand the difference and how they operate. Policies provide a limit of coverage and some include the defense costs within those limits. Other areas to consider are: duty to defend, aggregate limits, contractual liability, fire legal liability and pollution exposures.
Bonds resemble insurance contracts in many ways, but they are sufficiently different to require special comments. Bonds differ from insurance in that a bond expects no loss. A bond generally guarantees performance or that certain things will, or will not, be done. Unlike an insurance policy, a bond has three parties involved: surety (generally an insurance company), obligee (owner or entity that will benefit in the event of loss), and principal (this is the entity that needs the bond to guarantee his work or performance). n the event that the surety (insurance company) has to pay a loss to the obligee, the surety will look to the principal to indemnify the surety. Some examples of bonds: contract, bid, performance, payment, and maintenance.
Excess and Umbrella
Excess and umbrella liability policies are but a few of the many terms used to describe the various coverage formats providing catastrophic loss protection when underlying insurance is inadequate or lacking. These are liability coverages that pick up when the underlying coverage has been exhausted due to a severe claim. They do not provide primary coverage.
There is no industry standard and it is important that it match the business’ general liability insurance. These also have claims made and occurrence coverage triggers and it is important to understand these concepts.
Policies will either provide a duty to defend or indemnity coverage. Duty to defend is a provision where the insurer has the right and duty to defend lawsuits against the insured, even when those suits are considered false, groundless or fraudulent. Indemnity coverage means the insured must pay up front and may be reimbursed. Concurrency means that the policy period of the excess or umbrella policy is the same as the underlying commercial general liability. These policies can contain deductibles known as “self insured retention” which amount must be paid by the insured prior to the policy coming into play.
Flood and Earthquake
As a general rule, flood and earthquake coverages are not provided in standard property policies. Earthquake may be available as an additional coverage purchased from the property carrier. However, flood must be purchased as a separate policy from the National Flood Insurance Program, which is a Federal program. Further, flood can only be purchased if the county or city where the property is located is participating in the flood program. Coverages and rates are determined by the NFIP. The NFIP may be reached at 800-427-4661.
Inland marine policies are generally used to cover property that is mobile or in transit. t may also be used to insure such items as bridges and radio and TV antennas. Most policies cover physical loss although some may cover business interruption. Inland marine was the first line of insurance to introduce the concept of “all risks” (now generally referred to as direct physical loss). Valuation of property insured may be by “actual cash value,” replacement value, agreed value or other types of valuation. There are a large number of terms that are applicable to this line of insurance and it is important to understand them.
Most insurance companies offer package policies. These policies combine several different coverages under one policy. For example, fire and extended coverages, general liability and inland marine could be put into one policy with one anniversary date and one premium for a business. These tend to offer better coverage than the individual policies purchased separately and at a better price! any insurance companies develop package programs for specific types of businesses.