Insurance Issues

The definition of insurance, according to Webster, is “a system of protection against loss in which a number of individuals agree to pay certain sums (premiums) periodically for a guarantee that they will be compensated under stipulated conditions for any specified loss by fire, accident, death, etc.”

Simple, right? That definition sounds like receiving compensation for a loss would be easy, assuming you purchased the “stipulated conditions.” Many consumers believe when they buy a commercial package policy that they have unlimited property, liability, and other coverages for any losses that occur in their business. As insurance has evolved, the industry continuously reviews coverage forms to make sure the companies are receiving adequate compensation for the exposure.

These reviews sometimes lead to the creation of a coverage that must be purchased for an additional premium. This article reviews some of the important coverages many customers don’t purchase because they assume they already have coverage in their commercial insurance policy. The topics will be discussed in general terms, but you should contact your insurance professional to review them at greater length.

• Terrorism. With the passage of the Terrorism Risk Insurance Act of 2002, the insurance industry was scrambling to make and file changes to their coverage forms. The Insurance Services Office (ISO), which creates coverage forms most companies follow, has exclusions in its forms for “war, warlike action by military force, rebellion” for years. However, the events of September 11, 2001, caused many associated with the insurance industry to specifically review this exclusion. What’s been created is a new coverage option. Most companies are now offering terrorism insurance for an additional cost. If you aren’t going to purchase the coverage, you’re required to sign a waiver. In central Illinois, many insurance customers are wrestling with the idea of whether this applies to their business. Again, I advise you to thoughtfully walk through the dialogue with your advisor.
  
  
• Electronic Data Processing (EDP). As business continues to move at a faster pace and we’re investing large sums of money and resources into automation, I suggest you discuss your insurance coverage in relationship to this automation. The ISO property forms place limitations on the amount and scope of coverage related to your computers and other automated pieces of hardware. Many companies prefer to schedule the equipment based on hardware, media (programs) and extra expense. This will help you if a claim should arise, so you’re compensated for the loss of equipment and time to replace what has become the lifeline of many businesses.
  
  
• Employee Benefits Liability. Hiring and maintaining a quality employee is critical to the success of a business. Many employers have improved retention based on providing quality benefits. The benefits process has become increasingly more difficult to track and administer. Many businesses can’t afford a full-time human resource person, so they assign the task to an employee. Since this isn’t that employee’s educational background, the industry has seen an increasing number of claims arising out of the administration of benefits. This coverage will help fill a gap where you might currently be exposed and liable.
  
  
• Property Plus and Liability Plus Endorsements. Many insurance companies offer expanded endorsements that provide a sorted array of additional coverages. These endorsements are very affordable for the coverages provided. Due to the litigious environment, the courts have been finding loopholes to exclude coverages, which could be provided by one of these enhanced endorsements.

This is just a small sample of some coverages available to your small business, which could have a large impact if left unprotected. Again, I encourage you to spend time with your trusted insurance professional, in reviewing the need for the above-mentioned coverages, and others that pertain to your specific business. The insurance industry is rapidly changing based on market conditions. Make sure you do periodic reviews of your business in relationship to the changing insurance marketplace. IBI