INSURANCE LIKE CHINESE FOOD:
Certain specialized coverages (Workers' Comp, for example) may only
be available separately, however you should always purchase packaged
insurance to the greatest extent possible, and preferably from a
single source. Always look for insurance on your property
(buildings, equipment, inventory, etc.), business income, and public
liability in a single package. You'll generally receive much broader
insurance at the lowest price, and if you purchase everything from
a single source there is only one party to hold responsible for
Premium financing is the closest thing to guaranteed, obscene profits
on a scale equal to rock stardom or NBA residency. Some commercial
insurers offer low-cost installment plans, but many demand all cash
up front. Like cars or clothes, you can sign on for a great low-priced
insurance policy and make financed premium payments that will balloon
your actual cost to an unbelievable number without realizing it.
Shop for premium financing carefully, as rates vary widely. You
may actually find an ordinary credit card a cheaper source for cash
The great medical care wisdom also applies to business insurance,
i.e. don't get it from a stranger. Always try to deal with someone
you know or someone who comes from a known reference. It is
astounding how many people will purchase this product which may
determine the very survival of a business by using the yellow pages
or responding to a random phone call. Also be aware the agent you
found on the web at a well-known site may be some guy sitting at
his bedroom pc in his underwear. Maybe he has a license, maybe he
doesn't. Maybe he has a real insurance company, maybe not.
The common advice that you obtain bids from three agents or sources
is arguably wise, but taken to an extreme may actually backfire.
In addition to your having a small army of broker-agents to
pester you, underwriters at the companies they approach may be annoyed
at receiving requests on the same business from several agents &
refuse to get involved. (The business insurance community is much
smaller than you might think.) Consider trying both an independent
agent and a direct-writer agent for quotes.
If your inventory fluctuates significantly over the year and in
an unpredictable manner, you may be faced with this type of policy.
It requires that you report the value of your inventory on a very
strict schedule, usually monthly. Errors in reporting or late reports
can result in horrendous penalties if you have a loss. Avoid
these types of policies unless there just is no practical alternative.
Used commonly in professional liability, pollution liability, and
certain other specialty or high-risk lines, claims-made policies
require that the event which produced the claim, as well as the
damage or injury and the actual filing of the claim itself
all take place before the policy expires. (Or within some
specified reporting period.) Failing any of these three conditions,
the claim is not covered. This type of policy has been used in Contractor's
Liability insurance as well as certain other marginally-profitable
categories to limit losses. These policies vary widely in terms,
price and deductible, and have been utilized to produce much lower
than average rates, as they control what insurers refer to as the
"Tail." (Meaning claims filed after policy expiration.)
In certain insurance lines, this may be the only policy available.
TO OBTAIN CHEAP RATES:
Deliberately misrepresenting your risk to an agent or company representative
may get you low rates, and you may even sleep well under the delusion
that you have insurance. Unfortunately, if and when you have the
big one, your lying could mean you simply bought nothing. You
may get the nickle-and-dime claims paid without much question, but
carriers go to great lengths using almost unlimited resources to
investigate the big ones and will refuse to pay when you misrepresent
TO COOPERATE/REFUSING TO SETTLE:
All insurance contracts require your cooperation with the adjuster
in proving your loss, responding to lawsuits, etc. If you
fail to do so, the insurer may have grounds to withdraw & void
your policy. In liability claims, the insurance carrier generally
has the exclusive right to settle claims against you, and your influence
is limited to whatever persuasion you can exercise on the adjuster.
Some professional liability insurance policies for doctors,
lawyers, etc. require the insured's consent to settle. The
penalty for refusing settlement, however, is that you usually take
on responsibility for any final legal settlements which exceed the
figure your adjuster proposed.
COMMERCIAL INSURANCE FROM PERSONAL LINES AGENTS:
The person who did such a good job on your Homeowner's or Auto insurance
policy may not have a clue about insuring a business. Personal
insurance agents normally avoid most commercial like the plague.
Some, however, take on projects well beyond their ability. This
is especially true of captive agents for the large direct-writing
insurers. (Although independent agents do it too.) Keep in
mind that agents of direct writers have no particular responsibility
to you, owe their primary loyalty to their company, and usually
have only that one carrier's products. Direct writers are
known to offer some excellent and competitive business packages,
but buyers must be extremely cautious in selecting an agent.
ACCOUNTING VALUES AS INSURANCE VALUES:
Amounts of insurance required on your property for insurance purposes
can be entirely different from accounting or book values. Insurance
limits should reflect actual amounts you need for replacement at
current prices, not amounts generated for accounting or tax purposes
GOOD INSURANCE & GIVING IT AWAY:
Businessowners routinely succumb to customer and other demands for
notice rights, additional insured status, named insured status,
even limits preferences in settling claims. This typically takes
place when there is a considerable power imbalance in the relationship.
Keep in mind, however, that when you give preferences in your insurance
to others, you risk potentially having your own protection given
over to them and being without the very coverage you paid for.
FOR THE TOO-GOOD-TO-BE-TRUE:
The old proverb applies especially here, because you may discover
an insurance product you bought is worthless only when or if you
need it to save your business or property. Remember, like any other
business, insurance companies must sell their product for more than
it costs in order to survive.