Protecting Your Business With The Right Kind of Insurance

If there’s one thing you can do as a business owner to minimize the sleepless nights, it’s ensuring you've got the right level of insurance. 

Nobody likes to think all their hard work might go up in smoke or be washed away in a flood. Unfortunately, it can and does happen. Choosing the right insurance cover will allow you to pick up the pieces and resume operations with minimal financial loss and disruption to business should such an event occur. 

There are a few simple ways you can work out what kind of insurance is right for your business. Ask yourself the following questions: 

• What is the most catastrophic event that could befall my business? 
• What is the most likely adverse event we’re likely to encounter? 

Each business has its own inherent risks.  Don't roll the dice when it comes to your business. 

The answers will be very different according to what kind of business you run and where you’re located. If you sell outdoor furniture, the worst case scenario may be all of your merchandise getting destroyed in a warehouse fire. You’ll definitely want Property Coverage, which insures you against damage to buildings, contents and stock caused by fire and other perils. 

Conversely, if your run a website design business based in a small office space, you may find Property Coverage less critical. What you will need is Computers and Electronic Coverage, which insures you against theft, accidental damage, breakdown, fire, and business interruption.

This was a guest blog from Belinda J Darling. To learn more about how you can protect your business with the right insurance coverage, contact the experts at www.mckenzieross.com.au

Worker's Compensation Decreasing Rates: Is this Good for Employers?

Worker's Compensation Increases:I wrote this article about how to reduce your workers' comp insurance costs on my company's blog last week based on the report that workers' comp rates were set to increase at least 7% based on new legislation and company projections.

Employers will have less choices for workers' compensation 

Since then, there have been some more news on workers' comp where State Fund, CA's largest insurance company for workers' comp, has said that they will lower rates by 7%.  This sounds like good news to most business owners on the surface, but insurers lower rates are motivated by many factors.  See Insurance Journal's article: Calif. State Fund Board: Drop Rates 7%

As the CA workers' comp market begins to tighten, the State Fund is putting itself in the position to gain more market share in a shrinking market.  When an insurance market tightens it means that consumers will face higher rates, less discounts, tougher underwriting, and less choices of companies.  These market conditions are good for companies such as State Fund because they can entertain many risks that other private insurers will not be able to contemplate.

Lowering rates may force other private companies out of the workers' comp market because they will choose not to compete where they can't make a profit.  This is bad for the business owner because it will mean higher overall costs.   

The State Fund decreased rates will start January 1, but not all class codes renewals and will most likely not be in affect till second quarter of 2013.

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Report: Higher-Priced Drugs Added $2.1B to 2011 Workers' Comp Pharmacy Costs

Who is paying for these drugs?

When the insurance company foots the bill, some people tend to treat themselves to higher cost medicine.  If the insurance company is paying, why not get the name brand?  

I'm not blaming people for going for the higher cost meds because it is human nature to perceive a better quality from a higher priced product.  The consumer needs to realize though that the system can't sustain such high prices without them being passed on to the consumer.

Employers must pay the premiums for workers' comp, but when people take advantage of the system, we all pay for it.  It might result in higher medical insurance costs, higher prices to make up for business owners' increased over head, and higher prices for over the counter and prescription drugs.
Take a look at some of these statistics from a study highlighted in the Claims Journal's article below:

• $2 billion of waste resulting from use of higher-cost medications when therapeutically equivalent, lower-cost alternatives are available.

• $107 million of waste through use of out-of-network pharmacies and third-party billing.

• $40 million of waste from use of higher-cost delivery channels such as retail pharmacies instead of home delivery for long-term medications used by injured workers.

Its in all our best interests (insurance companies included) to keep workers' comp premiums down.  Hopefully, we can find a way to curtail useless spending and price gouging by pharmaceutical companies.

To read the full article, click the link below:
Report: Higher-Priced Drugs Added $2.1B to 2011 Workers' Comp Pharmacy Costs:

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Insurance Implications of a Double or Triple Net Lease

You've saved up your pennies and invested in a commercial building.  You find a nice tenant and start leasing the space.  You decide to do a triple net lease to keep your overhead down.  

Photo by Margan Zajowicz

Why that wasn't such a good idea:

1. This is one of your biggest assets, wouldn't you want to make sure it's covered properly?  Tenants don't have skin in the game when it comes to your building and are going to do the least possible to adhere to your requirements.  They are already paying you rent and see the insurance as an additional cost.
2. Your tenant could forget to pay the premium and you could be on vacation when the warning of cancellation comes in the mail.  The policy cancels, there's a fire, and you don't have coverage.



 Photo by  Alex Patru   

3. Crimes committed by the named insured (your tenant) are excluded.  For instance, your tenant could purposely burn down the building (commit arson) and the insurance company would deny the claim.  Yes, this would be the worst case scenario, but a disgruntled tenant who vandalizes your building would also leave you with uncovered property damage.

Please consider the three points above when insuring your commercial property.  

Disclaimer:

This blog post is not a substitute for professional legal advice. This blog does not create an insurance agent-client relationship, nor is it a solicitation to offer legal/insurance advice. Seek the advice of a licensed insurance agent in the appropriate jurisdiction before taking any action that may affect your rights.

  

Disability Insurance Vs. Workers' Compensation

I have often been asked by business owners:  

Instead of getting a disability policy, can't I just add myself onto my workers' compensation policy?

While it is possible to add yourself onto a workers' compensation policy, the benefits are not the same as a disability policy.

Was this paper cut work related?  

Here are some of the similarities:

• Both may pay medical bills if you are hurt
• Both may pay disability and lost wages
• Both may pay a portion of your lost income
• Both will cost you based on your current income

Here are some differences:

• Workers' Compensation only pays for on-the-job injuries
• Workers' Compensation will only pay at most 2/3 of your stated income
• Workers' Compensation may only pay based on your stated payroll (even if you take a draw or have other forms of compensation)
• Workers' Compensation is based on the rate for your specific class code and you pay per $100 of payroll.  Disability is based on many factors.

When does it make sense to add yourself to your workers' compensation?

• If you can't qualify or afford disability insurance
• If you are in a 'low risk' field such as computer programming and the rate per $100 is relatively affordable.  
• As an additional protection in case you get hurt on-the-job
• If you have an abnormally high deductible for your health insurance
• If you are prone to accidents

If you are truly worried about losing your income from getting hurt then nothing will suffice for a good disability policy.  Many people buy life insurance and feel like they have taken care of their family, but if have a bad accident and you don't die then your family can't collect.  

Don't forget that not all disability policies are created equal either.  Make sure to read the small print because in some policies you may not be able to collect if you are able to do any other job.  If you are a doctor, you aren't going to like it if the company stops paying because you can get a job as a barrista.  

Please note:

When employers make workers' compensation claims against themselves, it's a red flag for claims adjusters.  This is because it is easier for an employer to exaggerate a claim than an employee, so be ready to defend any over the top expenses for your medical treatment.  

Disclaimer:

This answer is not a substitute for professional legal advice. This answer does not create an insurance agent-client relationship, nor is it a solicitation to offer legal/insurance advice. If you ignore this warning and convey confidential information in a private message or comment, there is no duty to keep that information confidential or forego representation adverse to your interests. Seek the advice of a licensed insurance agent in the appropriate jurisdiction before taking any action that may affect your rights.