Here is an insurance checklist for every family business.
Risk Management involves: Risk Assessment, Loss Control, Risk Transfer and Risk Monitoring. Insurance is the most common form of transferring risk from the business. Insurance professionals and businesses advisors such as
Family Business Experts
play a vital role in effective risk management.
This insurance checklist should help with Risk Assessment and provide guidelines for discussion with your professional advisors.
Using your browser's File / Save As / Text function, you should be able to make a copy in a text file and print it so that it is close at hand as you work on your risk management plan.
Checklist is divided into three classes of coverage: 1)ESSENTIAL COVERAGES; 2) DESIRABLE COVERAGES; 3)EMPLOYEE BENEFITS.
For each of the statements, put a check if you understand the statement and how it affects your insurance program. Then study your policies with these points in mind and discuss with your agent questions you still have.
Four kinds of insurance are essential: fire, liability,automobile, and workers' compensation insurance. In some areas and in some kinds of business, crime insurance, whichis discussed under "Desirable Coverage," is also essential.
1. You can add other perils-such as windstorm, hail, smoke,explosion, vandalism and malicious mischief - to your basic fire insurance at a relatively small additional fee.
2. If you need comprehensive coverage, your best buy may be one of the all-risk contracts that offer the broadest available protection for the money.
3. The insurance company may indemnify you - that is, compensate you for your losses in any one of several ways:(1) It may pay actual cash value of the property at the time of loss. (2) It may repair or replace the property with material of like kind and quality. (3) It may take all the property at the agreed or appraised value and reimburse you for your loss.
4. You can insure property you don't own. You must have an insurable interest - a financial interest - in the property when a loss occurs but not necessarily at the time the insurance contract is made. For instance, a repair shop or dry-cleaning plant may carry insurance on customers' property in the shop, or you may hold a mortgage on a building and insure the building although you don't own it.
5. When you sell property, you cannot assign the insurance policy along with the property unless you have permission from the insurance company.
6. Even if you have several policies on your property, you can still collect only the amount of your actual cash loss. All the insurers share the payment proportionately. Suppose, for example, that you are carrying two policies one for $20,000 and one for $30,000 - on a $40,000 building, and fire causes damage to the building amounting to $12,000. The $20,000 policy will pay $4,800, The $30,000 policy will pay $7,200;
7. Special protection other than the standard fire insurance policy is needed to cover the loss by fire of accounts, bills,currency, deeds, evidence of debt and money and securities.
8. If an insured building is vacant or unoccupied for more than 60 consecutive days, coverage is suspended unless you have a special endorsement to your policy canceling this provision.
9. If, either before or after a loss, you conceal or misrepresent to the insurer any material fact or circumstance concerning your insurance or the interest of the insured, the policy may be voided.
l0. If you increase the hazard of fire the insurance company may suspend your coverage even for losses not originating from the increased hazard. (An example of such a hazard might be renting part of your building to a cleaning plant.)
11. After a loss, you must use all reasonable means to protect the property from further loss or run the risk of having your coverage canceled.
12. To recover your loss, you must furnish within 60 days (unless an extension is granted by the insurance company) a complete inventory of the damaged, destroyed and undamaged property showing in detail quantities, costs, actual cash value and amount of loss claimed.
13. If you and the insurer disagree on the amount of loss, the question may be resolved through special appraisal procedures provided for in the fire-insurance policy.
14 You may cancel your policy without notice at any time and get part of the premium returned. The insurance company also may cancel at any time with a 5-day written notice to you.
15. By accepting a coinsurance clause in your policy, you get a substantial reduction in premiums. A coinsurance clause states that you must carry insurance equal to 80 or 90 percent of the value of the insured property. If you carry less than this, you cannot collect the full amount of your loss, even if the loss is small. What percent of your loss you can collect will depend on what percent of the full value of the property you have insured it for.
16. If your loss is caused by someone else's negligence, the insurer has the right to sue this negligent third party for the amount it has paid you under the policy. This is known as the insurer's right of subrogation. However, the insurer will usually waive this right upon request. For example, if you have leased your insured building to someone and have waived your right to recover from the tenant for any insured damages to your property, you should have your agent request the insurer to waive the subrogation clause in the fire policy on your leased building.
17. A building under construction can be insured for fire, lightning, extended coverage, vandalism and malicious mischief.
1. Legal liability limits of $1 million are not considered high or unreasonable even for a small business.
2. Most liability policies require you to notify the insurer immediately after an incident on your property that might cause a future claim. This holds true no matter how unimportant the incident may seem at the time it happens.
3. Most liability policies, in addition to bodily injuries, may now cover personal injuries (libel, slander and so on) if these are specifically insured.
4. Under certain conditions, your business may be subject to damage claims even from trespassers.
5. You may be legally liable for damages even in cases where you used "reasonable care."
6. Even if the suit against you is false or fraudulent, the liability insurer pays court costs, legal fees and interest on judgments in addition to the liability judgments themselves.
7. You can be liable for the acts of others under contracts you have signed with them. This liability is insurable.
8. In some cases you may be held liable for fire loss to property of others in your care. Yet, this property would normally not be covered by your fire or general liabilityinsurance. This risk can be covered by fire legal liabilityinsurance or through requesting subrogation waivers from insurers of owners of the property.
Executive Liability Insurance
Directors & Officers Liability
Employment Practices Liability
1. You can purchase insurance to cover fixed expenses that would continue if a fire shut down your business - such as salaries to key employees, taxes, interest. depreciation and utilities - as well as the profits you would lose.
2. Under properly written contingent business - interruption insurance, you can also collect if fire or other peril closes down the business of a supplier or customer and this interrupts your business.
3. The business - interruption policy provides payments for amounts you spend to hasten the reopening of your business after a fire or other insured peril.
4. You can get coverage for the extra expenses you suffer if an insured peril while not actually closing your business down, seriously disrupts it.
5. When the policy is properly endorsed, you can get business-interruption insurance to indemnify you if your operations are suspended because of failure or interruption of the supply of power, light, heat, gas or water furnished by a public utility company.
1. Burglary insurance excludes such property as accounts, for articles in a showcase window and manuscripts.
2. Coverage is granted under burglary insurance only if there are visible marks of the burglar's forced entry.
3. Burglary insurance can be written to cover, in addition to money in a safe, inventoried merchandise and damage incurred in the course of a burglary.
4. Robbery insurance protects you from loss of property,money and securities by force, trickery or threat of violence on or off your premises.
5. A comprehensive crime policy written just for small business owners is available. In addition to burglary and robbery, it covers other types of loss by theft, destruction and disappearance of money and securities. It also covers thefts by your employees.
1. You can purchase a special glass insurance policy thatcovers all risk to plate-glass windows, glass signs, motion-picture screens, glass brick, glass doors, showcases, countertops and insulated glass panels.
2. The glass-insurance policy covers not only the glass itself,but also its lettering and ornamentation, if these are specifically insured, and the costs of temporary plates or boarding up when necessary.
3. After the glass has been replaced, full coverage is continued without any additional premium for the period covered.
1. You can buy rent insurance that will pay your rent if the property you lease becomes unusable because of fire or other insured perils and your lease calls for continued payments in such a situation.
2. If you own property and lease it to others, you can insure against loss if the lease is canceled because of fire and you have to rent the property again at a reduced rental.
Insurance coverages that can be used to provide employee benefits include group life insurance, group health insurance,disability insurance and retirement income.
Key-man insurance protects the company against financial loss caused by the death of a valuable employee or partner.
1. Workers' compensation insurance pays an employee only for time lost because of work injuries and work-related sickness- not for time lost because of disabilities incurred off the job. But you can purchase, at a low premium, insurance to replace the lost income of workers who suffer short-term or long-term disability not related to work.
2. You can get coverage that provides employees with an income for life in case of permanent disability resulting fromwork related sickness or accident.
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