We Are All Sales Reps. We Need Protection.

A type of insurance that is relevant to sales reps is general liability insurance. If you travel to meet with clients or prospects, you are at risk. Here are the when and wherefores.

General liability insurance, or commercial general liability (CGL), addresses business’s claims of bodily injury, medical costs, property damage. You don’t have to be guilty, only accused. It can happen when you attend a meeting, meet clients at your office, or even go out to lunch with them

It could happen if a client slips or falls on your premises, or even trips on something you left in the pathway. 

If you are at a client’s location and you drop something on a piece of equipment or their computer…….oops, property damage has occurred. You are liable.

Completed operations; less likely for sales reps, but if you left something behind that caused injury AFTER YOU ARE GONE FROM THE LOCATION…….oops again–completed ops.

Advertising injury; did you inadvertently slander or infringe on a copyright.

Personal Injury; you feel comfortable enough with the client that you say something libelous against somebody and it backfires on you. That’s personal injury; and by the way, it is different from the attorney’s definition of personal injury, which is the insurance industry’s “bodily injury.” Insurance personal injury includes libel, slander, false arrest, wrongful eviction, and discrimination. Remember, you only have to be accused to defend yourself, and that costs money.

It’s not expensive. Call us for more information.

How Much is Your Employee Worth?

Employees are expensive, aren’t they? They cost you real money in their taxes and workers comp. But, you can’t run your business without them.

There are some other costs associated with employees; there is the cost of acquisition, the cost of training, and the cost of managing them. So, when you find a really good one, it pays to hold on to her or him.

It used to be easy to hold onto employees. There was an unwritten contract that they could be with your company for life. Now many companies aren’t around for life, and other companies are looking for your good employees, willing to bid on them with more money and benefits. Loyalty on both sides no longer exists, and employees feel free to move around every three or four years. And it is not even seen as a negative on a resume for the new employer. Everyone knows the new rules of the game. So how do you compete for employees and keep the really good one?

There are benefits that can be provided, beyond the obvious health insurance and such, that could keep an employee with you if he or she is integral to your organization.

We have some answers. Just contact us for a discussion on how we can work for you.

How do I get out of my business when it’s time?

Let’s say you have been in business for some time, and family does not want to run the business when you are out. You have invested too much effort and time into making this business a success. Plus, you would like to earn some sort of residual when you let it go.

I suppose you could just sell the business. Aren’t there plenty of potential buyers who would pay top dollar for your business? Probably not; every buyer is looking to steal, not buy.

Suppose you have an employee who would make an excellent business owner for your business, and you might really want him or her to take it over when you are done. Big problem, though, that employee will never be able to afford it when the time comes. What is to be done?

With a correctly structured program you could plan the buyout and the financing, and at the same time provide an incentive for her to stay on until that day when she takes over. You could even make it tax deductible.

Let me know if that sounds interesting.


Top ten insurance coverages for Contractors:

Do you have enough coverage to protect yourself for the time that you suffer a claim? We know that you do exceptional work, so you will never suffer a claim, right? Wrong!! Statistically wrong. Someone will not like your work, or for some other reason feel compelled to get their money back on work that you did. Or you will be dragged into a lawsuit for which another contractor had responsibility, but the lawyers are looking for deep pockets.

Example; I had a plumbing contractor get dragged into a lawsuit that involved faulty window installation that was the source of water damage. Or when the general contractor absconded with the money paid him without ordering the work done by his subcontractors. Oh, you are the general? Congratulations; your sub did a poor job and you are getting sued. You don’t have to be guilty; just accused. Now you have to defend yourself in court.

So what do you need?

General Liability, or GL.

Covers you for any damage you do to person or property while you are on the premise.

Products and completed operations: This is part of your Comprehensive general liability coverage, and covers you for your work after you leave the job: did you leave a nail sticking out that hurt someone later on? Or did your assistant not double check that solder joint and your plumbing job sprang a leak and damaged 10,000 square feet of new wood floor? Oh, by the way, I am not making these examples up.

Endorsements to your general liability coverage:

 If you specialize in commercial work, you will need a Commercial products and completed operations endorsement. This will cover your endorsee for the full 10 year statute of limitations on a lawsuit. Your customer and general contractor will demand this type of specific endorsement. Unfortunately, it is not available for residential work, but if you do both, you will need endorsements for both types.

Primary wording endorsement; This assures your endorsee that YOUR insurance policy will be the first to pay for any claims, and they don’t have to have their insurance pay it and come after yours for payment (subrogation.)

Oh, and peaking of subrogation, a Waiver of subrogation assures them that you can’t come back against them, even if it is their fault. YOUR insurance will pay it, no matter whose fault it is. What a great deal—believe me, they want it and they will demand it

And here is a new wrinkle that you may already have run across: they didn’t demand all of the above when you started the job, but now that you want to get paid, all of a sudden a page of requirements shows up as prerequisite to your getting a check. You already did the work and they didn’t warn you? Not their problem.

New condo work-an entirely new type of headache:

Let’s talk about work on New condominiums. A developer wants to build new condos, which he does. Then he establishes a separate organization called a homeowners association, to which he transfers all ownership responsibilities. Bad work? almost always. He can almost always count on being sued for roof work or some other item, because the homeowners association does not want to exceed the statue of limitations window. For that reason it is incredibly expensive for an insurance company to insure you if you do new condo work. it’s complicated, so if you do such work, let’s talk.

Independent Contractors? NOT. Let’s discuss Workers Compensation.

If you have employees, an employee, someone who might be an employee who works one hour per week, or even someone who gets paid on a 1099, almost certainly, you will need Workers Compensation insurance. The laws changed this year so that the definition of an “independent contractor’ has been so narrowed as to become almost nonexistent. The potential penalty for not doing it correctly is $100 per day per employee who was not insured.

Workers Compensation Waiver of Subrogation:

Same thing as for general liability coverage, but they can charge you by the job, by the year or decline to provide it at all.

Commercial vehicle coverage

Why get commercial vehicle coverage instead of just having personal vehicle coverage? well, for one thing, the coverage is higher; you can get $1,000,000 of coverage, which for a business is not a whole lot. You can also cover it under your commercial umbrella—see below.

And lastly, it can provide Non-owned auto liability coverage. send your assistant to pick up a part in their own car and the get into an accident? You get sued as the employer. Have an installer technician who uses his own vehicle? He is also covered. You can’t be without it.

Property Coverage:

Have tools and equipment? Office property? Building? If you work from your home, business property and tools will NOT be covered by your homeowners insurance.


And did I mention that $1,000,000 is not a lot of insurance for a business? If you are getting sued, it will likely be for more than that. If you are doing commercial business, they may want $5,000,000 of coverage before you can get a job. If you do municipal work, you may need $10,000,000. You will need excess liability coverage to increase your underlying coverage.

And then there are the contractor and performance bonds. A whole other conversation.

Complicated, yes. Difficult, maybe. Need help or advice with any of these? Give us a call. We have been writing contractor coverage since 1991. We can help.

Are you Certain Your Restaurant is Properly Covered?

Let’s say you are a restaurateur and you are having a really bad week; first your chef cut himself while preparing, then your refrigerator died and all your cold-stored food spoiled. Then to top it off, one of your delivery kids got into an accident while making a delivery, and the insurance company is threatening to come after you.

Are you covered for all of those possibilities? What about the ones you don’t know about? What if another coverage was omitted and there was a loss? Restaurant insurance is so complicated due to the many types of restaurants and their various activities that it is easy to miss a coverage. Or if you are not with the right insurance carrier, they might not even have coverage for one of your activities.

Which types of restaurant are you? There are specific types of coverage for each type of food service:

Do you provide table service, and if so, are you a fine dining restaurant, or casual only? Are you fast food? Are you a buffet, cafeteria, smorgasbord, or some of each? If you offer takeout, do you deliver as well? If you are a bar or nightclub, that is a different category with its own set of risks and specific coverage. Country club, mall/shopping center, sandwich bar. It makes a difference as to your insurance coverage, and your workers compensation class code can be affected as well.

Depending on what features your restaurant offers, coverages can vary greatly. Full bar, or wine and beer only? Do you have entertainment, a dance floor? Do you cater? Are you renting out space for events or banquets? If you have off site events, that is yet another type of coverage. Do you have parking, and if so, do you have valet? Yours, or a subcontractor? Are they covering you in case they hurt someone or something while on your property? How is your ANSUL system? Does it cover your deep-fryer? Your fish tank could leak and cause damage, or even do damage to a customer? Do you have coat check, storage of entertainers’ equipment or other property of others? Are your fridge and freezer covered if they explode? Are you compliant with ADA, or are you vulnerable to lawsuit?

Here are some of the coverages you may require: premises liability, product liability in case your food poisons someone, property coverage for your fixtures, building coverage if you own the building or are on a triple-net lease, food spoilage coverage, equipment breakdown, non-owned auto, advertising, leased property, and workers compensation.

Do you really want to keep track of all of this yourself? Do you trust that it is all in place?

Insuring restaurants can be a minefield for an agent who has not had experience, or does not work with insurance companies that have the correct programs. Why take chances? At very least, why not review your options. Give us a call.

Did your HOA premium just take a jump?

Have you received an increased HOA insurance premium from your old standby insurance company? The one who used to be the most competitive? You are apparently not alone. Those companies have experienced rate increases this year and HOAs are noticing.

HOA coverage is pretty complicated, and there are there are a number of conditions which may have caused an increase. Let’s take a closer look at the background and the elements involved in coverage and in producing rates.

If you are reading this, you already know that an HOA is a private association, formed with the purpose of managing a residential subdivision. Their exact responsibilities and powers are dictated by a governing document called the CC&Rs, or Contracts, Covenants and Restrictions. A subsection called ByLaws are the exact rules by which the association operates, including creating a managing board of directors, elections, responsibilities, job descriptions, levying fines and more. These are the governing documents.

The above documents also define the exact responsibilities of the association vs the members in matters such as how much and what type of insurance must be obtained by the HOA.

Each year, various sections of California laws are updated with respect to what HOAs are allowed to do and what they are required to do, as well as how they are restricted. The first development tract in which I was an owner, for example, disallowed the sale of the homes to Jews. As a Jew, moving into that complex, and having purchased my home from another Jewish family, I was unaware of those sections of the CC&Rs, and clearly, by the time the first family had purchased their home, the Civil Rights laws had preempted that CC&R clause.

This past year, a number of discrimination cases were filed and settled, causing payments to be made by HOAs. This threat of increased risk can drive up rates for all HOAs as insurance carriers prepare for possible battles in the courts.

So what types of HOAs exist?

There are some associations, which only manage the common areas of single family homes in a community. They make sure that there is visual uniformity in appearance of the homes and that the grounds are kept.

There are some associations which are responsible for the actual structure of the buildings. This is especially true in the case of condominiums and townhomes but can apply to single family units and duplex units within the community as well. All of these powers and responsibilities are given in the governing documents.

Is your HOA responsible for interior insuring floors, cabinets and other structures? Ask your governing documents, as these responsibilities vary from HOA to HOA.

So what are the parts of the insurance policy?

Property first. What coverage is needed in order to properly insure property to value? Should coverage be just for exterior walls, or should it include those kitchen cabinets and floors? How about other fixtures, walls, tile and so on? And what value should be placed on all of the property?

Fortunately, insurance agents have tools that provide guidelines on replacement value of property. Agents must be skilled in using these tools for calculating total insured value of the property.

You should be aware that the cost of materials has a lot to do with property coverage rates. As building materials become more expensive, property pricing goes up. Insurance companies sometimes have automatic increases, which may or may not be necessary—it’s an area for review.

And how about common area equipment and structures, such as pool equipment, recreation equipment, fences, pools, spas and dozens of other items owned in common by the members of the association. All of these must go into the consideration of total insured value.

Then what is a reasonable deductible to apply to coverage? Do you want it to apply to the smallest loss, or are you a risk taker as an association and want a higher deductible? How much higher? An agent needs to explore this with the insured, as the answer is not standard. Are you covered enough, or too much? Another area for review.

Is your coverage for replacement cost at full value, or depreciated value like a car? A loss could hurt—badly by the time you depreciate value and subtract your deductible.

What other areas should be considered?

Liability coverage: Will it cover just physical damage that a member might do against a non-owner or some other third party, or their property? How broad, exactly is the liability coverage included in the policy?

Is your liability coverage limit $1,000,000? Really? 200 units in the group, $40,000,000 of assets, and you think a lawsuit is going to stop at $1,000,000? Let’s plan for a worse-case scenario, or even the worst-case scenario, with more coverage.

I know of one claim levied by a renter in a complex against the handyman of the complex, claiming he touched her inappropriately. Will your liability cover that, or will your association be writing a big check? Not guilty? Prove it. and by the time you prove it, how much have you spent in legal fees? Pay to make it go away? How much will that take?

And speaking of handymen, does your HOA have employees? You will certainly need workers compensation coverage, because as an employer, the law requires that you protect your workers from injury. Are you getting the best rates for your workers compensation coverage?

Do they drive their own vehicle for the HOA to pick up supplies? Do the board members? Do they run for stamps, food for a party? The re is a coverage for that as well, in case they are involved in an accident while doing work for the HOA. Will your HOA be covered when it gets sued?

And speaking of board members, they are directors and officers of your HOA. There is a possible scenario in which the HOA members hold them responsible for errors in judgment, or even perceived errors in judgment or management. Is your board covered for that? If you are a board member, did you sign on to work part time for nothing and be vulnerable to a lawsuit for doing what you thought was best? I thought not. It’s an area for discussion.

Oh, and by the way, your Treasurer is in charge of plenty of money. Is the HOA covered in the event that he or she decides to use HOA monies to fund a trip to the Caribbean…….permanently?

Does your HOA operate a website? You could be accused of infecting any visitors. After all, are you keeping track of buying and maintaining certificates? Website security updates? Do you have coverage for that? Even if you are not infecting, if you are accused of it, you still have to defend yourself. That can cost you.

And finally, let’s talk about my favorite; earthquake coverage. Do you have it? No? have you heard of the Northridge quake in 1994 and that we are overdue for another one? You do have it? Great; how is it structured? What is the deductible? What assets are covered? Is it simple building coverage, for earthquake, or does it cover more, like your foundations, pollution, mold, debris removal?

You need an insurance agent who can make sure that your HOA is covered and covered correctly and fully. Who will that be? If you have questions, let us know. We have thirty years of experience in the business of insuring commercial property, and we can help.

Is that your defense, Mr. Jones?

“I was only kidding”; “it didn’t happen like that”; “it was consensual”; “she wanted it”; “it was no big deal”; “I’m innocent”; and the ever popular, “I’m old and blind.”

What the heck is going on in the world? Employers are feeling like this is a game of whack a mole with employee issues. One gets solved, the next one pops up. Even Google employees took a full day to walk off the job in protest—by the thousands—all over the world. What just happened to our world?

This apparently is not something new. What is new is the social media interaction that allows people to realize that they are not the only one with a problem of being harassed. That gives them strength to come forward, possibly even some opportunistic situations, but likely not, in most cases.

Employees have become aware that there are workplace issues, and are beginning to take action. They are too sensitive, you say? It’s innocent and they should suck it up? Unfortunately, that seems to be a genie that will never return to the bottle. From here forward, the rules have changed in the workplace, and employers will just have to deal with it.

For years, workers compensation carriers have required that employee handbooks be in place, and that they cover employee interactions. Very often, the rules were not observed. Now the game has changed.

Employers will now have to be ever so much more cautious about creating a workplace that is safe and treats everyone equally. That goes for men as well as women. I personally know of a situation where a married male friend of mine was sexually pressured by his supervisor, also a male. This ultimately caused a mental breakdown of my friend. At the time, 30 years ago, there was no recourse for him, but to quit a really good aerospace job.

Even if you are an employer who runs a “clean shop,” treats everyone well, and makes sure that nothing unseemly happens between employees in his business, he may still be accused by a disgruntled employee for something that is not the case. The ensuing reputation damage and legal costs could break the bank. What is to be done?

There is an insurance coverage that has been around for more than 20 years, called Employment Practices Liability Insurance; EPLI. Our agency has been writing this coverage for years, but many employers have not wanted to step up and purchase it, because they felt that their house was clean and nothing could happen. “look, nothing has happened in all these years; why would it now?”

As a result of social media, people are more aware now, and that is making it far more likely that something will happen going forward.

So what is EPLI coverage? It has a number of coverages that span many areas. Here is a partial list:

  • violation of any federal, state, local or common law, prohibiting any kind of employment-related discrimination;
  • harassment, including any type of sexual or gender harassment as well as racial, gender, religious, national origin, sexual orientation or preference, transgender status, pregnancy, disability (including HIV), marital or family status, mental status, age, obesity, genetic information or predisposition (including BRCA status) – based harassment and including harassment via Social Media and workplace harassment by non-employees;
  • abusive or hostile work environment;
  • workplace bullying;
  • wrongful discharge or termination of employment, whether actual or constructive;
  • breach of an implied employment contract, breach of the implied covenant of good faith and fair dealing, or promissory estoppel;
  • breach of an actual or alleged written employment contract as long as another Wrongful Employment Practice is also alleged;
  • wrongful failure or refusal to hire or promote, or wrongful demotion;
  • wrongful failure or refusal to provide equal treatment or opportunities;
  • employment termination, disciplinary action, demotion or other employment decision that violates public policy or the Family Medical Leave Act or similar state or local law;
  • defamation, libel, slander, disparagement, false imprisonment, misrepresentation, malicious prosecution, or invasion of privacy;
  • wrongful failure or refusal to adopt or enforce adequate grievance policies or procedures;
  • wrongful, excessive or unfair discipline;
  • wrongful infliction of emotional distress, mental anguish, or humiliation;
  • Privacy Violation
  • retaliation, including retaliation for exercising protected rights, supporting in any way another’s exercise of protected rights, or threatening or actually reporting wrongful activity of an Insured such as violation of any federal, state, or local “whistleblower” law;
  • wrongful deprivation of career opportunity with the Insured Company, negligent evaluation or failure to grant tenure;
  • improper use of background checks in any employment decision to hire, fire, discipline, promote or demote;
  • violation of the Uniformed Services Employment and Reemployment Rights Act or other federal, state or local statute protecting the reemployment of military personnel; or
  • negligent hiring or negligent supervision of others, including wrongful failure to provide adequate training, in connection with 1 through 19 above,
  • Employment Event Loss
  • Employment Event” means any of the following events, which shall be deemed to commence (i) when an executive officer of the Insured Company first believes in good faith that it is more likely than not that such event will occur within the next sixty (60) days, or (ii) with respect to 5. below, when the event occurs, whichever is earlier:

And there is more, but the above list is enough to strike fear into the strongest employer and have them wonder if it is all worth it.

What is also covered is the cost of legal fees, so an employer can protect herself if accused.

How much does this all cost? At one time it was less costly than it is now, but since the two famous Hollywood cases from the past two years, the cost has risen along with the likelihood that more employers could have disgruntled employees.

Is it worth it? you bet. As with all insurance, it’s much cheaper to insure than it is to pay out of pocket once there is a lawsuit.

How do you find out if it is for you? let us help. Give us a call and we can help sort it out for you.

Nobody Wants Me.

You are a business with a few (or maybe many) vehicles to insure. Maybe Nationwide or Liberty Mutual insured them for you; great companies, but they have decided to insure fleets of vehicles on a very restricted (in most cases, completely restricted) basis. You received one of the many hundreds of letters from one of these, or other insurance companies, telling you that they would not insure you.

Why? You ask. No losses, good track record. I’m a stellar customer. Why am I getting dumped? Now I am faced with surplus lines insurance—twice the price, same coverage. What is going on here?

What is going on is that throughout the industry, some of the insurance companies are finding that fleet auto insurance (5 or more vehicles) has become non-profitable. You are being painted with a very broad brush, which includes all of the fleets that don’t have as good a record as you.

Stuff happens that can affect you. for example:

I just had one of my clients’ drivers try to avoid a cat and ended up swerving into a driveway and destroying a vehicle parked there. Big truck totaled the vehicle in the driveway.

That same client, that same month, had another driver swerve to avoid a tire coming from the opposite side of the freeway. Big truck ended up totaled and hanging off the guard rail over a 25-foot drop. Nobody injured, but a big loss.

What to do? Fortunately, because of my affiliations, I have quite a number of insurance companies who will write insurance coverage for fleets of commercial vehicles-competitively. More than most agencies. We are competitive on fewer than 5 vehicles as well.

So, what am I getting with Commercial Vehicle Insurance? How does this all work?

There are two major ways in which we can insure a vehicle used for business, depending on the actual use, the type of vehicle and the insurance company.

Personal Auto Insurance: covers your vehicle while going to and from work and for personal use.

Commercial Auto Insurance: covers your vehicle for business use

                Personal auto policies exclude business use

                commercial use can be Sales, Service or commercial trucking

Let’s explore these uses.

Sales use: this is called business use. It assumes that mileage you put on your vehicle will be in traveling to customers’ sites to make sales, speak to existing clients, go to meetings or meals with clients and so on. This could be use in a private passenger vehicle.

Service Use: An example of this would be a contractor using a pickup truck to go to a work site or sites, where he would be using his tools for his job. You don’t even have to think contractor in this. You could easily think domestic cleaning service, such as “Merry Maids.” They go from customer to customer during the day and do their work in each location, bringing their cleaning tools with them. We can think of other examples as well.

Commercial use: an example would be delivering packages, or products such as raw materials. The type of vehicle used could be a personal vehicle like a mini-van delivering printed products, to a step van such as Fedex or UPS, all the way up to a gasoline truck, cement truck, tow truck or produce truck. Heavy equipment qualifies as commercial use as well. Think tractor and trailer or flatbed. As long as it can be registered to travel on roads and freeways, it can be commercial use. Equipment such as bulldozers are in a different category.

Some insurance companies will accommodate sales use on personal lines policies. Some will even allow light pickup trucks, (no more than ½ ton) as service vehicles. An example of this might be a contractor who operates as an individual. He may be able to insure his truck for being at one or two jobs per day.

Such a policy will be rated for business use and covered that way. Beware of using your personal vehicle for sales calls and not advising your insurer that you are doing that, as your policy may specifically exclude such use unless endorsed for business. Your insurance carrier may not allow such endorsements, and you don’t want any rude surprises in case of an accident.

Make sure that if you are driving for work, that you have adequate insurance coverage. $30,000/$60,000 will not do if you are in business. An accident in your commercial vehicle will likely exceed that limit, and then they go after the business. Get the highest limits you can.

So why bother with commercial insurance?

Your client may require you to have certain coverages not afforded by personal insurance.

Your client may require higher limits than available on a personal insurance policy; $1,000,000 combined single limit, for example. Personal lines policies normally do not have limits this high.

Your client may require an additional insured certificate, which actually names them as part of your policy. This is very common with commercial, and largely unavailable for personal lines.

You may need to tow a commercial trailer. This is definitely not covered by personal lines insurance.

You may have employees who drive for work incidentally (running to the Post Office for stamps,) or consistently (a salesman using her personal vehicle to make sales for your company.) For this type of use, you would add non-owned auto coverage to your policy. This protects your business in the event that this person is in an accident while on company time or business. I did have a client who asked an employee to pick up lunche for the business owner, and the driver got into an accident. Of course, if an attorney finds out that it is business use, they will sue the company for any damages in excess of your coverage limits. If you are operating as an individual, rather than as a corporation or LLC, such a lawsuit can affect you, the business owner directly.

If you are in business, the best protection for you is to operate under an entity such as an LLC or a corporation, and insure your vehicles under that entity.

If you have questions, give us a call. 888-885-3388

Finally Understand Your Commercial Insurance Policy

Navigating an insurance policy can be a daunting thing. You just received your policy from your agent and you would really like to know what it says on that 50 to 100 pages of text and form.

I can explain how a policy is structured. I won’t go into specifics about the coverages in this article, but you will at least have a roadmap as to where the various parts are, and what they try to do. And since I specialize in commercial insurance, and those are complex, I will concentrate on commercial.


Lately it seems that the disclosure section of a policy comes before the informational section. Many policies are using 20 to 40 pages of disclosures. Information on Terrorism coverage, Flood coverage, employee characterization, coverage changes from prior year, and updates to coverage. How to file claims may also be stated in those pages. This information used to be disclosed at the back of the policy, and you could get straight to the meat of your coverages. In any case, you may find that those pages come first.

Declaration Pages

The summary of your coverage amounts, dates of your coverage, who is insuring you, and the cost of insurance, is next. This page or pages are what are termed “Declaration Pages,” and are actually required by law. They disclose to you what you are paying for when you buy a policy.

Another section of the Declarations page has a list of the forms and endorsements to the policy. More on this later. In all, these pages can be from 1 to 10 or more in number, depending on how much detail is in them. Coverages can be broken down by type and location. You will often see the rating base of the policy.

Rating Base

To digress just a bit, the rating base of a policy is how the premium was achieved. There may be a rate for area, gross sales, property amount, payroll, or other rating bases depending on what type of business is being insured. The rate used is multiplied against the rating base, or amount, in order to get the premium for that portion of the total premium.

Classification Number

Along with the rating base is a classification number, not always shown in the declarations page. This number is critical, as it defines which rate is to be used. Mathematicians, who are called actuaries, use statistics from past losses for each type of business, to determine the possibility of future losses. They also take into account other factors, such as their tolerance for risk, or how much they can realistically charge for a classification, as well as what they think the future may hold in terms of marketplace, weather in the case of Flood coverage, and so on.

The insurance companies then use the actuarial information and assign their own rate to the classification number. Then they have to file that rate with the insurance department. And if the insurance department disagrees, they can disallow that rate from being used.

In any case, the classification may be on display for you to see how the insurance company arrived at your rate.

Double Check Your Premium

If you see a rate that doesn’t calculate out correctly, it could be that despite the premium coming out at one amount, you are being charged a higher rate, it could be that you are subject to a “minimum premium.” This is the lowest premium for which the insurance company will sell the policy, despite the rating factors.

And by the way, this is one of the reasons that we shop insurance coverage; one company may have a greater tolerance for your type of business’s risk factors than another, and we could get a lower premium.

Insurance Forms

So back on track: next come the insurance forms with standardized wording. Some insurance companies use wording standardized by the Insurance Services Office (ISO.) technically speaking, the ISO provides statistical, actuarial, underwriting, and claims information and analytics; compliance and fraud identification tools; policy language; information about specific locations; and technical services.

The language used should be plain, understandable English. That does not mean that it may not need some interpretation. And some parts refer back to earlier parts. It reminds me of a French cookbook I once used. I was ready to prepare a dish on page 253, when it told me to use the beef stock described on page 40, which they assumed I had prepared earlier and had sitting around.

ISO wording is used by most insurance companies, and if you see their designation at the bottom of a form, you know it has been standardized. This is a good thing, because when you compare coverages from different companies, if they are using ISO forms, you are comparing apples to apples. On the other hand, if an insurance company uses its own wording, you may not know what is included or excluded, as you can’t compare it to standard. This is called “manuscripted wording” and there are many companies who do use it. It is not necessarily a bad thing, but you have to select your insurance company carefully.

Property Forms

Usually the property forms come first after the declaration pages. Sometimes they are preceded by a rating page. The property form will define the types of property covered, how thoroughly it is covered, where it is covered, under what perils it is covered, and under what conditions. Exclusions are also noted in this section, and should be examined, so you know what is not covered. Included is a section on how losses are paid.

After the property section, you will see a number of endorsements. These either enhance the standard wording, or are exclusion wording that clarifies what is not covered. These types of endorsements are often purchased to enhance coverage, or you can purchase deletion of the exclusion.



General Liability

The section on commercial general liability usually comes after property. Liability protects you from lawsuit in the event that you hurt someone’s body or property. It also defines the personal injury which may be covered; libel slander, false arrest, false imprisonment, wrongful eviction, and the like.

There is a section on who is an insured; the insured, family, employees, and so on.

Just as in property coverage, the liability section may be preceded by a rating page, and after the forms, there are endorsements which can either enhance or limit coverage under certain conditions. Again, in some cases you can pay to buy enhancements or to make limitations go away.

You may ask why there are endorsements. Good question. A standard policy form is a basic wording that may be used for many different types of businesses, anything from apartment buildings to plumbing contractors. Each of these businesses has different needs and ways of operating, and the endorsements tailor the basic wording to specific businesses so that you don’t need a different form for each type of wording.

So that’s it. Most commercial policies are structured this way, and now that you have this information, you know what specifics to ask your insurance agent about your coverage