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Is Workers Compensation coverage too expensive?

I have a recent prospect who keeps dragging his feet with regard to providing information for a workers compensation quote.

I hear from a different source that he is afraid of the potential costs. Let’s explore.

First, what happens if he continues to put off getting workers compensation coverage? Suppose there is a claim. Small chance of that, you say? With a workers compensation policy also comes instruction on how to avoid claims and losses. If he is operating without coverage, he is more likely to have a claim. If that happens, his business is personally liable for any worker injuries.

Employees often get hurt while not on the job, wanting to collect for their injuries and time off; so they file a claim. They don’t know that there is no workers compensation coverage in place.

Alternately, they could be on an errand for the company and get into an accident in their vehicle. In either case, not only is the business owner liable for any claims payment, but also for attorney fees. Not cheap.

Then there is the law. It says that you can be fined up to $1000 per day per employee for each uninsured day. If a claim does get filed, they will be exposed as being non-compliant with the law.

And lastly, new companies often get charged a slightly higher rate, just because the owners are not experienced enough to avoid them. Companies who have been operating without coverage usually get surcharged an even higher rate as a type of punishment for non-compliance.

So, is workers compensation coverage too expensive? It depends. Would you like to roll the dice?

Please call us to discuss the options. 888-885-3388

The Case of The Three-Fingered Man

No, it’s not a mystery. It is a workers compensation scenario. And yes, it is extreme, but it happened, and other such incidents do happen.

A client of mine had a machine shop with large presses which stamp down on pieces of metal in order to form them. According to standards, such machines are to have a number of safeguards. There must be a yellow line around the machine, within which only the operator is allowed to stand while working the machine. This is to prevent distractions.

Another safeguard is the placement of handholds out of the way of the machinery’s working components, so that the machine will only operate when your hands are clear of the press. If you are a machine operator in a hurry to produce your parts, you may be tempted to circumvent that safeguard. If that happens, your hands may still be in the way when the press comes down. This resulted in a three-fingered operator, and a workers compensation claim.

We have seen claims all the way from this extreme to one as simple as an employee throwing out her back while reaching for a fallen paper clip. Anyone can have an accident at work at any time, and there are a myriad of ways that can happen. It is important to protect your business with workers compensation coverage so that your business does not bear the responsibility of paying the price for your employee’s injury.

Have questions? Give us a call at 888-885-3388.

How Shall I Insure My Business Vehicle?

There is more than one way to insure a business vehicle. Your personal lines insurance agent may have a program whereby a vehicle can be insured on a personal lines policy. This may work fine for a salesman who goes to see clients in his personal vehicle. His policy will be rated for business use and covered for such usage. 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. you don’t want any rude surprises in case of an accident.

Your insurer may also allow you to place coverage for a service vehicle on a personal lines policy. 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.

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 truck will likely exceed that limit. Get the highest limits you can.

If you are a company (LLC or Corporation,) and your company registers the vehicle, you can have many advantages. Here are some:

  • You can obtain $1,000,000 of liability coverage for about as cheaply as you can get personal insurance
  • You can be insured for towing a commercial trailer—one that carries a piece of commercial equipment, for example.
  • You can insure your employees for the incidental use of their own vehicle while on company business or company time (even running to the store for stamps or to get lunch for the crew,) in case your company gets sued for their accident.
  • You can get broader coverage for an incidentally operated commercial vehicle.

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

Trying to save money by insuring for less? Beware of the Coinsurance Clause.

If you have $100,000 of inventory and fixtures, but you want to save a few dollars on the insurance, you may be tempted to insure, say, $25,000 of it and call it a day. The chances are slim that you would lose it all in one incident, right? My example comes from a true story, and I hope it motivates you to always “insure to value,” and review annually.

I had a client who insured his office for $25,000 of contents—property, and fixtures installed by him. Every year, I would ask him if the coverage was correct, and he would assure me that it was. One night, on a New Year’s eve, as it turned out, he had a burglary, where all of his expensive fixtures were stolen. The total loss was about $40,000. So, did he receive the full $25,000 for which he was covered? No, he did not.

The assumption with insurance is that an insured will insure to value. If you have $100,000, you insure that much, otherwise, you only get partial coverage.

As it turned out, he should have been insuring for about $75,000. He insured for one third of value, and since property coverages have a coinsurance clause, he got less. Here is how it works: you insure for one third, so at the time of loss, you only get one third of your loss, even if you have more coverage than that. In my client’s case, he received $40,000, less deductible divided by one third; about $13,166, on his $40,000 loss.

The moral is to insure to value. And don’t depend on your insurance agent to read your mind. You must inform your agent of any changes to operations, management, inventory, fixtures or anticipated receipts and payroll. Do it when you have the changes, so you won’t forget………better yet, do it before it happens so your agent can anticipate any possible repercussions.

Have questions? Give us a call. 818-773-8849

What kind of company insures you

Here in California, we have two types of insurance companies. Admitted and non-admitted.

Admitted companies are backed by a safety net called the State Guarantee Fund, which would pay for any unpaid claims if the company becomes insolvent. Interestingly, these are generally very large companies with lots of assets, and can afford the costs involved with being admitted in California.

The surplus market utilizes mostly non-admitted insurance companies. They are not backed by the State Guarantee fund, so they could go under and leave claims on the table. Fortunately, they are usually also large companies, and not likely to go under………but they could.

The surplus lines market provides us an avenue for riskier types of insurance and specialized insurance, which often is lower volume business for the company.

Sometimes the lines cross. For example, I recently was referred a plumbing contractor, for whom I submitted applications to the usual surplus lines companies. Then I discovered that there are two admitted companies who might take on a plumber with low receipts, new in business, no track record, and so on.

You never know if such markets exist unless you have access to many, many markets through your large marketing division, which we have at Commercial Services Insurance.

If you want to check more markets than you currently have, contact us at www.thecsia.com .

Audit Issues with Workers Compensation Coverage

What could possibly go wrong with my workers compensation audit?

I received a copy of an audit statement from one of our work comp companies that went to my client. It seems that they had increased his work comp audit premium over time.

Workers compensation carriers (companies) will reconcile their issued policies at the end of the policy year to make sure that the payroll estimated at the start of the policy gets adjusted to the actual payroll that was paid during that policy year. The adjustment will usually involve either a payment request or a refund, depending on actual payroll vs. estimated.

This is where things often go awry. Incorrect classifications, misunderstandings of reported payrolls, incorrect inclusion of owner’s payroll, and many other issues can cause the audit statement to be incorrect. It is critical that your agent ask you if the payroll seems right, and to notify you immediately if it is not. Also, your agent must review the details of the audit to make sure that the rating characteristics included in the audit are correct as he/she understands them.

Once certainly does not want to pay the insurance company more than is owed. It requires diligence and attention on the part of the agent to protect his client from unduly high premiums.

Want to have us review your coverage? please contact us. We have been doing this for nearly 30 years, and we keep an eye on your money.