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Wednesday, November 28, 2012

Frequently Asked Questions About Business Insurance Umbrella Policies

What is Business Insurance?

Insurance is risk management, whereby individuals and organizations hedge against risk by transferring it to another entity, at a cost. Business insurance is a form of risk management specifically suited to companies, including sole proprietorships. Business insurance is available in a wide array of formats, including a business owner's policy (BOP) and a professional indemnity (PI) insurance policy. While most businesses have insurance to hedge risk, there is insurance that the government requires by law.

What is a Business Insurance Umbrella Policy?

The great difficulty with hedging risk is recognizing it, as in recognizing specific risks as well as understanding how much of any one risk item there is. In some cases, it is practically impossible, so umbrella insurance is an object designed for such scenarios. In simple terms, a business insurance umbrella policy is responsible for various broad schools of risk and the policy assigns a maximum obligation to each school. When a claim-worthy incident occurs, the insurance company assesses the incident and then assigns it to the most appropriate school of risk.

What is Umbrella Liability Insurance?

The most important form of business insurance is liability insurance, and the most common form of a business insurance umbrella policy is a liability insurance umbrella. Due to the nature of liability, a company risks its immediate assets as well as its future income whenever it does business. Liability insurance hedges against that risk, and an umbrella policy protects the company against a myriad of circumstances rather than dictating situational coverage and so forth.

What are the Umbrella Liability Insurance Basics?

Umbrella insurance is, by its nature, more expensive than standard insurance. Therefore, most commercial umbrella insurance tends to be in addition to other policies. A company will have a core policy and if a claim-worthy event is specifically covered by it, then the core policy handles it. Otherwise, the umbrella policy drops down to fill the gaps in the core policy. Typically, an umbrella policy covers pure liability, and insurance companies sell it in increments of a $1 million dollars.

How is an Umbrella Policy Rate Calculated?

The calculation of business umbrella policy rates can be complex depending on the type of insurance. Above, we mentioned umbrella liability coverage that usually covers pure liability in increments of a million dollars. In those cases, the calculation is simple, and the insurance companies just multiply the per-million rate by the number of millions in coverage. In advanced scenarios, it depends on an estimate of risk as well as the particular industry, past performance, total worth, credit history and so forth.

How is the Lowest Possible Business Insurance Rate Achieved?

Achieving the lowest commercial umbrella insurance quotes is not much different from shopping for auto or home insurance for individuals. Rates fluctuate greatly, so comparison-shopping is the key to success. The Internet is an amazingly effective tool for insurance purchasers, and that is true for companies as much as it is individuals. Without the Internet, companies are limited by their local options as well, but with it, they are able to find a remote insurance company that best meets their needs.

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Commercial Insurance Distribution Channels on the Internet

If you worked for a UK Insurance company just twenty years ago or anywhere else in the world for that matter, you would not have heard the term Internet distribution channel, except perhaps in the idle chat of the IT department boffins and analysts in the company cafeteria.

There were only two main distribution channels, or ways of moving insurance products to the market and the Internet as a serious sales and marketing contender would have to wait another ten years to appear.

At the time, the main channels were the direct channel, which meant producing insurance products that could be sold directly to the public from a call centre, thereby cutting out the costs and expense of managing a middleman, and the broker or intermediary channel.

The broker channel was further sub-divided into insurance brokers, agents, tied agents, consultants, sub-brokers, managing agents for Lloyds and the affinity corporate market.

Both channels offered different propositions for the same products dependent upon the way a policy was sold.

At the time only personal lines insurance products such as car and home insurance were available via the direct channel.

It was also considered that commercial insurance and business insurance were too complicated a product to sell direct over the phone, would take up too much time and would require a bank of approved underwriters with scripts to man the phone lines, as no commercial insurance autoquote systems existed. Consequently nearly all commercial insurance was sold via the intermediary channel.

This dual path situation for the sales, marketing and deliverance of insurance polices continued until Insurance finally became a product that could be bought and sold on the Internet. The earliest offerings around the turn of the Century were for personal lines insurance and there was barely a mention of Commercial insurance, save for the odd contact us button.

Ironically as personal lines insurance developed over the Noughties and became a much larger channel of distribution, the two previous direct and broker channels re-established themselves online, this time in much closer competition.

However both the insurance companies and the insurance intermediaries were caught napping as a new distribution channel emerged on the Internet; the aggregator or price comparison site, and in record time accounted for over 90% of online Internet insurance sales.

The public love to compare prices and the fact that most personal lines products could autoquote without the intervention of an underwriter, meant they could all be aggregated into an online insurance price comparison site, such as we see everywhere in the media today. This is a testament to the comparison sites success as a channel in its own right.

Commercial Insurance in the meantime was still in its infancy as a channel on the Internet, until very recently.

The inertia was mainly due to the reluctance of the large general insurance companies to standardise and autoquote for commercial products. They felt the risk was too high and underwriters resisted the change.

The change came about by market forces as the Broker channel started to sell commercial products using its own web-enabled back office systems.

This meant that online business insurance brokers could collect information about a businesses insurance requirements on a website form, and pass the data to its internal systems. These back office comparison systems are composed of a panel of insurers and providers that provided autoquotes.

Straight through processing to an insurance company could be carried out by the existing EDI or electronic data interchange mechanism.

The single broker business and commercial propositions soon became the target of the price aggregators and the large and now very rich comparison sites, who started to offer online insurance comparisons using broker panels in 2009, which rapidly became popular with small business.

The large composite commercial insurers were forced to respond and last year released a string of autoquote products into the Internet channel including packages for shops, offices, pubs, commercial let property, tradesman, professionals and commercial liability to name just a few.

The fact that it is nigh on impossible to watch television for more than an hour or two today, without seeing an advert for a builders public liability and tools policy from a dotcom is proof that the Internet has finally arrived as a commercial insurance distribution channel.

When You Might Need Insurance From Lloyds of London

If you have anything that your local insurance broker or online market cannot find coverage for, then you will usually be referred to a broker or managing agent who has access to Lloyd's of London.

This could be for anything from a car or factory requiring insurance, right through to an International Space Station or Game Show prize fund. If it's a strange or specialist risk, then Lloyd's will always be able find cover for it, for a price.

Lloyd's of London is an insurance market for global risks, marine and shipping insurance, business and commercial insurance and personal lines. It has markets for both property and liability insurance and all types of consequential loss.

No matter where you are in the World you can still get cover from Lloyd's, as long as your risk is specialist enough to warrant it.

Many people assume that Lloyd's is expensive because of the unique, hazardous and massive risks that it underwrites.

However this is not always necessarily so as demonstrated by the large Motor division.

The Motor department underwrites car risks like any other insurance company except that because Lloyd's is a specialist market with various syndicates and brokers competing on price, premiums are often much cheaper and covers more specific to the risk.

Lloyd's now has brokers, and underwriting agents with binding authority in over two hundred countries around the World.

At one end of the scale underwriters will be responsible for insuring personal accident cover, home, motor and property cover for a famous sportsperson, businessman or movie celebrity.

At the other end, syndicates or teams of underwriters at Lloyd's, will provide cover for a satellite launch or the liability for a new cancer fighting drug.

Between these extreme examples, cover is available and provided for everything from large commercial and industrial property, global marine shipping and events such as hollywood movie making through to large spectacles such as the Olympics or the World Cup.

In recent years Lloyd's has become the main market for global weather and environmental risks and in 2011 paid out for damage caused by Queensland's Cyclone Yasi, Christchurch earthquakes, the Japan earthquake and subsequent tsunami, 1,600 tornadoes in the South and Midwest US and floods in Thailand.

For the Names that provide the funding, it was the largest catastrophe claims year on record, with a loss of £516 million.

Aside from catastrophe placement, Lloyd's is now the global market for new risks and emerging markets such as Computer Industry, Internet and Cyber risks, Intellectual Property, Genetic Engineering risks and Biotech risks.

A Guide to Finding Insurance With Flexible Premium Payment Plans

Since the credit crunch and subsequent recession of 2008 everyone has 'felt the pinch' with the high unemployment, slow or little growth and inflation, leading to a restriction in the supply of money and cashflow problems.

Having to pay out large annual recurring fees has had a crippling effect upon many households on low or fixed incomes. So it is with insurance premiums, whether it is for a car, home or business, the insurance fees are usually demanded in one annual lump sum.

This had led to many people under-insuring or cancelling covers to try to make cost savings. In the most extreme cases this has led to an increase in the number of uninsured drivers on the roads and homes and properties without adequate cover. Similarly, cashflow has become a major problem for many small business and paying for the years cover in advance is not possible for many.

Everyone is looking for cheaper insurance and one way to stretch limited disposable income is to spread the payments for cover where possible.

Many personal lines and business insurance companies are now offering more flexible monthly premium payment plans.

Insurance by its very nature demands that for the contract to be in force and valid, the consideration for the contract in the form of money as a premium, must be received before the cover period for the contract starts.

With Insurance policies there is no credit. The money must be received before the event for cover to be effective.

Monthly payment plans work because they allow the insured to cover themselves on a recurring temporary basis, even where the contract in force is annual. A flexible payment plan allows the insured to retain the bulk of the premium and effectively earn interest on the amount unpaid. It is also easier to cancel the policy.

Many insurance companies do not like to offer flexible payment plans or staggered payments because it costs them money. When a policy holder pays the total premium 'up front', that money and all the other premiums collected, is put into investment funds that earn interest for the insurance company.

Many people assume that insurance companies make profit from the difference between premiums collected and claims paid out. It is this interest earned from the premium fund that is an insurance company's largest source of profit, earning money on money.

Payment plans therefore come at a price, usually with an interest rate that is a lot higher than the current standard APR, to allow for administration costs.

It is important to compare rates charged when looking for coverage as well as premiums, as these hidden costs can make what at first appeared to be a cheap proposition, a much more expensive option over time.

Finding Payment Plan Suppliers

So how do you establish if a company is offering flexible payments?

To save a lot of wasted time it is necessary to check whether an insurance company is offering payment plans, early in the buying process, before getting a quote.

If using the telephone to a broker or a direct insurer, ask early in the conversation whether such plans exist.

If using the Internet, look for companies displaying the Direct Debit mark in the form of overlapping twin D's. All insurance companies collect monthly payments by direct debit and this is a firm indication that a website offers these facilities.

Use search engines to narrow down the specific type of insurance required and add keywords to the search terms such as 'payment plan' or 'monthly payments'.

If using a price comparison engine, do not assume that all the companies quoting allow for payment plans, however most of the large ones will allow you to compare covers which usually provides this information.

On a cautionary note, if you have found a policy you are happy with and an insurance company that offers flexible payments, be sure to read the small print carefully. Many an individual or company has had their insurance immediately cancelled because of problems with missed direct debit payments and banks.

Small Business Insurance for Common Marine Coverages

Small business insurance for common marine coverage's includes property that is mobile, transitory, and not fixed to any location. Some of the more common types of marine coverage's would be for Fine Arts, Valuable Papers, Laptops, Sales-persons Samples, and Contractors Equipment to name a few. Mobility contents exposure to more perils than other contents that are located in a building because of their transitory nature.

If you have a claim, most property insurance policies will only pay for the cost of the material, such as the canvas for a painting, but not the intrinsic value that goes with a typical piece of fine art. Since most small businesses do not have much in the way of fine art, the built-in coverage's usually suffice and are typically limited in value but you can purchase higher limits if desired. The most common limits for fine art are usually in the $5,000 to $50,000 range. Property that is at exhibitions, trade shows, and on display can also have coverage under the supplemental marine coverage's on a property policy. This is usually on a temporary basis so if you leave your property permanently on display at a museum, airport or some trade show that typically would be protected on the exhibition coverage.

The business personal property in transit is probably a supplemental coverage that can be useful for the typical small business. Since each business varies greatly as to their procedures and practices, property in transit coverage may or may not be necessary. The supplemental Marine coverage usually has limits between the $5,000-$50,000 ranges. You can purchase higher limits if you need to do so. Usually the insurance carriers separate out property in transit versus sales-persons samples of business personal property. This coverage typically does not cover property of others. You would need specific motor truck cargo coverage to cover property of others. Salesperson samples typically have limits of the $5,000 and $50,000 range.

Valuable papers and records tend to have in the package policies low limits. This is different from valuable papers and records having to deal with Accounts Receivables. This coverage is separate coverage that is unique and specific. A valuable paper and record in your business may not be a valuable paper and record to another business. This coverage typically pays to repair and restore the damage of the papers or records and the cost of recreating the papers. Many times you cannot recreate valuable records if they are paper only records but can usually be done if they are of a digital media type records. If the records are of a digital media type, the reproducing and restoring and/or replacing of these records can be substantial in the cost that is involved. The inputting and re-loading up databases can be an enormous undertaking. So having valuable papers and records coverage can help your business from suffering a financial loss because of damages to these records.

So, You're Thinking of Becoming a Taxi Driver

For anyone considering becoming a taxi driver there some pretty important factors to be reviewed and research.

Firstly, do you have the temperament to be a taxi driver? Remember, you are going to be in an enclosed space with a great variety of people for hours on end. These people might sit or silence or natter all the way through the journey, they'll either be completely uncommunicative or highly opinionated and you're a captive audience. These people will also want you to fetch and carry things to and from the car and maybe cram impossible amounts of items of shopping in your boot. Additionally, some may be wheelchair bound or suffer from immobility. And, let's not forget the drunkard who might leave you a special present. If you are prepared to deal with the vagaries of Joe and Jo public, then your next consideration is choice of vehicle.

You will need to make a decision as to whether you want to drive a saloon, or opt for a people carrier, minibus. It is important you talk to local firms about the different rates you can achieve for operating both. This is research you need to do anyway, irrespective of what vehicle you eventually opt for. There are various costs involved in being a cab driver, so you need to know the work is available to cover taxi insurance, book rental (i.e. - support for the office that provides you work), fuel, plating (your registration with the local authority) and general running costs.

Once you've opted for a saloon car, there are requirements you should look for:

Most local authorities require that any car used for a private hire vehicle is less than 15 years old. Remember, although your taxi insurance quote will be lower the older the car, there could well be a trade off in how much you have to pay out to keep the car running. A newer car should cost less and if you can afford a brand new car, you have the assurance of manufacturers extended warranties. Some industry experts recommend that a large saloon that has depreciated by 70% after three years is the optimum choice - models such as a Mercedes C5, Audi 95, Vauxhall Vectra If your driving is going to be mainly large town/city based, you'll want a car that is comfortable being in 3rd gear for most of the day. Big windscreen for clarity of vision Comfortable, good-sized steering wheel Good sized boot Good radio/CD player Satnav An optional extra for taxi drivers operating nights and weekends in busy urban areas is the anti-assault screen.

Of course, you have to buy a vehicle you can afford. It is pointless taking out a car loan or entering into a finance lease if you don't earn enough from being a taxi driver to make the repayments. And, buy one where insurance is reasonable.