The business world today is being held accountable more and more often. In many cases, this means that a business might be stripped of its traditional business insurance limits during a catastrophic event. These are events that a business owner likely never dreamed of occurring to them. It is important, though, to plan for these unexpected events.
Legal settlements can not only rattle the framework of a business, they can put it in a serious financial bind. While a business might have been diligent about ensuring that they have adequate amounts of commercial auto insurance, general liability insurance and employer’s liability insurance, they might be unpleasantly surprised to learn that it is not enough. Given the fact that insurance settlements continue to rise, a commercial umbrella insurance policy is an effective way for a business to protect itself against a large loss.
Commercial Umbrella Insurance: Protective and Affordable
Many businesses – especially small and medium sized ones – might wonder about the necessity – as well as the affordability – of such insurance. Commercial umbrella insurance is unique, though, and it is that uniqueness that makes it so affordable. During an event, such as a legal settlement, your other insurances will be tapped for payment first. This means that those insurances that are required – auto, commercial liability and employer liability – are used to their limits.
Then the Umbrella Comes Out
Once the limits of your other, mandatory insurances are reached, then your commercial umbrella insurance kicks in. While this type of insurance is optional, purchasing a policy is considered to be a good investment in the long term viability of a business. To put it in perspective, for many small and medium size businesses, just one accident, injury or mistake that is determined to be the fault of the business can completely wipe out its financial coffers if the settlement outweighs its monetary limits.
Of all of your business expenses, none can be as necessary as commercial auto insurance for your fleet of business vehicles. Unfortunately, automobile accidents involving a commercial vehicle place your business as the primary person of responsibility rather than the individual driver, your employee, of the vehicle. As such, when determining the best ways to approach your commercial auto insurance, you need to take some special considerations for your drivers and vehicles.
Driver Responsibility
All of your employees need to exhibit the responsibility and care in driving your commercial vehicles as they literally have the future of your business in their hands. Prior to allowing employees to drive a commercial vehicle, have them complete the following strict set of criteria.
Pass a standardized drug screen to check for the presence mind-altering substances. In addition, you may need to conduct a questionnaire about each employee’s alcohol use. If you ever suspected an employee of coming to work while under the influence of alcohol, you cannot allow that employee to drive your commercial vehicles.
Complete a defensive driving course. All of your drivers need to be extraordinarily aware of their surroundings when driving during the course of business. Furthermore, you may consider continuing education for monthly updates on changes to existing traffic laws.
Commercial Vehicle Responsibility
Do not allow commercial vehicles to be used outside of the course of work. The more time you or your employees spend driving work-related vehicles, your risk for having an accident increases.
Ensure your commercial vehicles receive proper, routine maintenance. Check the brakes, tire pressure, turn signals, headlights, taillights, and license plate visibility of your commercial vehicles once per week if not every day prior to use.
Although you may have already purchased a commercial auto insurance policy, you have a duty to actively work to prevent auto accidents. In addition to keeping your employees and other drivers safe on the road through driver diligence and vehicle maintenance, you need to make sure your investment will be protected against disasters.
Being a business without workers’ compensation insurance in California is a serious matter. If an employee is injured during the course of business duties and the business is not insured, it does not mean that the business is absolved of its responsibilities. The Uninsured Employers Benefits Trust Fund was established to ensure that employees are still compensated for their medical expenses even if the business did not comply with the law. Using the power vested in this entity, it can pursue many avenues to ensure that the injured employee is compensated, including placing a lien on the business, imposing a stop order so that the business can no longer legally and delivering fines, penalties and jail time.
If you should decide that you do not want to carry workers’ compensation insurance on your employees and one of them becomes injured or sick while on the job, you will be responsible for paying 100% of the cost of their bills. Without obtaining adequate workers’ compensation insurance, an injured or sickened employee can sue your company to obtain the funds necessary to cover their medical bills. In addition, there is the potential that your business will be fined, penalized and even more for not meeting its obligations to its employees.
The California state labor board, the Division of Labor Standards Enforcement, is responsible for ensuring that businesses comply with a range of labor standards, including having an adequate amount of workers’ compensation insurance. If the Division determine that the business was lacking in this regard, in addition to fines and penalties, it is possible that you will serve a jail sentence in the county jail. A stop order is also likely to be issued that prohibits the business from using the labor of those employees who are not covered. It is a misdemeanor to not comply with such an order.
You need to protect and insure your business. Accidents happen. Fires, floods, slips, falls, sicknesses and even fatalities. They all happen. Everyday. That’s why no matter what size business you’re running, from a two-man operation or a corporation worth millions of dollars, you SHOULD ALWAYS have commercial property insurance.
Not everyone who is looking for business insurance actually understands what it is, though. Or why they need it. Here’s our brief but informative round-up of information to get you started.
3 Frequently Asked Questions about Commercial Property Insurance
My Business is Brand New…Do I Need Insurance on my Commercial Property Already?
Absolutely. Think of it this way: If you could suffer a loss then you need insurance. It doesn’t matter if you’re on day 1 of business or day 1000…you need the insurance.
If I Work From Home Do I Still Need Commercial Property Insurance?
Yes. In most cases you’ll only be insured and reimbursed for up to $2,500 of damage or loss to business assets that occurr within a homeowner’s insurance policy. It is best to purchase additional insurance and protection under your home coverage or add on a commercial property insurance policy to cover anything over the $2,500 amount.
What Steps Can I Take to Lower My Commercial Property Insurance Premiums?
Every policy and insurance premium is based upon the amount of risk involved. Show high risk and you’ll pay more. Mitigate that risk and you’ll pay less. Here are some simple steps you can take to mitigate the risk and lower the premium on your commercial insurance policy:
Have a well-lighted work place (in and out).
Keep electrical systems maintained.
Install adequate sprinkler and fire safety systems.
Teach and preach on the job safety to every employee and keep records of safety training.
Keep the minimal amount of cash needed on hand. Make daily or twice daily bank deposits.
Those are our most FAQ and the answers we give. If you have any more questions or require any further detail, please contact and ask.
When your insurance company issued your Workers Compensation policy, you paid an estimated premium for the term of the policy. This rate was based on the nature of your business and your estimated payroll. However, once your policy expires, the insurance company conducts a premium audit to gather data about your actual costs for the applicable policy term. If there is any shortfall, you are responsible for the difference between the original estimate and actual premium.
Naturally, you want to keep the difference between the estimated and actual rate as low as possible. Consider the following list of tips:
Have all necessary records available for the auditor.
Break down your payroll by classification code so that the auditor doesn’t have to classify any unexplained payroll. Leaving the decision up to the auditor could result in having the payroll placed in the highest classification.
Separate overtime wages from regular wages. This allows the auditor to discount the overtime wages back to regular wages.
Exclude tips, severance pay, meal and travel advances and bonuses paid for inventions, because none of these are included in Workers Compensation premium calculations.
Divide uninsured subcontractor billings into material and labor costs since you are only required to pay premiums for labor. If you don’t have an actual split, figure on 50% for each. One important exception to this is for heavy equipment operators who are employed as subcontractors. In this case, use a third of their total billings as reportable labor costs.
Don’t include short- or long-term disability payments in the data given to the auditor because these are excluded from premium calculations.
Be sure to cap all covered officers’ payroll at the maximum for your state.
Exclude wages paid to employees who are on active military duty because their wages aren’t included in premium calculations.
Present the auditor with all Certificates of Insurance for covered subcontractors so you aren’t charged for them.
Classify all employees in the lower-rated payroll classifications if you aren’t sure about where they should be classified. However, you should never deliberately misclassify an employee.
Be sure you make the auditor aware of all employees who do only clerical work and are physically located away from the shop floor. These employees qualify to be classified in the lower rated clerical codes. If your clerical staff isn’t physically separate from the shop, you should consider changing their work location.
The business world today is being held accountable more and more often. In many cases, this means that a business might be stripped of its traditional business insurance limits during a catastrophic event. These are events that a business owner likely never dreamed of occurring to them. It is important, though, to plan for these unexpected events.
Of all of your business expenses, none can be as necessary as commercial auto insurance for your fleet of business vehicles. Unfortunately, automobile accidents involving a commercial vehicle place your business as the primary person of responsibility rather than the individual driver, your employee, of the vehicle. As such, when determining the best ways to approach your commercial auto insurance, you need to take some special considerations for your drivers and vehicles.
Being a business without workers’ compensation insurance in California is a serious matter. If an employee is injured during the course of business duties and the business is not insured, it does not mean that the business is absolved of its responsibilities. The Uninsured Employers Benefits Trust Fund was established to ensure that employees are still compensated for their medical expenses even if the business did not comply with the law. Using the power vested in this entity, it can pursue many avenues to ensure that the injured employee is compensated, including placing a lien on the business, imposing a stop order so that the business can no longer legally and delivering fines, penalties and jail time.
You need to protect and insure your business. Accidents happen. Fires, floods, slips, falls, sicknesses and even fatalities. They all happen. Everyday. That’s why no matter what size business you’re running, from a two-man operation or a corporation worth millions of dollars, you SHOULD ALWAYS have commercial property insurance.