frequently asked questions


Below are some of our frequently asked questions. If you have any other questions or concerns, please feel free to contact us.

  1. Do I need workers compensation insurance?
  2. Is a broken windshield covered under my auto policy deductible?
  3. Why do insurance applications include questions asking for credit information?
  4. What is a certificate of insurance?
  5. What is an Insurance Premium Audit?
  6. Do you understand your deductibles?

Q1: Do I need workers compensation insurance?

 

A1:  Employers have a legal responsibility to their employees to make the workplace safe. However, accidents happen even when every reasonable safety measure has been taken. 

To protect employers from lawsuits resulting from workplace accidents, and to provide medical care and compensation for lost income to employees hurt in workplace accidents, in almost every state, businesses are required to buy workers compensation insurance. Workers compensation insurance covers workers injured on the job, whether they're hurt on the workplace premises or elsewhere, or in auto accidents while on busienss. It also covers work-related illnesses.

Workers compensation provides payments to injured workers, without regard to who was at fault in the accident, for time lost from work and for medical and rehablitation services. It also provides death benefits to surviving spouses and dependents.

Each state has different laws governing the amount and duration of lost income benefits, the provision of medical and rehabilitation services and how the system is administered. For example, in most states there are regulations that cover whether the worker or employer can choose the doctor who treats the injuries and how disputes about benefits are resolved.

Workers compensation insurance must be bought as a separate policy. Although in-home business and business owners policies (BOP's) are sold as package policies, they don't include coverage for workers' injuries. 

 

Q2: Is a broken windshield covered under my auto policy deductible? 

A2:   Broken windshields and other glass are typically covered under the comprehensive coverage of an auto insurance policy. Comprehensive generally provides coverage for physical damage to your vehicle not caused by a collision with an object or another vehicle, but by a variety of other specific situations, such as fires, floods, or hitting a deer. So, if your windshield is broken but you don't have comprehensive coverage, the cost of replacing it will not be covered by your auto insurance. If you do have comprehensive, the cost probably will be covered, but to what extent depends on the details of your particular policy. Most drivers purchase comprehensive coverage with a deductible, in which case you would have to contribute a certain amount out of your own funds toward the cost of replacing your windshield. For example, if you have a $250 deductible, you'll end up footing half the cost when your $500 windshield breaks.
 

Q3:  Why do insurance applications include questions asking for credit information?

A3:  A person's financial responsibility simply reflects the way they pay their bills. Studies indicate that financial responsibility is a good predictor of future insurance claims. This means that by using financial responsibility when evaluating applications, insurance companies are able to more accurately understand the risk involved.

When our partner insurance companies use financial responsibility, they don't actually look at the credit report. They are only concerned with the financial responsibility grouping that the customer falls in to based on the information collected by the credit reporting service. The insurance companies' rating software interprets the information and reflects it in the rate offered. The rating goes on behind the scenes and the system does all the work.

Here are some facts about the use of credit by insurance companies in general. 

  • It is estimated that more than 90% of insurance companies use credit/financial responsibility when evaluating applications.
  • Credit is merely one of the factors that companies look at when evaluating applications. Others include driving history, years of driving experience, and the type of vehicle.
  • Insurance company queries are counted as "soft hits" and will have no impact on your credit score.

 Q4: What is a certificate of insurance?

A4: A certificate of insurance provides evidence that insurance coverage is in effect the day the certificate was printed. These are different from an additional insured in that it does not add anything to your policy--it is just evidence of insurance. You will sometimes see certificates of insurance issued with additional language that says "the certificate holder is an additional insured on XXX policy." When you need a certificate of insurance you should request it of your broker. Also you should request one when contracting with anyone. You don't want to work with a vendor that is not insured. If the vendor has insurance, a potential claimant is less likely to recover from you.

Q5:  What is an Insurance Premium Audit? 

A5:  The primary purpose of a premium audit is to calculate your final premium. When your policy was issued, the premium was an estimate of an exposure basis (usually payroll or sales) multiplied by a rate. The rate used is determined by how the exposure rate is classified. The audit will examine your records to establish the actual exposure basis and make sure that the correct classification codes and rates are used in determining your final premium. Because the original premium was an estimate, the audit will most likely result in a change of premium and/or classifications for your business. Premium audits are commonly performed on General Liability, Liquor Liability and Workers Compensation policies. By auditing these policies we can make sure your business pays the correct premium. Typically, information from the audit will generate either a bill or a refund. In addition, the premium audit can provide valuable information about your business operations. You will be contacted abut completing a premium audit after the policy expires or is canceled. The audit process is designed as a service to you that guarantees you only pay the premium you owe.
 

Q6: Do You Understand Your Deductibles?

A6:  The underlying intent of insurance is to cover larger or significant losses, not minor ones. By sharing risk with the insurer via a deductible, the expensive costs of adjudicating minor losses are avoided, which translates into premium savings. Of course, your deductible also reduces the amount paid by an insurer for the claims you do file, which provides another basis for an insurer to lower your premium.

Most business people understand that a higher deductible results in a lower insurance premium. However, there are several vital points to consider before opting for a higher deductible:

•  How much risk are you willing to bear?

Not every business owner has the same tolerance towards risk. Risk acceptability should be premised on the general practice of others in your industry and your business' current and projected cash flow predictions.

Insurance coverage with a higher premium / low deductible may appear to be more expensive and less tempting in the short-term. However, the psychological impact of a significant loss while possessing coverage with a lower premium / high deductible may have more serious consequences to your bottom line when you actually do suffer a significant loss.

You have to carefully weigh the pros and cons of what you can pay in premiums versus how much deductible you'll have to absorb in the event of a significant loss. 

• Not all deductibles are equal.

Savings on premiums are not necessarily proportionate to higher deductibles. Although a $1000 deductible might save you $200 in monthly premiums and a $2000 deductible saves you $400 in premiums, a $3000 deductible might only result in a $450 premium saving which is a smaller ratio in terms of costs versus benefits. The ratio of premium savings relative to higher deductibles will vary amongst insurance carriers. You should consult with your insurance broker to secure coverage which not only offers the best insurance benefits to cost ratio, but which is practical to the financial realities of your business.

Also, deductibles can be applied differently for different types of policies. The most common deductible types are:

·         Aggregate Deductible – the most common type of deductible you will find on a commercial policy. This refers to a single deductible which applies for all losses during the policy period. If you have $18,000 in total claims and an aggregate deductible in the amount of $7500, then you would receive $10,500 from your insurance carrier.

·         Straight Deductible – the deductible you will pay for each and every claim you make during the policy period. Were you to have a straight deductible for your fleet and you incur 3 collision claims, then the ascribed deductible would be applied separately to each of the 3 claims.

Before considering a deductible change, be sure to consult with your insurance broker to fully understand your options.