The benefits of a Master Policy

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We have all heard the phrase “Cheaper by the Dozen." This means that things are handled more efficiently as a group than individually. This same principle can be applied to insurance as well. More specifically, property owner’s insurance and whether that be rental properties, apartments, or other commercial buildings, there are many benefits to an insurance consumer that can be achieved by combining multiple insurance policies into one master policy. 


The first benefit, and probably the one that consumer’s value the most, would be the premium saved by combining policies. Using the “Cheaper by the Dozen” example, say you own 12 rental properties and currently insure them all on their own separate policies, each costing you $1,000 for the year ($12,000 total). If you could combine them into one policy, the larger premium amount will allow you to gain a “bulk discount” of say, 10%. Your annual insurance premium would then drop from $12,000 to $10,800, saving you $1,200 per year. Over an extended period of time this kind of savings could really add up. With the larger premium for the portfolio you may be able to better absorb a loss vs. a single location premium.


In addition to saving you money, combining your insurance policies will make your life easier. Imagine reducing 12 separate renewal dates into just one common effective date. Handling everything once a year instead of 12 different times will make the task of managing your insurance portfolio much simpler and give you more time to focus on growing your business. 


To find out more about the many other benefits of combing your insurance policies into one master policy, I can be reached at 405-507-2734 or nbritten@pi-ins.com
 

Percentage deductible? What is that?

What is a “percentage deductible?”

A percentage deductible is a calculated deductible based off of the total insured value on your property policy.  For example: you have your hotel or apartment insured for $3,000,000; the contents insured for $250,000; and, your annual receipts/business income insured for $250,000. Your total insured value would be $3,500,000.  With a 1% wind/hail deductible, your deductible would be $35,000.  

I know this topic may seem elementary, but I’ve spoken with several clients and learned they had been misinformed on how a percentage deductible works. 

As your agent, I will always strive to get a flat deductible. Questions? Let’s talk. 

Sean

Mother Nature and Deductibles

If you live in the Midwest region of the country, or “Tornado Alley”, it is almost inevitable you have experienced some form of wind and hail that may or may not have resulted in an insurance claim. Whether it was your personal home, auto, or maybe a rental dwelling, you have seen the damage that Mother Nature can cause during the storm season.

As a landlord, these storms can impact to your bottom line and it is important to understand how your properties are covered against these perils. There are few different approaches to structuring your insurance deductible, and choosing the correct deducible for your portfolio could mean the difference in thousands of dollars to your bottom line. When explaining deductibles, the Insurance Information Institute says,

“A deductible can be either a specific dollar amount or a percentage      

of the total amount of insurance on a policy. Generally speaking,

the larger the deductible, the less a consumer pays in premiums for

an insurance policy.”

There is not a universally correct deductible option for everyone and it is not a certainty that you will have the liberty to choose which form will apply to your policy, but there are a few factors to understand how your deductible will affect your policy.

Percentage vs. Flat Deductibles

If you have a flat $1,000 deductible, that money would be deducted from your claim. So, if your insurance company has determined that you have an insured loss worth $10,000 you would receive a claims check for $9,000.

Percentage deductibles are based on a percentage of the property’s insured value. So if your house is insured for $100,000 and your insurance policy has a 2 % deductible, $2,000 would be deducted from the amount you are reimbursed on a claim. In the event of the $10,000 insurance loss, you would be paid $8,000.

Per Location vs. Per Occurrence Deductibles

Realizing how your deductible will apply to your property schedule is crucial. Say you have 10 rental dwellings and a single hail storm damages all 10 roofs. If you have a $1,000 per location deductible, that would equate to $10,000 in total deductibles you would pay if you were to file a claim to replace all your roofs.

Using the same situation where all 10 properties are damaged by one storm, if instead you have a $5,000 per occurrence deductible, you would only pay one $5,000 deductible if you were to file a claim to replace all your roofs.

Not all carriers will offer a per occurrence deductible, and depending on the number of locations you have and the total insurable value of your portfolio, it may not be the right fit for you. It is important that you consult your agent to explore all the possibilities that are available to you and figure out which deductible structure suits you the best.

If you have questions or would like to learn more about our unique programs for rental dwellings you can reach me at 405-507-2734 or nbritten@pi-ins.com

Costs to consider when bidding for jobs

These days everyone wants to know the upfront cost of a project.


When you bid jobs, the General Contractors (GC) look at cost along with what you will do and what material you will use. Let’s look at some costs to consider when bidding for jobs.


Auto Coverage

For ease, let’s assume all your drivers have clean motor vehicle records (MVR). For a one-ton truck, you are roughly looking at a $1,000 annual premium with $1,000,000 liability and a $500 deductible for comp and collision. A variable would be if you have a fleet of ½-ton trucks. 

Now, are you having the employees who drive your trucks provide their MVR’s? Many factors play into you having their records. One example would be the cost of having a driver who has 2 DUI’s vs. a driver with a traffic ticket for rolling a stop sign. But hey, that’s what insurance is for……right? The easy answer is “yes” but you could end up spending your valuable time away from a job site with dealing with these issues. 


Workers Comp Coverage

Again for ease, let’s assume you keep perfect books and split all of your payroll between landscape maintenance and landscaping. As you know, landscape maintenance has a much less expensive rate than landscaping. There is a lot that goes into calculating the workers comp premium, but let’s say your maintenance rate is $4.50 per $100 in payroll and the landscaping rate is $9.00 per $100 or $4,500 per $100,000 and $9,000 per $100,000 in payroll. These figures are based on no workers comp claims within the past 5 years.

What is your protocol when an employee is injured? Do you have a doctor you trust or are you relying on an unknown doctor who keeps your employee in the workers comp system for an unknown length of time, ballooning your claim? Also, do you stay in touch with the injured employee? Do you keep an open line of communication to prevent them from getting bad advice?


Equipment Coverage

Let’s say you have $140,000 worth of equipment and it’s insured for a premium of $1,000 and a $500 deductible. Damage? Destruction? If you have provided the equipment year, make model and serial numbers, we can get you replacement cost as opposed to actual cash value. What is actual cash value? In essence, it’s depreciation. Kind of like a used car value. We have the only company our there that will give replacement cost on equipment. They don’t just write you a check, they’ll find you the equipment just like the one you lost.


General Liability

What types of contracts are you getting yourself into? Are you doing large jobs for larger contractors or sticking with smaller residential companies? Do you hire sub-contractors? If so, is there a written contract? There are certain coverages in an insurance policy that kick in as long as there is an actual contract in place. NO HAND SHAKE DEALS. Friendship goes out the window when large sums of money are involved. Make sure you are protected. Have contacts in place with sub-contractors and let us look at the contracts you are signing.


Did these topics bring more questions to mind? If so, let’s talk. This is what we do. These are the questions we ask. 
 

How A Wellness Plan can save you on Workers Comp premiums

wellness workers compensation plan

Many companies are now considering wellness plans and how they can help reduce health insurance costs. With health insurance costs on the rise every year, I can see how this becomes a topic for health insurance brokers and TPA’s (Third Party Administrators) to explore. What is seldom talked about, however, is how a wellness plan can reduce your Workers’ Compensation costs.

When we are looking at ways to cut costs, the addition of a wellness plan is an expense that just might pay for itself. Consider that a Duke University Medical Center analysis found that obese workers filed twice the number of Workers’ Compensation claims, had seven times higher medical costs from those claims, and lost 13 times more days of work from work injury or work illness than non-obese workers did. Further, smokers were absent from work 50% more and took longer to recover from injuries. With Workers’ Compensation costs continuing to rise, a wellness plan can promote the balance between treating injured workers and returning them to work with cost containment strategies.


By implementing a wellness plan and incorporating it into your workplace accident procedures, the ROI (Return on Investment) for Workers’ Compensation alone is estimated at 4:1. Knowing this, some companies are starting to involve the risk management department in the development and implementation of wellness plans and then offering it to injured workers as a way to get them back to work quicker.

Because the best, and easiest way to educate employees and get them engaged in wellness is through their health insurance, many companies are now offering incentives to encourage participation in wellness programs such as lower deductibles, additional employer contributions to HSA accounts, lower coinsurance, etc. On the flip side, others are introducing the “stick” approach whereby deductibles and co-payments are higher, etc. for not participating in wellness initiatives such as smoking cessation plans or health risks assessments.

The real savings derived from a wellness plan that is often overlooked is the cumulative savings when it is incorporated into a company’s benefit package. For example, add all the savings that the health insurance community describes with the Workers’ Compensation facts I just explained and the savings from both sides are exponential. If you are under a fully insured (standard) group health plan and a Workers’ Compensation fully insured plan, this could be a good savings. If you are self insured or insured in a captive or large deductible, the savings could be even more and would start immediately in this case as the cash flow is more rewarding early on with this type of plan.

Would all industries benefit from this approach? Since Construction, Oil and Gas, Service, and Manufacturing pay much higher Workers’ Compensation rates than industries primarily with office workers, they stand to benefit the most from implementing a wellness plan. If I were a CFO at one of these companies I would consider this immediately.

Chris Moxley, CIC

Real Cost of Your Property Insurance

What is your TCOR (Total Cost of Risk) for your Property Insurance?

Property Insurance Real Cost

Many Businesses look at their Insurance Premiums as their cost of risks from year to year and do not take into account what their real costs associated with their property exposures are.  You hear a lot of discussions about Workers Comp and Liability when talking about Total Cost of Risk but very little is said about your property exposures. 

The Total Cost of Risk (TCOR) is defined as the overall costs associated with running corporate risk management program.  These include such items as:

  • Insurance Premiums
  • Deductibles
  • Uninsured Losses or Losses exceeding Insurance Limits
  • Risk Control or Safety Expenses
  • Management's time in dealing with issues (claims, contractors, moving tenants)
  • Reputation with Insurance Companies (future premium increases)
  • Loss of Reputation in Community
  • Fines (City, State, Federal)
  • City or State Mandates (ordinances) that force upgrades after a loss

When looking at these issues, most would have to agree that avoiding the loss is by far the best way to lower your TCOR and a key component of risk management.  Even though many say that there is not much they can do to lower their risk cost or, “it is just luck” that could not be further from the truth. 

Here are some items that can lower your TCOR for your property exposures:

  • Inspections of Property to identify problems to prevent losses
  • Fire safety equipment such as extinguishers, alarms, & sprinklers
  • Properly Value Properties before loss
  • Contractor Hiring & Risk Management Transfer
  • Proactive improvements to property such as electric, roofs, plumbing, etc.
  • Disaster Recovery Plan
  • Tenant Screening where applicable

We will explore these in future articles.

Chris Moxley, CIC, CRIS

Do you have a Disaster Plan?

disaster plan oklahoma tornado

As we approach weather season, let's talk about your disaster plan. I have discussed in the past that a good Disaster Plan is critical to reduce your total cost of risk. When we ask clients about their disaster plan, I usually hear, “no we need to work on that” or, “yes our computer guy has us taken care of”.  The problem with the first response is obvious but when I dive into the latter scenario,  I often find many holes in their program.  As we know, having your computers backed up is very important and most of us think and expect that that is being done properly.  Even though you may find that the backup is not being done as good as it can be done, a bigger problem is what are you going to do with that data if your building is a total loss due to a fire, tornado, or ice storm?  Even if your data survives, most businesses never recover from a total loss at their property.  Below are some important elements of a complete Disaster Plan:

  • Data Backup and Recovery – This includes software and not just data.
  • Written plan with procedures,  and contacts.  Copies of relevant data for each key employee  should be kept at their houses.
  • Facilities & Power - If you are shut down, for many types of disasters, so is your power.  Who will provide power, computers, office space, warehouse space, and internet or phone connectivity if these are out.  A disaster can include a major cut in your internet service without any type of natural disaster being the cause.  We partner with firms that provide these services to our clients.
  • Testing – If you plan has not been tested, it will probably fail or not obtain it’s desired result.  Everyone we know that has tested their plan has found huge problems they had to fix after the test. When you test, you should simulate a complete loss and restore just like you would have to do in a disaster.
  • Funding – Now that you have the plan to take care of all of this, who will pay for it?  It’s important that your Risk Advisor structures your insurance to properly fund your plan.

Managing your Risk when you sign Sign Contracts

Risk management in Oklahoma and signed contracts.

 What you sign can impact your Total Cost of Risk as much as anything else you do.  Yes that signature you sign in haste just to get that invoice paid, or obtain that lease before anyone else, can be a huge risk to your business.  Many business owners do not have anyone review their contracts before they sign them.  Below are just some of the contracts business owners sign that should be reviewed by an attorney and insurance broker or risk consultant:

  • Leases (property)
  • Automobile or Equipment Leases
  • Construction or Service Contracts – This includes subcontract agreements with any subcontractors or service providers or contracts where you may be the owner of the property for work being performed.  An example of this might be you hiring a General Contractor to do a roofing project for you and he hires a subcontractor to do the work.  You should review this contract as well.
  • Distributor Contracts – whether you are the one selling the product or the buyer

What are we looking for?  An attorney should be looking at the entire contract including how you will be paid and when or how you can get out of the contract.  Your Risk Consultant or insurance broker should be looking at:

  • Indemnity Clauses or Hold Harmless agreements – are they fair? Are they insurable?
  • Does your insurance cover as many of the exposures that you are assuming as possible – (many are uninsurable)
  • Does the contract use modern Insurance Language -  Many are still patterned after policies first introduced in 1973.  Those were modernized in 1986 and much of the wording could be out of date if not modernized
  • What can be taken out or changed that benefits you – If we can suggest changes in language that reduces your exposures, many times that can be negotiated before you sign the contract(s)
  • What endorsements need to be added to your insurance to meet the requirements and how much will it cost you?

Commercial Umbrella Liability - What Limit should I carry?

Umbrellas and Excess policies are important because they give you additional (higher) limits on multiple policies by purchasing one policy.  Most cover General Liability, Automobile, and the Employers’ Liability part of Workers’ Compensation Insurance. Umbrellas are written on their own form and often contain broader coverage than their underlying policies plus they offer drop down coverage for these situations.  Excess policies follow the underlying policies and are only as broad as the polices they encompass.

I have been asked several times what Umbrella Limit a company should carry? While there is no definitive answer to this question, companies should begin their analysis by using the net worth of their company as a guideline.  For example, the more you have, the more you should carry. Companies with substantial property values that have appreciated over time should look to  more than just their financial statements to determine asset values. They should also look at the current market value of their properties. 

We all hear of large losses that put companies out of business, where there could not have been enough coverage purchased to cover the loss. I have personally seen accidents that exceeded $2,000.000 but I have not seen anything over $10,000,000.   This is why I am a proponent of dividing your companies into separate entities if it makes sense to do so. Whether or not you do this, keep in mind that the higher limits you obtain, the less each incremental layer will add to your premium. For example, let’s say the first $1,000,000 of the umbrella  costs $2,000.  The next $1,000,000 might cost $1,000 and the 3rd $1,000,000 might cost $500 for a total premium of $3,500 for a $3,000,000 umbrella.

Whatever you do, take the time to properly protect your company.  You spent a lot of time building your business, so spend the time to make sure you get to keep it.