Take this short ten question risk management quiz. If you know an answer right away, give yourself 10 points. If you have to do research to find something out, that counts as a missed question.
If you pass with 70 points or higher, you’re in the elite group of business owners or managers who understand and pay very close attention to their business’s risk management. Less than 70 points and you are like 99.99999% of other business owners/managers – – – just trusting someone else to take care of it without substantial knowledge of the details.
Help on finding the answers is given after the questions.
- What is the difference between an admitted insurer and an excess and surplus lines insurer, and which type insures your business for general, auto, and excess liability?
- Is your commercial general liability policy written using all ISO forms and endorsements?
- Are your commercial general liability and excess liability policies identical in terms of what they cover, or does your excess policy exclude some of the coverage provided by your general liability policy?
- Is your business covered for all automobile-related liability, or are certain types of vehicles and/or drivers excluded?
- Which of your business’s insurance policies are covered by your business’s excess liability policy?
- What type of property insurance policy does your business have? Does it cover all causes of loss other than what is specifically excluded, or does it only cover certain causes of loss that are specifically described?
- Is your business’s property insured on a replacement cost basis, or on the actual cash value of the property at the time of a loss?
- How much business income protection does your business currently purchase? How long will it last and what are the monthly limitations?
- How much coverage would your business have if a hacker obtained your online banking login information and drained your cash accounts?
- How much coverage does your business have for an employee who sues you as their employer for gross, willful negligence?
Okay, here we go with answers:
- An admitted insurer is one who must have their policy language and rates approved by the state in which they do business. In other words, they are closely monitored. Excess/surplus lines insurers are not required to do so, and generally speaking have more restrictive coverage and higher rates (not surprising, eh?) You can find which type your insurer(s) are by looking at the declarations pages of your policy. If it is written with an excess and surplus lines insurer there should be BIG, BOLD wording on one page alerting you to that fact.
- Open your GL policy (provided you actually have the whole thing, which you may not) and look through the policy forms. If it says, “Copyright ISO” and some year thereafter, it’s an ISO form. If it says something along the lines of “Uses Some ISO materials, with its permission” or “copyright (your insurer name here)” it is a manuscript form. ISO forms are *typically* more favorable, and manuscript forms are almost always bad news unless you had a sharp risk manager helping craft the language.
- This part is easy. Look at the forms list on your GL policy declarations pages, then look at the forms list on your excess policy declarations pages. If the exact names and form numbers are listed on each, you have identical coverage. If your excess has forms that your GL does not, odds are your excess policy restricts coverage. Sure, it may extend over the GL – – – it just does not cover everything the GL covers.
- This is easy too. Look at your auto liability declarations. There is a coverage symbol (usually a number). If it is “symbol 1” your business should be covered for any auto-related liabilities. If it is anything else, your business is almost certainly NOT covered for all auto-related liabilities.
- Pull up your excess liability policy and look for the “underlying policies” – – – usually found in the declarations pages but may be listed on an endorsement toward the back of the policy. If you ultimately can’t find anything, just email your customer service rep from your agency and they can tell you.
- Look for the “causes of loss” in your property policy. If it’s “special” you have what is known as all-risk coverage (which is the broadest in terms of what causes of property damage are covered), if it’s “basic” or “broad” you do not.
- This should also be found on the property dec pages. You want replacement cost, because that covers the cost to replace the property rather than allowing the insurer’s adjuster to show up and short-change you with “well, the depreciation, blah, blah, blah and it’s worth the actual cash value…..” which means you’re getting a tiny payment nowhere near what you really need to fix your problem.
- Look on your property policy dec pages and see if business income is listed. There should be a limit of insurance given for that too, and also should be information on how long the coverage lasts and how much money your business can take each month after a property loss that hampers your operations.
- Does your business carry cyber risk insurance? If not, you almost certainly do not have this coverage. If so, look at your cyber policy declarations page to see the limits, and then check the “insuring agreements” in your cyber policy to see if that activity is covered or excluded.
- This one is fun, which is why I saved it for last. Many employers say, “unlimited” because of workers’ comp. Not so at all. Look at your work comp dec pages. There are limits listed there, usually $100k, $500k, or $1M. That is how much coverage you have for what is known as “employer’s liability.” If that line is underlying on your excess/umbrella policy, you can add those limits too. If it is not, you get the limits on your work comp policy and that is all. Oh, and for what it’s worth, if this is not underlying on your excess/umbrella most insurers will do that for free if you ask them to – – – and that’s why this often gets missed. There is no commission on free.
I made this quiz easy.
It could have been FAR more difficult and detailed, because insurance is intentionally multi-layered and confusing.
So, how did you do? Do you know the answers to some or most of these? Did you check to be sure your answers are correct?
Let me stop you before your brain gets the better of you. Your agent likely does not know all these answers. They may know some, but they’d have to look and dig for the others.
Many business owners and managers assume their insurance agent has read their policies cover to cover and knows everything contained therein. It’s possible that could happen, but in my experience I have never seen that to be the case.
If you have not read your business’s policies, you probably don’t know many of these and that makes you normal.
Having an unbiased, non-salesperson risk manager keeping track of all the specific details of your business’s coverage is critically important for the health of your business.
If you aren’t a risk-management minded business owner who understands and tracks all this, who is looking after these details for your business?
To Your Success,
Drew Boyd