Insurance isn’t a foreign language, but sometimes it may be just as confusing. Understanding the different terms and types of coverage can help you make educated decisions about coverage for your business.
Property insurance is coverage for your assets and will indemnify you for the loss in value from a covered loss that damages or destroys buildings and business and personal property. The intent of this coverage is that you will be in the same financial position after the claim is settled as you were before the loss.
You can purchase this coverage separately, in a package, or in a combination policy called a Business Owner’s policy (BOP).
Casualty insurance promises to pay sums of money on your behalf in the chance you are legally responsible for bodily injury or property damages to someone else or their property. If your obligation is enforceable by a court of law and not excluded or limited by the policy, you will have financial protection to the limit of coverage you purchased.
Personal and advertising injury liability
Personal and advertising injury liability coverage is usually included in the general liability policy. It refers to a variety of claims, such as:
- False arrest;
- Detention or imprisonment;
- Malicious prosecution;
- Unlawful entry or eviction;
- Defamation of character;
- Violation of privacy;
- Using ideas that belong to someone else in your advertisements; and
- Infringement of a copyright or trade slogan.
For example, you might be successfully sued by an innocent customer who is erroneously arrested for shoplifting. Or, you might be sued because of advertising copyright.
Employee benefit liability
Another coverage that is typically available as a part of the general liability policy is employee benefits liability. This protects you against an error in administering your employee benefits. For instance, if you or one of your staff fails to offer health coverage to an employee when the worker would be eligible to be included you would be covered by employee benefits liability.
Another example: If an employee incurs medical expenses which would have been covered by the health plan, but she was not added to the policy at the proper time, the health insurance carrier will not cover her expenses. Because you were found to be legally responsible for the oversight, employee benefit liability coverage would pay on your behalf.
Workers’ compensation is designed to pay on your behalf the benefits set out in your state’s laws regarding the injury or death of your employees in the course of their job.
Employment practices liability
This coverage is becoming more important due to an increase in the number of lawsuits being filed against employers alleging wrongful acts in the course of hiring, firing, promoting or failure to promote employees. Since there is no resulting bodily injury or property damage, the general liability policy would not pay any sums you may be required to pay in a judgment.
Commercial automobile liability
Commercial auto liability, including garage keepers’ liability, will provide funding for judgments or legal damages you may be responsible to pay because of your ownership, maintenance or use of an automobile. The garage keepers’ coverage will protect you from damages to vehicles you have in your care, custody or control when servicing or storing them as a part of your business activities.
Even if you are found innocent of charges alleging you are legally responsible for damages, you will still have to pay fees for a defense attorney. In most casualty policies, defense cost is provided in addition to your limit. However, if the damages are equal to or greater than the limit purchased, the defense cost protection will terminate.
Umbrella liability is the name the insurance industry uses to identify a policy that effectively provides higher limits or coverage if the damages you are responsible to pay as a result of bodily injury or property damage are more than your primary policy limits.
Employee benefits program
Employee benefits is another area of insurance that can be confusing to understand. An employee benefits program generally refers to group health, life insurance and/or disability coverage.
Group health insurance premiums may be one of your largest insurance expenses. These plans vary in many ways. Some terms to know in relation to these premiums:
- Deductibles: The amount you or your employee has to pay before the insurance company will pay any charges from the provider;
- Co-pay: A percentage of the provider’s charges that will be paid by you or your employee when a charge exceeds the deductible;
- Maximum out-of-pocket: The most an insured will be responsible to pay for covered medical expenses incurred in a policy term; and
- Maximum benefit: The most the insurance company agrees to pay for covered medical expenses may be for the policy term, a calendar year or lifetime.
In addition, the average age and health conditions of your group will affect the premium for your benefit plan. If you are thinking about changing your insurance agent or company, don’t forget to look at the dependent spouses and children that are or will be covered by the plan. Is there a spouse who is pregnant or a child who is disabled? Would they have benefits for their needs under the new plan at least equal to the benefits under the existing plan?
Life insurance as a group benefit is usually purchased as term life insurance and is relatively inexpensive. Again, the ages of the employees will affect the total premium payable. Most often the same agent who is working with you on your health insurance will be able to provide coverage for life insurance as well.
Disability insurance is valuable to your employees but is typically expensive. This benefit is designed to provide a continuing income when an employee is unable to work due to an accident or illness. Statistics show that employees are very likely to have a disability lasting more than 90 days at some time during their working lifetime. The percentage is higher than 50 percent of all workers.
Scott Brothers is president and CEO of Joplin, Missouri-based The Insurancenter.