How Much Will The Insurance Cost?
I get that question all the time from clients and non-clients.
“I’m starting a business and we’ll be doing XYZ. What insurance will I need and how much will it cost?”
Or, “we just landed a really big contract but they’re requiring we increase our liability limits. How much will that cost?” (see my previous post, “Negotiating a contract.”)
I always try to answer the question with my best guess, but at the end of the day, the real answer is this:
It depends.
No one likes that answer, but remember: Every business insurance premium is customized for that particular business. Gross sales, payroll, location, credit history, driving history, claims history, even the type of building you’re in all play a factor in how much premium you pay.
So if you need a rough figure for budgeting purposes, my guess will probably be good enough.
But if you need a hard number, the only real way to find out how much your insurance will cost is to apply for it and get a real quote from an insurance company.
It happens a lot: a business is close to landing a lucrative contract and in the final stage, they send their agent the insurance requirements (so far ignored) only to find the extra coverage required will cost a bunch of money.
True Story: a local IT firm was close to signing a large contract with a worldwide computer company, then discovered at the last minute that the insurance requirements easily topped $50,000 annually. Would’ve been much better to find that out sooner.
I know a painter that bid a job, signed the (unread) contract, finished his work, and submitted his invoice. The general contractor said, “Great, just get us a ‘Certificate of Insurance’ and we’ll cut you a check.” The painter asked his agent for the certificate but was told he doesn’t have all the requirements and to fulfill them would cost $2500. The same amount he was supposed to get paid! Ouch.
If the insurance requirements are looked into early on, sometimes the extra cost can be worked into the negotiations, or the requirements reduced or even removed.
Contractors and IT companies, yes, but also wholesalers, government contractors, and any other business that has the chance to land a big contract is likely to run into this at some point.
So ask for a template copy of their vendor insurance requirements early, and nip this in the bud.
Insurance quotes just $5!
As I’ve mentioned before, auto insurance as an advertising category (like beer or fast food) has exploded. Even the local carriers are getting into the act. They often say, “call us for a free quote.” Just so you know, ALL insurance quotes are free. That’s because every person or business that buys insurance is evaluated by the insurance company to determine how much to charge. And really, would you ever actually pay for a quote?
According to Propertycasualty.com 37% of business owners think their IT departments have sufficiently protected them from cyber attacks. And 15% say they just aren’t concerned. The article goes on to say that “the increased use of electronic health records, mobile devices, apps and social media offers cyber criminals new places to play.” I’ve said before, this is a growing risk that like Facebook and Twitter, just isn’t going to go away. Click the title to read entire article.
Tsunami Is Not Water Damage, Huh?
Now that we’re 5 weeks past the Japan disaster, the most common question I’ve received from business owners is, “If I have ‘water damage’ coverage on my property policy, would that have covered me if my business had been hit by the tsunami?” The answer is a resounding NO. Water Damage is not Flood. The insurance companies define water damage as leaking pipes, drains backing up, etc. For a tsunami, you would need flood insurance. And even that coverage has its limitations, check with your insurance advisor. To find out if you’re business (or residence) is in a flood zone, go to www.freeflood.com. By the way, just because you’re not in a flood zone doesn’t mean you won’t get flooded. It just means the likelihood is lower. It also means flood insurance is cheap.
Twitter virus attack highlights key risk of social media
Very interesting and informative article from Business Insurance magazine. Businesses can and are being held liable from cyber attacks. General Liability insurance does not cover these types of risk. Click on the red link below. I welcome any questions or comments.
Twitter virus attack highlights key risk of social media | Business Insurance.
Spilled Drink Pays $5 Million
Did you see the 10/12/10 Star Advertiser? A Maui McDonald’s must pay a woman $5.67 million after she slipped and fell in the restaurant back in November, 2007. Slips and falls are the most common general liability insurance claim. An expensive reminder of just how much a small liquid spill can cost if left unchecked. Yikes!
Hawaii Workers Comp Rates Flat In 2011
In Hawaii, Workers comp rates have fallen over 60% since 2005. But this year, HEMIC is filing a 0% change in the average workers comp rate. I don’t expect the other insurance companies to be much different. While you may wish for a continued decrease in rates, it could be worse. Florida is asking for a 6 to 7% rate increase. And Washington just announced a 12% increase for 2011.
Motor Vehicle Records now $20
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Just a note to any business owner with commercial auto insurance. As you know, every year most insurance companies request an updated driver’s abstract, or Motor Vehicle Record (MVR) before renewing the auto policy. Up until June 30, 2010, the city charged $7 for each record. Effective July 1, 2010, the city raised the price to $20 for each driver. Yikes!
Aloha and welcome!
Thanks for stopping by. The reason for this blog is to pass on commercial insurance insights and relevant news to my business clients and colleagues. Commercial insurance is always changing. New products come and go. And coverage issues are always a topic that fosters much discussion. Occasionally I’ll write an article on commercial insurance and post them here so that anyone interested can read them (see the Articles link). I appreciate any comments or questions you may have. Let’s discuss…
Tom Allen, Commercial Insurance Agent, CIC 
