Pollution Insurance

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With the increasing awareness of environmental issues, new legislations are being introduced affecting our everyday economy. One of the main culprits of pollution is synthetic chemical. It has enhanced the quality of life and is easily found in our everyday lives.

Unfortunately, it is nonbiodegradable and negatively impacts our environment. The chemicals found in the process of producing pesticides, weed killers, petrochemicals and plastic are main sources of pollution.

When it comes to environmental issues, it is easy to think of only large oil industries and radioactive waste disposal plants. However, even for businesses that look very safe, there is a potential risk of producing, storing, or releasing environmentally threatening waste materials.

One example is a dry cleaner. Perchloroethylene (PERC) is used by most dry cleaners due to its effectiveness in dirt removal, color retention and ease of use.  However, it is highly toxic and can travel fast and far in soil and water.  Whether due to an operator’s mistake or machine defect, Perc leak can lead to serious groundwater contamination. For this reason, landlords may request a dry cleaner to receive an inspection or obtain a pollution insurance.

 

What is Pollution Insurance?

Environmental accidents can cause major disasters to businesses. This is because general business insurance declarations contain a clause called ‘Pollution Exclusion’.

In other words, regardless of whether the chemicals are gradually leaked over a long period of time or a sudden and accidental release, all losses caused by environmental accidents are excluded from the coverage of general business insurance.

As a result, a separate pollution insurance needs to be purchased.

Starting from the surge of asbestos litigation in the 1970s, pollution insurance gradually developed. Then in the mid-1980s, pollution insurance became a separate type of policy. This was followed my environmental accidents being excluded from the coverage of general business insurance.

 

Who Needs Pollution Insurance?

If the soil or groundwater of the commercial real estate you currently own or intend to purchase is contaminated, the current or past owner faces environmental cleanup costs that may exceed the value of the property. Being unable to meet the environmental requirements will bring disadvantages. Not only will the value of the property plunge but restrictions on land use and development will be imposed.

The danger of casualties also needs to be put into consideration. Whether you are buying or selling a property, pollution insurance will provide protection from such dangers.

Many buyers hire experts to conduct a Property Assessment before purchasing commercial real estate. However, this only reflects the current condition of the property. It doesn’t consider the possibility against environmental pollution that may be discovered or may occur in the future.

However, if a property owner has a pollution insurance, he or she can be compensated for damages caused by environmental pollution that may be discovered or occur in the future.

Businesses such as golf courses, auto repair shops, gas stations, dry cleaners, apartment complexes, plastic manufacturers, and amusement parks require pollution insurance.

 

What Does Pollution Insurance Cover?

Pollution insurance protects against the following accidents related to liability from damage caused by hazardous materials, land relocation, cost of recovering contaminated undeveloped land, above ground or underground storage tanks, etc.

  • Expenses incurred in purifying pollutants at the insured’s property.
  • Property and personal injury to a third party.
  • Cost of cleanup when pollutants flow into the property of a third party.
  • An environmental accident that occurred while transporting chemical products or wastes.

Coverage may vary slightly depending on the insurance company and industry.  When in the process of obtaining pollution insurance, you should fully discuss the risks with an experienced agent. This will help you in choosing the appropriate amount and scope of coverage.

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Common Home Insurance Exclusions

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Few people are fully aware of the coverages they have purchased for their home insurance.  As a result, many homeowners assume that they have coverage for losses that aren’t covered. Keep reading to learn about common limitations or exclusions in a standard homeowners’ insurance. We’ll also be covering alternative options to better protect your home.

 

1. Cash and Valuables

The annual number of theft cases, in Dallas TX alone, is more than 46,000. Even with security cameras and burglar alarms, crime rates rise especially by the end of each year. Standard home insurance provides coverage for theft. However, there is a limitation for cash and high value items. Therefore, it is beneficial to know the extent of coverage in advance.

The extent of coverage varies by insurance companies and plans. For stolen cash, a typical homeowner’s policy can cover up to $100.  In other words, it’ll only cover up to a certain dollar amount. As for securities such as stocks and bonds, $500 is the max. High value items such as jewelry rings, watches and fur coats are also covered up to $500.

It is wise not to have too many cash or jewelry at home. Using a safe deposit box within a bank is an alternative. As for high value items, you can list them as Scheduled Personal Property on your home insurance. With a little additional premium, this endorsement will provide extended coverage for specific valuables.

 

2. Commercial Equipment or Inventory Stored at Home

Theft of computers or equipment included in business inventory are typically compensated up to $2500. However, each insurance company may offer different limits. It’s best to check the coverage on your home insurance in advance. If you have a business insurance, find out if  theft coverage extends to business inventory stored within the home.

3. Mold Damage

A typical home insurance doesn’t cover mold damage, just as termite damage is excluded. There was a time when many insurance companies in Texas had to temporarily stop selling home insurance. It was in result to a tug-of-war between state authorities on whether to pay for mold damage. There is no separate insurance for mold coverage. However, most insurance companies provide options to add coverage at an additional cost. The coverage limit is usually around $5,000.

 

4. Damage Caused by Underground Pipe

Water damage caused by an underground pipe that result from lack of maintenance or wear and tear are not covered. For a water damage caused by a pipe to be covered, the primary cause must be sudden and accidental. For example, if a sudden weather change causes a pipe to burst, leading to a water damage, it is likely covered.

If the damage is due to a covered loss, you will receive assistance based on your coverage. Home insurance helps pay for various expenses such as drying, cleaning, repairing or replacing wet carpet and walls. If your home is uninhabitable, you can also receive assistance in temporary housing expenses. Keep in mind that home insurance provides coverage for the damages caused by the damaged pipe not the repair or replacement of the pipe itself.

 

5. Damage from Earthquake

Homeowners insurance does not cover natural disasters such as earthquake and flood. A separate insurance exists for earthquake. In California, where there is a high change of earthquake, a separate earthquake damage insurance can be purchased. It’s available from a state-run company called California Earthquake Authority (CEA) designed to help victims from these risks.

Naturally, people living in areas highly exposed to earthquakes or floods, have higher insurance costs compared to those living in areas that do not. Earthquake insurance deductibles usually range from 2% to 20% of the property’s value.

6. Flood Damage

Typically, home insurance does not include flood coverage. Therefore, it is recommended that people living in flood prone areas to obtain flood insurance. In most cases, if you apply for a loan while buying a house located in a flood-prone area, the loan company requests you to submit a certificate of flood insurance. 

The flood damage caused by Hurricane Katrina in New Orleans caused an enormous damage that was unprecedented in U.S. history. It is said that many of the victims have left for other areas without any compensation because they didn’t have flood insurance.

Flood insurance is managed by the Federal Emergency Management Agency (or FEMA). The actual sale and service is provided by insurance companies designated by the government.

 

 

 

 

 

 

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Business Auto Insurance

Business Auto Insurance   

When buying a car, you will be asked to present a proof of insurance. So how is personal and business auto insurance different? Does personal auto insurance fully cover business auto? How should you purchase insurance for commercial vehicles? Below are answers to frequently asked questions.

Some may think personal auto insurance will provide coverage for running a business at home. However, it doesn’t always provide coverage for using a personal car for business purposes. This is why it’s important to consult with an insurance agent. There are two major variables to check. One, is  how often you use your vehicle for business. The second is what purpose you use it for. Reviewing the usage will  help determine the appropriate type of coverage.

Vehicles registered under a business, should be insured under business auto insurance. The same goes for vehicles that are owned by an individual but used exclusively for business purposes. Commercial auto insurance is essential to protect businesses.  This is considering that claimants can file lawsuits against businesses for more compensation in the event of an accident. Another important fact to keep in mind is that General Business Insurance (Liability or Property Insurance) does not cover accidents caused by business-owned vehicles.

 

Types of Coverage

Commercial auto insurance, like personal auto insurance, has similar coverages. Among them, liability is the most important coverage to protect your business. This can be divided into two parts: Bodily Injury and Property Damage. Bodily injury protects your business when you or an employee is responsible for injury or death of others in an auto accident. Property damage covers damage to another person’s property caused by an auto accident. Next, medical payment coverage helps pay medical expenses for occupants who are injured while using the business auto.  These are mandatory coverages required by most states.

There are optional coverages such as “collision” and “comprehensive”. Collision covers the business’ car repair costs in the event of an accident. Comprehensive covers losses from natural disasters and theft.

In some states, it is mandatory to purchase uninsured or under-insured motorist coverage. This coverage protects you when you are in an accident with another driver that doesn’t have insurance or insufficient coverage to pay for your damages.

There are additional coverages such as “towing” for when you need to take your vehicle to a repair shop.

Another is “rental reimbursement”.  This coverage helps pay your rental car costs while your car is being repaired due to a covered accident.

Commercial Auto premium

One way to reduce costs is to increase the deductible for collision coverage. As for liability coverage, maintain sufficient limits.
Each state has a different minimum limit for liability insurance. However, most of those limits are not enough to protect the business. Liability helps pay for  hospital expenses, loss of income, and property damage. If you get into an accident and don’t have enough liability limit, the other party will most likely go after the business.  $500,000 to $1 million in liability coverage is recommended for commercial auto insurance.

Another option is to opt out on collision coverage for vehicles that are old.  If you get into an accident and the cost of repair is higher than the current market price of the car, insurance companies pay the cash value instead of the cost of repair. Therefore, you should consider if collision coverage is necessary in your case.

Business auto insurance is likely to be higher than personal car insurance in terms of cost. However,  it is better to have insurance that will properly cover you in an accident.

Contact us today to learn more or to get a quote.

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What is Bailee Coverage?

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Business such as dry cleaners, alterations or shoe repair constantly have customers dropping off and picking up their clothing or shoes. Laundromats are no exception as some are offering wash & fold services.

With the majority of the inventory as possessions of clients, what would happen if there were to be a fire? How are you to compensate customers for the loss or damage of their entrusted items in such accidents?

Bailee coverage is crucial for businesses that hold customers’ property  while repairing or servicing. If a customer’s property is lost or damaged, the insurance company investigates the case. If you are found liable, the bailee coverage provides financial compensation to your client. Some business owners may already have  Bailee coverage.  However, it is more important to check if a sufficient amount of coverage is in place.

To determine the appropriate insurance coverage amount, check your inventory on the busiest day of the week or month. Then, calculate a monthly average. By multiplying the average monthly inventory by 1.25, the Safety Factor adds about 25%. This will help you find out how much inventory you keep and determine the appropriate amount of “Bailee Coverage”. This coverage may not seem so important in your day-to-day business operations. However, it will be helpful in cases when there’s a great damage to the customer’s property due to fire or theft,

For example, there was an incident where a dry cleaner was vandalized and robbed. After the basketball world championship’s final game, what started as an excited crowd became a group of mobs. They broke into a dry cleaner and ran away with all the clothes. Luckily, the owner of the dry cleaner was able to continue the business without much difficulty. He had prepared for the possibility of such an accident and had sufficient amount of bailee coverage. If he had not shown any active interest in determining if he had the sufficient amount of coverage for such  accidents, he would have had to reimburse the remaining lost items out of pocket after using up all his coverage limit minus the deductible of $1000.

Below are additional tips to be better prepared.

  1. Ask your insurance carrier or your agent on the coverages you have and the limit amount.
  2. In case of an accident, accurately assess the customer’s lost item.
  3. Estimate the value of the lost item based on both the price and the year of purchase.
  4. Check if your insurance provides coverage for risks such as riot, fire, or theft.
  5. When it’s time to renew your insurance, double-check if you need to update your insurance coverage limit or add additional items.

Above all, your priority should be to know what your insurance covers and the limit amount before an accident occurs.

 

 

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Vehicle Accidents and Total Loss

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Most car accidents are minor with damages that can be repaired. However, in some cases, the vehicle may end up being totaled.

Below are some frequently asked questions that may aid in a better understanding of total loss accidents.

 

 

◈ What is total loss and how is it determined?

 

The term “total loss” refers to cases where the cost of repairing the damaged vehicle is higher than the car’s actual cash value.

You may think that a vehicle is declared totaled when it is severely damaged and unable to drive. However, it is more of the value of the car rather than the extent of damage.

For example, a 2015 Buick and 2021 Buick occurred the same amount of damage.  There is a higher possibility that the 2015 model will be totaled since it has a lower value compared to the 2021 vehicle.

A claims adjuster looks up the actual cash value of the damaged vehicle on the insurance company’s data base.  It is then compared with the cost of repair to determine if it should be totaled.

Typically, insurance companies use the NADA (National Auto Dealers Association) or Kelley Blue Book and a secondary reference.

 

◈ What if you disagree with the insurance company’s payout or want to keep the totaled car?

 

 You can try to negotiate with the claims adjuster.  If you have done any recent maintenance, submit documentation showing proof the car is worth more than previously estimated. The adjuster will be able to refer to the documents to re-evaluate the value amount. You can also submit documents showing installation of custom parts or equipment to your insurance company.

Depending on the case, it may be possible to keep your totaled vehicle. In this case, the payout amount from the insurance company will be different from when you sign over your vehicle. You will receive the actual cash value minus the deductible and the salvage value.

If you wish to keep your vehicle, communicate with your adjuster on your options.  Keep in mind that the repair expenses, will be out of pocket.

 

◈ What happens to my totaled vehicle?

 

As mentioned earlier, in order for a vehicle to be determined as total loss, the cost to repair must be higher than the value of the vehicle. However, depending on carrier and state law, a vehicle is sometimes considered total loss when the damage amount exceeds a certain percentage of a car’s value.

Once the vehicle is declared as total loss, the insurance company pays out the actual cash value minus the deductible that you have selected on your insurance coverage.

The signed over vehicle will then be sent to a salvage auction.  Some cars will be refurbished but, in most cases, will be dismantled for parts.

 

◈ What if you want to buy a vehicle that has been totaled?

In most states, vehicles that have been determined as total loss are auctioned. The rules may vary but you will most likely need a salvage dealer or car dealer license to participate in these auctions.  So, if you’re planning to repurchase a totaled vehicle, it is important to check what the guidelines are and have a license in possession.

If you do repurchase a totaled vehicle, keep in mind that the whole repair cost will have to be out of pocket. Make sure that all necessary repairs are made because if it doesn’t pass the state inspection by the DMV, the insurance company may later decline coverage for a future accident.

In addition to passing the state inspection, you should also obtain Liability Insurance. Be aware that some insurance companies may not offer comprehensive or collision coverage for vehicles with salvaged titles.

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How Commercial Property Insurance Rates are Determined

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Commercial property insurance is essential for commercial building owners, just as home insurance is for homeowners. Which is why it’s important to know the criteria that affects the premium. The basic premium calculation is to multiply the loss rate estimated by the insurance company by the insured building limit.

 

Although it differs among insurance companies, exposure to fire hazard is the most important factor in commercial building risk rating. For example, a building with explosive manufacturing will have a higher premium compared to a travel agency office. Well-maintained buildings with fire preventive measures have a lower premium than those that are not.

 

Many variables are used to calculate the fire risk rate. Among them, building materials and construction types account for the largest portion. Fire hazard ratings are determined through state-licensed inspectors. They typically sign contracts with insurance companies to rate buildings’ structures. Below are five standardized rating systems that determine fire hazard ratings:

 

  1. Construction Materials

The materials used to build the building affects your insurance costs. Flammable materials, are considered high risk. On the contrary, buildings with fireproof materials may receive discount benefits. New Buildings that are built on existing structure may negatively impact your fire rating. Therefore, it’s important to consult with your insurance company or agent before remodeling. Fire hazard rating can also be affected by the materials used for the interior. A building built with non-combustible materials but with wooden walls, stairs, and floors would receive a lower safety rating. The higher the percentage of non-flammable materials, the better fire rating.

 

 

  1. Location

Buildings located in urban and large towns have a lower insurance rate compared to buildings located on the outskirts of the city. This is because putting out fire for rural locations are more difficult.

 

 

  1. Occupancy

The type of business that occupies the building also affects the fire rating. Office buildings which are low risk receive a favorable rate. On the other hand, restaurants that use ovens or grills every day or car body repair shop that use flammable paint or chemicals have poor fire ratings. Even if only one tenant runs a high-risk business in the building, it will affect the fire rating of the entire property.

 

 

  1. Fire Protection Measures

Buildings that have automatic sprinkler systems throughout the whole premises receive a significantly improved fire rating. In addition, installing fire extinguishers and automatic fire alarm systems in appropriate locations can improve the building’s fire rating. However, if the location of the building is more than 500 feet away from a fire hydrant on the side of the road, the insurance premium will be higher.

 

 

  1. Exposure

There are external and internal exposures that affect the fire rating. If your commercial property is next to a wood or oil storage, the level of risk becomes higher. As for internal exposures, flawed building foundations, exposed electrical or mechanical risks can also have a negative impact on insurance premiums. In addition, the building’s construction year may also have an indirect impact on its rating. Old buildings may have a higher insurance premium, compared to new ones.

 

Together with these five factors, an insured’s claim record also affects the insurance rate. The guidelines differ by each insurance company but, certain surcharges are added depending on the type of the claim and the amount paid out. If your commercial property does not have any factors that may negatively affect your rate but, has a high insurance premium, you may want to talk to an insurance expert to review your policy.

 

If you have any additional questions regarding commercial property insurance, or would like to speak to an agent for a quote, please contact us at 972-243-0108.

 

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Coinsurance in Business Property Insurance

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Many tend to neglect the coinsurance provision found in business property insurance.  However, this term is an important factor that determines whether you will receive sufficient compensation for your property damage. Most accidents are likely to be partial losses with the chance of a total loss being low. With that in mind, a policyholder is likely to underinsure the building by purchasing lower coverage limits to save on premiums. The concept of coinsurance is an agreement between policyholders who want to lower their insurance coverage limits to pay less, and insurance companies that want to maintain their insurance coverage limits at a reasonable level.

Coinsurance stipulates that at the time of loss, more than a certain percentage (usually 80%) of its full value should be insured. If this regulation is violated, you will not be able to receive 100% compensation for when a partial loss occurs.

Let’s say that you own a commercial property worth $100,000 and insure it for $40,000 with 80% coinsurance. A fire occurs resulting in a loss of $40,000. Although the loss amount falls within $40,000, you will only receive $20,000. This is because you have failed to meet your coinsurance percentage of 80%. Under the coinsurance provision, the property should have been insured no less than 80 % of full value ($80,000 ). Since only half ($40,000) of the required amount ($80,000) was insured, your insurer will only pay half of your loss ($20,000). This is called Co-Insurance Penalty in insurance terms.

In commercial insurance, the value of a business property is based on its value at the time of loss. Due to this reason, it is important to regularly check if you have sufficient ring your business property. coverage amounts and make the appropriate adjustments to the limits. This will prevent cases of being penalized for partial losses under the coinsurance clause. The coinsurance penalty doesn’t apply to total loss accidents. However, since you will be paid within the insured limit, having the sufficient coverage amount is important.   If reducing your insurance premium is a priority, consider increasing your deductible rather than underinsuring your business property.

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Understanding Your Home & Auto Deductible

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So you’ve seen a deductible on your auto or homeowners insurance policy. How does it work exactly? You probably already know that it’s the amount of “cash-on-hand” you need should anything bad happen. What you may not know is that it can be a bit more complicated than that.

Auto Deductible

Simply put the deductible is how much you are responsible for paying for physical damage to your vehicle. Let’s say a tree falls on your car and causes $3,000 worth of damage. If your deductible is set to $1,000, then the insurance company will only pay $2,000 for that loss. The deductible is how much you will pay on your own.

The auto deductible applies to physical damage. It will never kick in for any liability losses. This deductible ranges from $100 up to $5,000. You can also separate these into different amounts for comprehensive and collision. Collision is for when you’re in an accident; this will cover the physical damage. Comprehensive is for really any other physical damage out of your control, such as fire, lightning, hail, stray rocks, etc.

Homeowners Deductible

Your homeowners policy also carries a deductible. There are two separate ones that apply here as well. You may have seen both of them the same, but they may not always be so. The deductible for all-peril and wind/hail damage losses remain separate. It can get more complicated with a third deductible that applies to catastrophic storms, but we will keep it relatively simple and only talk about the first two for now.

An all-peril loss is any loss listed on your policy that is covered. This covers things like fire, lightning, falling objects, theft, etc. Typically your all-peril deductible will be a percentage, but it may also be set as a flat amount. The percentage deductible is based on the overall, dwelling replacement cost, coverage amount. So in this case, if you want a percentage deductible, maybe consider how much your overall coverage is. The higher your dwelling coverage, the higher your percentage deductible will be.

On the other side, the wind/hail deductible is for exactly what it describes: wind and hailstorms. This would be any damage, typically to your roof, resulting in wind damage or hail damage. It is very rare to see this deductible a flat amount; it is standard across the board for this deductible to be a percentage.

 

Effect on Your Premium

Your deductibles, whichever you choose, will have the greatest visible impact on your premium. The higher your deductible, the cheaper your policy will be. This is due to the simple fact that you would be paying more out of your pocket for each loss.

This is something to consider when choosing which deductible is best for your policy. Do you find that you are opening claims often? If so, maybe a slightly more expensive premium with a low deductible might save you more money in the long run. Are you someone who is comfortable with cash-on-hand and you seem to not be using your insurance for claims quite so often? Then it looks like a cheaper overall policy with higher deductible is for you. It is all based on your personal situation and what you’re comfortable paying, either in overall premium or each loss.

Do you still have questions? Would you like someone to look over your policies and make sure you’re covered? Reach out to one of our qualified agents, and we can see what we can do for you!

 

Resources

Understanding Homeowners Insurance Deductibles – Policygenius

Car Insurance Deductibles Explained – Progressive

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What Are Telematics?

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The terminology itself is an adopted term to describe all technology associated with tracking and communicating driving data. Insurance companies will take this data, and either offer you a personalized rate based on how you drive, or simply give a solid discount.

You’ve probably heard of various insurance companies offering a plug-in device for your car; lately these companies are adding a phone app to also track your driving. These devices all monitor various driving habits such as miles driven, time of day, hard braking, quick acceleration, etc. This is what we call “usage-based insurance” or UBI.

UBI consists of two types of rated insurance based on your driving data: “pay as you drive”, and “pay how you drive”. These are pretty self explanatory. Pay-as-you-drive telematics measures the distance you typically drive. This driving data measures how much and how often you’re driving. Pay-how-you-drive means that your driving habits, rather than pure distance, is measured.

So why should you consider rating your insurance based on telematics?

Traditionally insurance is rated based on historical data collected from the previous year. This doesn’t take into account certain years, or time periods, where you would be driving infrequently. You also may want to consider that if you are a low-risk driver, you could get a lower premium on your insurance. Telematics also accurately record accident damage; so if you find that you need your insurance, it may be helpful to have them already know what has happened. However, we know that this does bring up certain privacy concerns. This has led to some states writing legislation that requires insurance carriers to disclose the data they collect. In effect, this has caused these carriers to collect less driving data.

When you’re looking to lower your premium…

Adding telematics can be the easiest change to make without making a dent in your coverage. Many people have left the roads and their commutes this year. With the advent of working from home, or the unfortunate job loss due to Covid-19, many are looking to reduce their premium as much as possible. Why pay so much for insurance when you’ve reduced the chances you’ll need it? Various carriers, such as Nationwide, are offering variable rates based solely on how much you drive. So if you’re unsure of sharing your driving data, but want this variable rate, this may be a good fit for you.

If you’re looking to save money on your auto insurance this year, and telematics sound like a great idea, reach out to us and one of our knowledgeable agents will be happy to assist you.

 

Resources:

Telematics/Usage-Based Insurance – National Association of Insurance Commissioners

Background on Pay As You Drive Insurance – Insurance Information Institute

 

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Hard Market: Increasing Insurance Costs

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Your insurance renewal offer arrives, and it’s increased this year. How frequently does this happen? Has it remained more steady or even lowered in previous years? Why would it suddenly seem to rise? This increase can be attributed to a hard market.

Characteristics of Hard and Soft Markets

The insurance environment flows between two stages, which we call “hard and soft markets.” A hard market is defined by its higher premiums, stricter underwriting criteria, less competition among insurers and so fewer policies are written. Due to a number of reasons, insurance carriers decide that they want to make it harder for you to find affordable coverage. Otherwise in a soft market, you’ll find that your premium is generally lower and it’s easier to shop around. Insurers will evaluate these same metrics and when they determine the risk isn’t so daunting, the market will soften and become easier to obtain that price you’re looking for.

What causes the market to harden?

The primary factors that lead to a hardening market are weather and social inflation. This year in particular has added a new one to the mix: Covid-19. Let’s look at a few of these more closely as to why they may be adding to your premium increase. These are all factors that an insurer considers when offering a policy premium.

  • Weather: Catastrophic weather events lead to more frequent losses. You probably already guessed this one. As we see a rise in hurricanes, hailstorms, and tornadoes, we’re going to also see more claims filed for the damage that follows. Insurance companies pay close attention to the weather patterns, and predict how this will affect the amount of money they will pay out in any given policy period.
  • Social Inflation: You may be wondering what this means exactly. Simply put, social inflation is the term given to rising insurance costs, based on how much companies pay out in lawsuits. The general attitude towards large companies has become more hostile in recent years. This is more a sense of trying to topple down “the man.” Unfortunately this attitude also extends to small businesses. In general, if a lawsuit is brought against a company, juries have been handing out higher and higher awards. This is a risk that insurers look at when they’re offering policies to businesses, even small ones.
  • Covid-19: The year 2020 notably brought to you the leading factor in this year’s hard market. Covid-19 and its related lockdown caused many businesses to close, sometimes for good. If your business was affected by this, then you are already aware of its impact. Insurers were suddenly hit with claims for business income (closure) losses.

Why does it seem so sudden?

This is largely due to you, the insured, becoming comfortable in a soft market phase. If you’re used to your insurance policy remaining the same, or even going down, over a few years you don’t worry too much about it increasing. Unfortunately, this also makes things like risk management a bit more complacent as well. Don’t worry, this kind of thinking happens to everyone.

Another thing to consider is that all policies are vastly different. What covers everything for a donut shop will not have the same protection for a landscaping company. In a soft market, you’re able to find a policy that is tailored to your business’ exact needs and within your price budget very easily. Because of this complacency that it’s so easy, once a market hardens and your specific policy increases in price, it’s suddenly harder for you to find that same coverage within the same price range.

Unfortunately the fact of the matter is that we are currently experiencing a hard market phase. If you’re seeing your insurance premiums increase this year, it’s currently not so easy to find what you need within budget. Let us help! Reach out to one of our knowledgeable insurance specialists, and we’ll help you find that perfect policy.

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