Commercial Insurance


Commercial insurance is defined as:

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Define Commercial Insurance

The definition of business insurance will likely vary depending on who you ask. The explanation may even change depending on how you ask it. It goes by a lot of names. You may hear it called many things. Business insurance, commercial business insurance or property & casualty commercial insurance.

TruePoint insurance defines commercial insurance as:

Insurance coverage for businesses that provides protection against a broad range of P&C claims. The term commercial insurance is used to describe several insurance policies. To determine which you need, you should, first, determine the risk faced by your company. A commercial insurance policy should also provide defense cost in the event of a lawsuit. This protection should be available regardless of the legal merit of the case.

TruePoint doe commercial insurance call us to speak with a business insurance specialist
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What should your Business Insurance Policy look like?

commercial insurance, TruePoint specialized in commerical insurance in Kentucky,  AKA Kentucky Business insurance
Business Insurance Policy

We stated the definition of commercial insurance might change. The truth is, it will change. The answer will vary based on who you ask, and maybe how you ask. Who you are will also alter the definition……… What type of business do you own? Do you have employees? Do you use vehicles in your business? Do you own buildings or other property? Do you need commercial insurance? These questions are just the beginning of defining your unique commercial insurance needs.

Property and Casualty Insurance

The term commercial insurance policy defines a vast range of coverages. Each offers a vehicle that provides specific protection to your business.

We can start by breaking insurance into one of three categories, Property, Casualty or both. The property will relate to (buildings, furniture, inventories, vehicles, and equipment.) The Casualty coverages protect against liability claims. Coverages include General Liability, Workers Compensation, Professional Liability, and many others. Most small businesses will find the third option most attractive. A Business Owners Policy or a BOP.

The benefit of the BOP is that it packages the general liability and commercial property. The packaging allows for more efficient and effective coverages. As it relates to Kentucky Business Insurance, BOP’s provide more coverage at less cost.

Knowing the coverages you need is more than half the battle

Business insurance is written in five major coverage lines. These lines are identified and briefly described below:

Commercial General Liability Insurance (or CGL) Protects when actions of the insured or an employee lead to property damage or bodily

Commercial liability insurance in Kentucky is most often referred to as General Liability insurance, commercial general liability insurance or CGl. GL.
Commercial Liability Insurance

injury of another. The policy should also provide coverage in the event the business must defend itself in a court of law.

Commercial Property Insurance The primary target of this coverage is owned and possibly leased buildings. In this section, you will also find coverages for the business personal property. This includes furniture, inventory, tools, some equipment and more.

TruePoint Insurance, Specialist in Kentucky Commercial Auto.   Need Business Auto insurance in Kentucky?  Give us a call 502-410-5089
Business Auto Insurance

Commercial Auto Often referred to a Business Auto it covers vehicles that are owned or leased by the company. As a personal auto policy does, the Commercial starts as liability coverage. Comprehensive and collision coverages can be added, as well as other additional items. A good example of a valuable add-on is a coverage know as hired or non-owned. It provides protection to an employee or volunteer autos during work-related activities.

Inland Marine Insurance One use is equipment or mobile equipment operated off-site known as commercial floaters. There are many more coverages that fall into this section.

Workers Compensation used to provide financial remuneration to employees injured while performing work-related activities.

There are many more coverages, most of which fall under one or more of the primary lines above. A few examples include:

  • More specialized liability coverages include:
  • Professional Liability or Errors and Omissions (E&O)
  • Garage Liability a form of CGL for auto garages, shop, dealers and more
  • Directors’ and Officers’
  • The property section contains many optional coverages and endorsements. What if any of it do you need? Including items such as
  • business interruption (aka business income),
  • earthquake coverage
  • flood insurance
  • water backup
  • utility disruption,
  • equipment breakdown and many more.
  • Trucking insurance is an example of a specific form of commercial auto insurance. Another form that we often see business auto insurance is referred to as hired and non-owned.
  • inland marine is our all other buckets. Below are just a few examples.
  • Bailee’s Coverage– Property of others under your temporary care. Think about a Dry Cleaner. Do they have coverage clothing? That’s Bailees.
  • Builder’s Risk- Insurance while a building or home is under construction.
  • Cameras
  • Communication equipment and towers
  • Computer Coverage
  • Contractors Equipment
  • Commercial Floaters
  • Property In Transit
Don't drive past Kentucky's Elite Business insurance agent,  Commercial insurance at 1085 Eagle Lake Dr, Lawrenceburg, KY  40342
Commercial Insurance

Identifying risk and understanding coverages

For centuries mankind has solved problems by finding solutions or answers to our questions. While it’s great to have a trusted resource or go to for every issue, there are times in life where we are on our own. When this happens, logic and common sense will go a long way.

If I don’t own a building do I need property coverage?

You might. Do you have an inventory or equipment that should be insured? Even if you don’t own a building, you still might need to insure one.

Does your lease require you to insure the building?

My business is family owned and operated; everyone that works here is related to the owner, me, the owner.

Do I need workers compensation insurance?

Kentucky business owners have the right to reject workers compensation coverage. If they’re not business owners, the state workers compensation commission will expect everyone to have insurance. Workers Compensation can be complex. That’s why we request clients to speak with an attorney before waiving any coverage. Learn more at Kentucky Workers Comp.

slow down or you will drive past Kentucky's best business insurance agency.  Commercial insurance at 6287 Taylorsville Rd, Fisherville KY  40023 or call 502-410-5089
Business Insurance

Why do I need CGL and E&O insurance?

It is possible. Some professions should have both. The coverages cover two different sets of risk. Why E&O or professional liability is typically associated with professional services, it also provides protection in the event of incomplete or shoddy work. Something that your CGL will not cover. Learn more.

Questions, feel free to reach out to a TruePoint agent. You can reach us at (502) 410-5089.

Deductible

Insurance term, definition, deductible, insurance deductibe, what is a deductible,

An deductible or insurance deductible is a fixed dollar amount or percentage that is retained by the insured. In the event of a claim (most often property claims) the insured will be required to come up with the deductible amount declared in the policy before receiving the insurance companies obligation.

What is an Insurance Deductible and why do I have one?

insurance deductibles, Kentucky insurance policies have deductibles: Auto insurance deductible, car insurance deductible, homeowner's insurance deductible, home insurance deductiblle, commercial insurance deductible, business insurance deductibel

Many insurance policies have deductibles. A deductible is a set dollar or percentage amount of a claim. The insured is responsible for paying this part before any payments will be released by the insurance company. The purpose of insurance is to reimburse the insured in the event of a loss. Insurance companies pool risks, which work to make payments more affordable for all. Insurance works because it accepts large financial exposures, spread over a geographically diverse group. Most of us have at some point dropped and broken an egg. Did your insurance company replace the broken egg? Insurance, the mechanism that we use to spread risk, fails to work if it is expected to cover all losses. Items below a certain threshold significantly reduce the effectiveness of insurance. Deductibles work to stabilize the insurance process. By reducing the number of small claims, deductibles reduce inefficiencies.

How Insurance Deductible Benefit Consumers

While consumers may find it difficult to accept, deductibles lead to lower premiums. Don’t take my word; you can demonstrate the theory yourself. You most likely have the ability to raise and lower deductibles on your policy. Re-quote your coverage; using both higher and lower deductibles. What you will find is that premiums rise as deductibles decline. You will have proof that the cost of insurance declines with higher deductibles.

How Insurance Deductible Benefit Insurance Companies

Why do I need an insurance deductible?  Deductible reduces insurance fraud.  What is a deductible?

Moral Hazard My Great Grandmother used to tell me that locks keep honest people honest. For insurance companies, deductibles can be viewed the same way that my Great-Grandmother saw locks. Example: Ed is trying to sell his boat. The best he can get is $1,200, but he still owes the bank $1,500. Instead of taking a $300 loss he could call his insurance company and reports it as stolen. Then he would have the $1,500 to pay off the boat.No! In this case, the $1,000 deductible removes the incentive to commit insurance fraud. It significantly reduces the chances of a loss for the insurer.

Deductibles reduce exposures to Moral Hazards: Locks keep honest people honest.

higher deductibles, lower premium. What deductible should I have?


Morale Hazard Unlike moral hazards, which are the result of an illegal action, morale hazards are more akin to neglect. Individuals that willing to expose insured property to hazards are considered morale hazards. For example, leaving a cell phone on your front porch isn’t illegal. It could be a perfectly beautiful day or a torrential storm. Would it be illegal if a 4 year old mobile phone was left in a hail storm? No. But this phone is old, and it has an insurance policy. Is it illegal to use the storm as an avenue for a new phone? Probably not. But there are clear ethical issues. This is a moral hazard.


Deductibles reduce exposures to Morale Hazards: Locks keep honest people honest.


Claims Cost: Relative to the size of the loss, insurers pay out a significant amount more on smaller claims. This is due to the considerable impact of fixed cost.
Deductibles improve efficiencies: Insurance is intended for catastrophic losses or larger financial exposures.
Deductibles occur on most property coverages. The property would be tangibles such as buildings, homes, vehicles and other real property. Until very recently deductibles have almost entirely excluded from liability claims. Giving consumers the option to include deductibles liability coverages is becoming more common.
Deductibles are a form of risk retention. They serve as a way to level the playing field for both the insurance company and the insurer. They give insurance companies a tool to reduce fraud and other manipulation. Deductibles also work to enhance the efficiencies of the insurance process. When used responsibly deductibles make it easier for everyone to minimize risk.

A Safer Prom

Prom season is just around the corner and TruePoint Insurance with inforamtion that we hope will make your prom a little safer.

High school proms are early chances to participate in a formal event. It is also considered a chance to act as a full-fledged adult. The event involves arranging a complete evening of dining, dancing and socialization. However, just as much time should be devoted to making the event as safe as possible.

It is almost inevitable that a prom will involve serious exposure to alcohol or other intoxicants. The evening also involves many young, inexperienced drivers who are excited about making their way to pre and post prom activities. Sadly, these factors have combined to make prom season dangerous. Serious traffic accidents often become the main feature of what should be a night of joy.

Prom-goers and their parents need to create a strategy for making prom night both memorable and safe. Here are some tips:

  • Parents should get all activity details, including dinner and pre and post prom events
  • Confirm the night’s events with school officials and other parents
  • Consider arranging a safe, group post-prom activity where participants can be supervised
  • Clearly lay out your expectations to your son or daughter about acceptable behavior regarding their evening
  • Discuss all details about transportation, whether they are drivers or passengers
  • Be sure that communications are set up. If the child does not have a cell phone available, find out the numbers where he or she can be reached during different phases of the evening
  • If practical, consider arranging for a third party to handle transportation (limo or taxi service)
  • Consider an amnesty arrangement. In other words, let your child know that they can contact a parent for emergency transportation should something go wrong and, for that evening, they’ll be no lectures or punishments

Help your son or daughter make prom night a bright memory rather than a tragedy. Plan on making safety and fun everyone’s priority.


COPYRIGHT: Insurance Publishing Plus, Inc. 2017
All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

What Kind of Boats Need Insurance?

boat insurance, ky boat insurance, buy boat insurance, find boat insurance, does Kentucky require boat insurance, houseboat insurance, watercraft boats, speed boat insurance, insuanceWhether you live in Louisville or Lexington or the surrounding communities, you’ll have no trouble finding a great body of water.  The Kentucky River, Ohio River, Mississippi River, and many other’s present awesome waterways for Kentucky boaters.

Kentucky is also home to many great lakes.  Near the cities of Benton, Murray, Cadiz, Princeton, and Eddyville you will find two of Kentucky’s treasurers.  Kentuck Lake and Lake Barkley combine for over 340 sq. miles of beauty and fun for all kinds of water-related activities.   Other notable Kentucky lakes include Lake Cumberland, Barren River Lake, Lake Laurel, Green River Lake, Cave Run, and Rough River Lake.

One of the most common questions boat owners ask is whether they need insurance, and what kind of boats require such insurance. Based on current state law, you are not legally obligated to invest in boat insurance. However, you leave yourself susceptible to a number of issues if you fail to invest in such protection.  Summer boating season will be here before you know it.  Don’t make the choice to go without boat insurance without first considering the cost.  Take a moment to continue reading, visit TruePoint boat and watercraft online or for a boat insurance quote call (502) 410-5089.

Consider What You Paid for the Boat

Does Kentucky require boat owners to have insurance?  No.  In Kentucky, it is legal to own and operate personal watercraft without insurance.  That includes boat liability insurance. boat insurance, how much does boat insurance cost, call for a boat insurance quote, boat insurance companies, sailboat insurance, cheap boat insuranceBut before deciding to forgo watercraft boat insurance, first, consider what you paid for the boat. Now think how many opportunities there are for severely damaging your boat.  On the way to the lake, you can relax a bit.  As long as the boat is on a trailer being towed by your insurance truck or car, the liability exposure of the boat will be picked up by your auto insurance.  Once off the trailer, the boat is your responsibility.  During the process of unloading your boat, it’s possible for you to damage another boat.  Just as easily you might also damage their truck, trailer, or even worse, another person.  Once on the lake, there is an unlimited supply of exposures.  Any of which might damage your boat.  Damaging your boat and losing your entire investment would be bad enough, but if you are involved in an accident with another boat, you could potentially be out a boat plus buying a new one for the other party.

Your auto insurance coverage does not protect your boat. This means even if someone runs a red light and crashes into your boat during transport, your auto insurance coverage will not pay for it.  Once on the lake, you will not only have property damage exposure, but you will no longer be protected by any form of boat liability insurance.

All Kinds of Boats Can Receive Coverage

boat insurance, watercraft insurance, personal watercraft insurance, jet ski insurance, what kind of boat can be insured, can i insure a jet ski, can i insurance a personal watercraft, boat insurance cost, best boat insuranceIf you’re able to take the watercraft out onto the water, then it can be protected with a form of boat insurance. Whether you have a bass boat or you have a houseboat you like to take out on the lake, all boats can be protected with boat insurance.   Cheap boat insurance can be found, which makes it hard to justify putting on watercraft on the water without proper boat insurance.

Boats are expenses, but liability losses are the greatest exposure for Kentucky Boat Owners.

You are never legally required to obtain boat insurance. However, an best boat insurance, top boat insurance, cheap boat insurance, fast boat insurance, i need boat insurance, bass boat insurance, fishing boat insurance, boat liability insurance, motor boat insurance, houseboat insurance, bass boat insurance, fishing boat insurance, pleasure boat insurance, ski boat insurance,accident on your way to the lake, on the lake, or even inside of your garage, may put your purchase at financial risk, and can even put you at risk of paying out due to liability issues.  It’s easy to find out what kind of coverage options are available for Kentucky boat owners.  All you need to do is give the team at TruePoint Insurance a call today.

Is Your Home Winter Ready? – Part 3

In this part we discuss a different hazard of the winter season.

Fireplace, winter hazardFiring Up A Hearty Loss

Do you own a fireplace, wood-burning stove or portable heater? What about a gas or an electric furnace? If so, you need to take steps to make sure that they are safe and used properly. This should be done well before the arrival of the heating season.

Have your furnace inspected to make sure that it will operate properly in cold weather. Clean filters and vents will go a long way to keep your furnace a source or warmth rather than a cause of a fire loss. An inspection should also make certain that your furnace is not a creating a dangerous carbon monoxide buildup.

Fireplaces and wood-burning stoves should also be inspected and, if necessary, thoroughly cleaned. Creosote, a tar-like byproduct of burning wood, builds up in chimney and stove flues very quickly. Even a single wood-burning season could produce enough buildup to create a fire or severe smoke hazard. Don’t do the inspection yourself. It’s worth the cost to have a professional inspect and clean your fireplace or stove. Also, make sure that you don’t burn softwood or paper. Using anything other than hardwoods exposes your fireplace or stove to quicker creosote buildup (softwood) or more intense heat (paper), which could clog or contribute to cracking a flue or liner.Home fire risk increase in winter

Be very careful with the use of portable heaters. Depending upon the type, they can be prone to malfunction or could be a hazardous source of burns, especially for children. Further, many types can be easily tipped with the combination of heat source and fuels, creating a serious fire hazard.

Finally, make sure you have fire/smoke and carbon monoxide detectors properly installed and in good working order. Test them and put in new batteries. Small expense, big payoff.

As always, insurance professional is a valuable source of safety and insurance information. Don’t hesitate to contact an agent to discuss your questions. If you haven’t had the chance, please be sure to read parts one and two of “Is Your Home Winter Ready” which discusses other winter concerns.

 

            Return to Section 1                                                           Return to Section 2

 

COPYRIGHT: Insurance Publishing Plus, Inc. 2017

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

What’s your best insurance analogy?

InsuranceI would be very interested in how you answer the following question.  So if you have the time to comment, please leave a reply at the end of this post, including the season, month or holiday as well as insights why?  Just curious!

Question:  What’s your best insurance analogy?

For me the answer is easy.  It depends on the current season.  Of course, I am an insurance agent, which means I can draw a correlation to insurance to everything.  That includes the bologna sandwich I am eating.  However, this time of year there seems to be an almost endless list of things to associate with insurance.  Below are just a few:

  • Fall is the time of year that we associate with change and mystery. Insurance don't be afraid of insuranceprotects us from the uncertainty that results during periods of change. Fall is also associated with a period preparation and protection. Insurance is no different.  We prepare for less desirable times by purchasing insurance.
  • Halloween is a time that most of us associate with fear. Ghost, goblins and all sorts of creepy critters running around asking us to fork over a few sugary treats. By doing as requested we avoid and unexpected and frightening trick.  That certainly sounds a lot like risk transfer to me.
  • Haunted Houses, we all know they’re not real, but the can scare even the bravest soul. Insurance agents have a bad rap. I am not going to say that it isn’t earned.  There are a number of agents out there that are similar to the haunted houses; they just aren’t the real thing.  Finding a good agent can and will reduce many of the fears that you may have regarding insurance.
  • Peanuts, It’s the Great Pumpkin. Every year around this time we all cringe as CharlieInsurance Sales Brown once again put’s his trust in Lucy to hold the football. Every year, in spite of severe ridicule, Linus forgoes the big Halloween sugar score.  Waiting in the pumpkin patch for a no show, the Great Pumpkin.
  • In most transactions, the buyer receives some degree of immediate satisfaction.  Insurance is not that way at all.  In fact, it is one of the only things that we as consumers ever buy that we hope to never use.  As a result, insurance consumers can in many regards be compared to Charlie Brown and Linus.  They have both made decisions based entirely on trust.

Each of the above associations are valid, but it is the Peanuts analogy that rings the loudest. Insurance shouldn’t be about selling, Insurance is about trust.  Think of Lucy as being the insurance agent.  Sure she’s a salesperson, a salesperson with a bad memory.  She will do everything in her power to convince Charlie Brown to trust that she will hold the ball.

Insurance is something you are required to have or should have.  Maybe you don’t know you need it yet, but if you need it then it’s not selling, it’s educating.  Everyone knows that Charlie Brown is going to kick the ball.  Charlie knows he’s going to, even though she’s not there, the little red-haired girl knows, and yes Lucy knows that Charlie Brown is going to try and kick the ball!

So if Lucy knows that Charlie Brown is going to kick the ball, why does she have to use the full-blown sales pitch?  Seriously, she doesn’t have the best reputation to start with.  So why not just shoot straight?  High-pressure sales must be addictive.  Just like Lucy, it seems that there continue to be too many insurance producers trying to sell something that can only be earned.  Trust!

 

So if Lucy is symbolic of the fast-talking hard selling insurance agent, they who should be associated with the insurance consumer.  A case can be made for both Charlie Brown and Linus.  Both characters display faith that is foolish.  This is very similar to what insurance consumers are doing.  Savvy consumers are asking questions aimed at obtaining adequate coverages at a fair price, while the foolish are lining up to be sold.

Linus also displays a firm commitment and faith in his beliefs.  Once again he forgoes the annual Halloween candy score while failing to prove his theory about the Great Pumpkin.  From this standpoint Linus is similar to consumers that refuse to seek advice from multiple sources.  Just as Linus’ belief in the Great Pumpkin left him with no candy; insurance consumers may be confronted with paying too much for insurance, being sold inadequate coverages, or both.

“Fold It Up This Way”: Five Things You Need To Know About Motor Home Insurance

Congratulations! You’ve Purchased A Motor Home

RV insurance, rv, insurance, KY, OH, TN, RV insurance, KY RV insurance, TN RV Insurance, OH RV InsuranceThe staff at TruePoint Insurance in Fisherville, KY knows that the truth about what you need with insurance is the most important factor. The staffers here are honest and will tell you exactly what is necessary to make your motorhome experience the very best that it can be. You’ve taken the plunge. You’ve purchased the motorhome. Now, how do you best protect it?

Arm Yourself With Information 

The best insurance policies are written when consumer and insurance agents know everything there is to know about what has to be protected. It’s your motorhome. Ask yourself some key questions to get your mind rolling as well as your insurance agents.

Arm yourself with answers to these five questions before you consider the amount of coverage and type of coverage you will need for your motorhome:

  • Who will be driving your motorhome? How old is the driver? Will there be other drivers on occasion?  Do you have a clear idea of the driving histories of all of the drivers of your new motorhome?  Motor Home, Motor Home Insurance, KY motor home insurance, OH motor home insurance, TN motor home insurance, Cheap motor home insurance
  • Where do you plan to take your new motorhome? Will you be driving internationally? Will you be driving out of Cheap RV insurance, Cheap Motor Home insurance, do i need motor home insurance, do i need rv insurance, insurance for fifth-wheel, insurance for rv, insurance for motor homestate? How often will you be driving out of state or internationally?
  • Where will your motorhome be stored when not in use?buy rv insurance, buy motor home insurance, but fifth wheel insurance, bu insurance for rv, by insurance for motor home, buy insurance for fifth wheel
  • Are you going to let others rent your motorhome when you and your family are not using it?

A complete, comprehensive conversation with an insurance agent at TruePoint Insurance in Fisherville, KY today can negate regrets tomorrow. Call us today or come in so that we can discuss how your motorhome can be the rolling bed of recreational freedom and enjoyment for yourself and your family.

What is insurance? Part 2 of 2

Understanding InsuranceInsurance

 

 

What is insurance?

 

 

Practice Risk Avoidance at your own risk

Individuals and business also practice a direct from risk avoidance.  Suppose you sold your car and committed to using public transportation.  Without a car, you have successfully eliminated your primary automobile liability exposure.  And without the risk, you are no longer required to carry the state-mandated insurance.

Businesses might opt to outsource specific functions allowing them to eliminate multiple risks ranging from property to casualty to workers Risk Avoidance at your own riskcompensation.  Altering production methods, implementing automation, and revising policies and procedures are just a few avenues where businesses can eliminate specific risk.

Risk avoidance is not a practical solution for all exposures, but it can be a very cost-effective solution when implemented correctly.  Those practicing this method must realize that risk avoidance may not be as simple as it appears.  You may have noticed in the auto liability example above, the phrase “primary exposure.”  This suggests that there continues to be potential exposure even after the sale of the vehicle.

You don’t have to own a vehicle to drive.  People rent cars all the time.  While it is hard to imagine a scenario where you could rent a vehicle without liability insurance if you did you would be exposed.  A more likely scenario would be your exposure in the event you borrowed a friend’s car. Coverage stays with the auto, so as long as you had permission from your friend to drive their vehicle, the policy covering the car would protect you.

Borrower Beware!  What auto liability limits does your friend have?  Did you ask?  Does it matter?  Let’s assume that the vehicle has the minimum coverages allowed by your state.  For us, that would be $25,000 for bodily injury for any one person, capped at $50,000 if multiple individuals are injured and $25,000 for property damage.

As the driver of the vehicle, you are potentially liable for damages that exceed the vehicles policy limits.  In this scenario, the vehicle coverages are limited, placing you in a position with significant exposure.  In your past, this wasn’t an issue.  When you owned an auto and had insurance, your policy extended liability protection to you even when it wasn’t your car.  Your decision to practice risk avoidance has triggered additional and perhaps unforeseen exposures.

There is an old saying, “You’re picking up pennies in front of a train,” or more simply said, you’re taking too much risk for only a modest reward.  If you practice risk avoidance, you better know the train schedule.

 

Risk Reduction; Modifying exposures for everyone’s benefit

Reduce riskWhat is risk reduction role in risk management?   Unlike the other three methods, risk reduction is not a stand-alone method.  It is more akin to a complimenting strategy or modification.  Examples of risk reduction would be businesses utilizing sprinklers, keeping parking lots and sidewalk free from ice and snow, or preemptively addressing employee actions that put an organization at risk.  Individuals performing regular maintenance on their home or auto are practicing risk reduction.  Installing a security system or erecting a fence with a locked entry gate around a pool are also examples of individuals utilizing risk reduction techniques.

When combing risk reduction methods with risk retention, the results directly benefit the individual or business.  These actions may have one of two outcomes.   The installation of a sprinkler system is an action that results in lessening the loss.  Steps taken to reduce risk can also lower the probability of loss.  The previously mention action to address snow and ice removal would most likely reduce the potential for a loss.

 

Don’t Fear the Loss Control Man!

The role of Loss Control can be confusing.  Insurance companies can be viewed as risk management consultants and as risk transfer solutions. However, a fine line exists between providing beneficial risk management counseling and becoming a deterrent to business.  The action of an insurance companies loss control efforts can easily gauge the company’s success in balancing the two roles.  When this group with providing risk reductions techniques for the insured they become a catalyst for change that becomes genuinely value added for both the insured and the insurer. Loss Control units aimed at creating awareness of potential risk reduction opportunities will have a positive financial impact on the insurance company, which should, in turn, have a positive effect on the insured’s cost of risk management.

When you buy an insurance policy, you are purchasing much more than a risk transfer agreement.  The insurance policy today has evolved to incorporate many aspects of risk sharing, risk retention and indirectly risk avoidance.  The final method of risk management, risk reduction also comes into play.  Acting primarily as an incentive, or a chance to reduce the overall cost insurance.

 

 

 So what is insurance?  Today, insurance is a contract/relationship between an insured and an insurer where the insurer utilizes modern risk management tools and encourages proactive steps by the insured which will lead to an increasingly efficient process of indemnifying the insured against specified peril(s). 

Access Part 1 of this series 

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What is insurance?


Insurance      Understanding Insurance

 

 

 

 

 

Insurance

Some people think that insurance is risk management.  But industry professionals will argue that insurance coverage is only one component of the risk management process.  What’s the difference between the two?  Risk management is a discipline used to identify, evaluate and address specific risks.  A risk management plan will utilize one or more of the four risk management methods.

The Four Risk Management Methods

     Risk Avoidance                  Risk elimination

     Risk Reduction                  Reduce

     Risk Sharing                       Transfer, Insurance

     Risk Retention                   Do Nothing, Self-Insure

 

So what is Insurance?

If insurance isn’t risk management, then what is it?  Insurance is commonly considered to be a mechanism for risk transfer.  If you look up the word insurance, you are apt to find the words “transfer of risk” or “risk sharing.”  So insurance is risk sharing or risk transfer?  Yes.  But it’s more.

Insurance is a mechanism that can be used to transfer risk from one party to another. In exchange for a premium, insurance companies will agree to provide indemnification.  Indemnification, or the protection against loss, can be purchased to mitigate a large number of exposures.  Insurance products exist to transfer both property and liability risks.

 

Insurance Today

“Ah, the joys of homeownership,” words muttered regularly by homeowners.   Homes generate problems.  Many associated with either property or casualty exposures.  Typically these risks are transferred to an insurance company through a homeowner’s policy.  In a pure form of risk transfer, the insurance company would make the insured whole in the event of a specified loss.  But most of us don’t transfer all the risk.  The amount we recoup will be the value lost less a deductible.

Most property policies have a built-in risk retention mechanism, the deductible.  On the surface, this may seem to be negative.  But before making these assumptions consider why it’s there.  The deductible is in fact risk retention.  By retaining the first $500, $1,000 or more, the insured can significantly lower the cost of insurance.  Without deductibles, insurers would become inundated by the number of small claims.  Smaller claims would also adversely impact administrative cost markedly.  Finally, without a deductible, insurance company’s exposure to fraudulent claims would likely skyrocket.  Without a deductible, insurers would face mounting costs that could only be offset by raising premiums.

At first blush, deductibles appear to work to the benefit of the insurance companies.  Deductibles no doubt benefit insurance companies.  But after considering the implications, it would seem that consumers are reaping the most value.

 

Today’s insurance contains a risk retention component

 

 

When insurance companies avoid risk it benefits the company and the consumer

You may have learned from experience that insurance companies will not provide coverage in some instances.  Insurance companies don’t want all risks.  By insuring only the risk that they prefer, they are practicing risk avoidance.  Trampolines, pit bulls, fireplaces, and log homes are good examples of risk that many insurance companies avoid.

Insurance companies underwriting higher risk exposures are expected to have increased losses.  What does this mean for the insured?  That’s hard to say.  It doesn’t mean that you can’t get insurance.  You most likely can.  It does mean that you will have fewer options and in most cases, reduced competition leads to higher costs.

 

Rejecting certain risk helps insurance companies, but how does it help the consumer

The practice of risk avoidance improves insurance companies underwriting results.  In theory, insurance companies that can successfully manage their risk are more likely to have higher profitability and faster capital growth.  As the company’s capital grows, so does the need to write additional insurance.  If enough insurance companies are experiencing the same results, competition will increase. The increased appetite for risk will ultimately impact the insured, by putting downward pressure on premiums.

 

Trickle-down risk management

The benefits from risk avoidance can be direct or indirect. The risk avoidance techniques used by insurance companies have both a direct and indirect effect. As mentioned, the direct actions put downward pressure on the cost of insurance. These practices can passively encourage consumers to avoid unacceptable risks. Over time, sound risk management practices trickle-down which further reduce risk management costs.

 

Access part 2 of this 2 part series which will be published on 9/20/18 

 

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