Is It Worth It?

The Cost of Insurance

Insurance Terms

Premium

Deductible

Underwriting

PremiumsIs the price of insurance an insured

person or business pays for a specified risk for a specified period of time.

premiums are dependent on a number of factors: location, age and type of building, use of building, fire protection, choice of deductibles, application of discounts, and amount of insurance you purchase.Shop around for the best price

Deductibleis the amount of money that you agree to

pay as part of a claim, before your insurer pays the remaining amount toward that claim.

may apply separately to each building covered or to personal property in each building

A higher deductible a lower premium

UnderwritingThe process by which an insurer selects

and classifies risks according to their degree of insurability.

Determining How Much•Insurance companies use their own underwriting standards to determine if your business is eligible for property and casualty insurance and at what price.

•Depending on the type of business you own or operate, you may be placed in a classification with other similar businesses.

Determining How Much•You are then charged a premium based on the current rate for the classification in which you are placed.

•If your business operation is very unique or specialized, the insurance company may have to develop an individual rate specifically for your business

•Which of course costs more money

What Factors Determine the Cost?Auto Insurance

rates are based on factors such as the type of vehicles driven, driving records of those operating the vehicles, territory, expected mileage, usage, size and value of the vehicles, and loss history.

Property Insurancerates are based on territory, construction and

occupancy of the building(s), loss prevention efforts, and fire protection.

What Factors Determine the Cost?General Liability Insurance

rates are based on a number of factors including territory, type of products sold or manufactured, loss history, business experience, and size of the operation.

Loss prevention and loss history also play a part in determining the cost

Am I Paying Too Much?typically with typically with

workers’ workers’ compensation compensation insurance, general insurance, general liability insurance, liability insurance, and insurance and insurance covering commercial covering commercial vehicles insurers will vehicles insurers will determine whether determine whether you are paying the you are paying the correct amount of correct amount of premium by premium by conducting an audit.conducting an audit.

An Audit….Now What?Keep records Keep records in order to verify your company’s payroll, sales, gross receipts, or other facts

Your daily operations may also be reviewed to determine the proper classification for your business.

If you have a business auto policy or a trucker's policy, an audit may be conducted to verify which vehicles you own or operate and how your vehicles are used.

Am I Paying Too Much?Your policy’s original estimated premium

might then be adjusted and, depending on the amount of the estimated premium you paid, the company will either collect an additional premium or make an appropriate refund.

Questions to Consider: Building Insurance

What will it really cost to replace your building in the event of loss from a fire or tornado?

Are there building upgrades that are required by law when you rebuild (i.e., fire sprinklers may need to be installed) and what will they cost?

Does the policy you are considering cover the extra cost to meet current building code requirements?

Questions to Consider: Building Personal Property

Every business owns some personal property that could suffer a loss.

What would it cost to replace all of your furniture, fixtures, inventory (minimum and maximum values during the year) and building upgrade (if you lease)?

Things to Consider: Business Interruption CoverageYou need to consider how long it would

take to restore your business operations in the event of a fire.

Where would you temporarily resume operations?

What expenses could you discontinue while repairs are being made?

Things to Consider: Liability Coveragecheck the lease and other legal contracts

you signed to see what and how much liability coverage the contracts require you to carry.

You may want to get price quotes for limits of insurance beyond what you are required to purchase according to your contractual obligationsYou may decide to either buy all the liability coverage you can afford or you may only want what is required.

Things to Consider: Auto InsuranceMost states require business owners with

company vehicles to purchase auto insurance

Most auto insurance policies include: liability insurance for bodily injury, liability insurance for property damage

Things to Consider: Worker’s Compensationis protection mandated by state law for a

worker and his or her dependents against injury and death occurring in the course of employment. It is not health insurance and is not intended

to compensate for disability other than disability caused by injury arising out of employment.

Things to Consider: Worker’s CompensationThe purpose of the worker’s compensation

system is to provide financial and medical benefits to the victims of “work-related” injuries and their families regardless of fault.