Frequently Asked
Questions

Most commercial properties use a form of insurance referred to as “specific coverage,” in which a specific property is insured for a named risk, such as fires, floods, thefts and more. However, specific coverage is also somewhat limited; oftentimes one policy will only cover one named risk at one location. Blanket coverage, on the other hand, can offer protection for a number of different properties and risks.

Under a blanket policy, you can group together coverage for multiple buildings and the property in them as long as the buildings are all similar in nature and function.

As a result, blanket coverage can make it easy and convenient to cover all the risks that threaten your properties. However, it’s important to know the characteristics of blanket coverage to see if it can adequately protect your business.

Because blanket insurance can offer coverage for multiple locations, it can often be useful for businesses such as apartment complexes and restaurant chains. However, properties covered under a blanket policy must be similar in nature. For example, a blanket policy would usually not a cover a business’s warehouse and storefront under the same policy.

Coverage under a blanket policy is generally triggered in the event of any loss associated with a named property. This can include fires, floods, thefts, personal injury liabilities and more. And, although it typically costs more than specific coverage, blanket coverage often provides broader protection than specific coverage by protecting against all of these liabilities simultaneously.

Builder’s Risk coverage is a type of property insurance specifically designed to cover property during the course of construction, including renovation and repair. Why do you need it? There are additional risks and responsibilities inherent in this type of work that a typical property policy is not designed to cover.

Typically the coverage is purchased by either the property owner or contractor. Regardless who purchases the coverage, all parties that have property involved in the project should be named in the policy. This may include the owner, contractor, subcontractors, the financial institution funding the project, and, in some cases, the architects and engineers. Once the project is completed and/or accepted by the owner, your regular property policy kicks in.

Since builder’s risk coverage only deals with the property, it does not include coverage for worksite injuries or design/construction defects. For any mishaps that occur on the job, you should rely on liability and workers’ compensation insurance policies for coverage.

Commencement of Coverage: Builder’s Risk policies provide coverage for property in the course of construction, renovation or repair. But at what point does construction renovation or repair begin?

• Typically, contracts require that insurance be provided for the duration of the contract period. This means that the policy inception date would be the date the contracts are signed.
• The lender may also specify the inception date.
• However, be sure to review insurance policy provisions to determine whether there are restrictions on when coverage begins. Policies may contain clauses that state coverage begins when construction commences or that the insurance company will pay for losses at the time you become legally responsible for the covered property, either on or after the effective date. Prior to any site preparation, demolition, or delivery of materials or equipment, review the policy to ensure there are no restrictions on coverage inception.

Coverage Expiration: Determining when coverage terminates can be equally problematic. Builder’s Risk policies can contain provisions that terminate coverage prior to policy expiration. The provisions typically state that coverage will end at the earliest of the following:

• The policy expires or is cancelled
• The property is accepted by the purchaser
• Your interest in the property ceases
• You abandon the construction with no intention of completing it
• Unless specified otherwise in writing:
  • 90 days after construction is complete
  • 60 days after construction is complete and building described in the  declaration is occupied in whole or in part, or put to its intended use

There are some limitations to builder’s risk coverage, but none that don’t have a simple solution:

• There is no coverage under the policy if the building is occupied to any extent, for over 60 days, without written consent of the insurance company.
• The policy only provides coverage for up to 90 days after the completion of construction. In the case where the building is completed only two days before policy expiration, there are only two days of coverage available. There are 90 days of coverage available after completion only if there are at least 90 days remaining in the policy period.
• Coverage issues can arise at the end of a project, after construction is complete and the structure is occupied, but a “punch list” and final completion work remains.

Here are strategies to understand the extent of your coverage:

• Understand the insurance coverage obligations of the project documents and contracts to ensure the policy period, at a minimum, fulfills the requirements.
• Understand the terms and conditions of the policy and what triggers the coverage to commence and cease.
• When coverage ends make sure permanent coverage is in place so no gaps in coverage exist.

Installation floaters insure a contractor’s materials, equipment, machinery and supplies from the moment they leave the contractor’s premises until a job is complete. This means that a contractor’s property will be covered in the following scenarios:

• While being stored at a temporary location
• While in transit to a job site
• While being staged or awaiting installation
• While being installed
• While pending acceptance by a project owner or general contractor

Put another way, installation floaters cover a subcontractor’s property before it becomes a permanent feature of a project or structure.

While installation floaters offer similar coverage to that provided by builders risk policies (another form of inland marine insurance typically purchased by project owners or general contractors), there are important distinctions between the two forms of coverage. Installation floaters are typically purchased by contractors or subcontractors that have a limited scope of work on a job because they provide coverage only for the insured contractor’s portion of a project.

Installation floaters can be utilized for both new “groundup” construction and for remodeling projects, the latter for which builders risk insurance may not be applicable. Additionally, policies can be written either on an annual basis to apply to all projects undertaken by a contractor or on per project basis.

Like other forms of inland marine insurance, installation floaters often exclude coverage for property while it is air- or waterborne. If a contractor’s work requires the use of a crane, helicopter, barge or watercraft to install property, the terms of an installation floater should be reviewed along with existing insurance policies in order to determine whether coverage is applicable and to identify potential coverage gaps.

Trees, shrubs and plants are also commonly excluded from installation floaters. If possible, contractors that perform landscaping installations should have their policy amended to specifically cover this type of property.

Companies that rely on temporary structures or falsework including, but not limited to, cribbing, scaffolding, forms, temporary fencing, and temporary lighting or retaining walls, should work with their brokers to find the proper installation floater. Policies may include a sublimit for these items, or, in some cases, exclude these items from coverage entirely.

Lastly, policies may omit coverage for losses that occur during testing. Companies that execute startup, performance, stress, pressure or overload testing of materials, supplies, machinery, fixtures and equipment should confirm that their installation floater meets their testing needs. Often, coverage for testing can be added at an additional cost.

As the coronavirus (COVID-19) outbreak evolves, businesses face growing uncertainty as to how this pandemic will affect their operations long term. This is especially true when you consider that many organizations—including bars, restaurants, entertainment venues, retailers and manufacturers—have had to close their doors or cease operations as a result of COVID-19. Not only has this severely impacted their ability to serve their customers, but, for some, it has also led to indefinite disruptions—disruptions that could impact their bottom line.

As a result of the unprecedented challenges COVID-19 brings, many businesses are turning to insurance, like business interruption insurance, for help. In the event of a loss, business interruption insurance provides coverage for income a business would have earned had it been operating normally. It can also help pay for expenses like employee wages, taxes, rent, loan payments and relocation expenses.

However, these policies are complex, and protection for losses stemming from COVID-19 is typically not included.

Under most business interruption insurance policies, coverage is only available if the loss in question stems from a covered peril. In many cases, covered perils include common interruptions like natural disasters, equipment damage and vandalism.

This means that, if the insurance policy requires a specific loss (e.g., a fire or earthquake) and the loss in question doesn’t qualify or is not stated explicitly, coverage may not be available. For the vast majority of businesses, COVID-19 will not constitute a designated peril, and business interruption insurance will not respond to losses.

Further, business interruption claims may arise from multiple causes, including both covered and uncovered perils. In these instances, the availability of coverage will depend on the policy language and any applicable laws regarding concurrent causes. Once again, coverage for COVID-19-related losses is unlikely.

Business interruption insurance is typically triggered by a direct physical loss or damage. Under this interpretation, contagious diseases like COVID-19 would likely not count as a covered loss. This is especially true as it relates to mandatory or voluntary closures stemming from human-to-human transmission of infectious diseases where a business’s physical location is still habitable.

However, some argue that COVID-19 can contaminate physical objects like HVAC systems or assembly lines, which in turn would force businesses to cease operations. In these scenarios, business interruption insurance could provide some protection. Still, most policy interpretations will make coverage unavailable. What’s more, most policies exclude coverage for viruses and other health crises altogether.

In some cases, policies may extend business interruption coverage for losses that arise from civil authority orders. This essentially means that, if a business is unable to access its property due to government-mandated closures, coverage may be available. However, in most cases, a direct physical loss to an adjacent or nearby property is required in order for civil authority coverage to kick in. For most insureds, civil authority clauses will not apply for losses stemming from COVID-19.

Contingent Business Interruption Insurance

Business interruption insurance is a crucial component of risk management programs, but it does not extend to disruptions to a third party. That’s where contingent business interruption insurance (CBI) comes in.

Unlike traditional business interruption insurance that compensates the policyholder for a loss resulting from damage to its own property, CBI lets businesses transfer the risk of certain losses to the property of a third party. CBI reimburses policyholders for lost profits and extra expenses resulting from an interruption of business at the premises of a customer, vendor, supplier or other third party.

Businesses are increasingly looking to this type of coverage as COVID-19 continues to affect the global economy. This is because, even if a business is not located in an area where COVID-19 has been detected, aspects of their supply chain might be, leading to potential disruptions. However, for the vast majority of cases, CBI will not be available.

With CBI, the covered third-party property may be specifically named, or the coverage may simply blanket all customers and suppliers. To secure coverage for COVID-19, insureds will have to review policy language to determine if their suppliers are included in the policy.

But even if the third party is explicitly named, CBI includes some of the same caveats as traditional business interruption insurance. Specifically, for CBI policies, some form of property damage will need to occur before coverage is triggered. Again, contamination will likely not constitute property damage.

Employment practices liability insurance (EPLI) is a form of insurance that covers wrongful acts that occur during the employment process. The most frequent types of claims covered under an EPLI policy include claims of discrimination, wrongful termination, sexual harassment and retaliation.

These policies will reimburse your company against the costs of defending a lawsuit in court, and for judgments and settlements. EPLI covers legal costs, whether your company wins or loses the suit. However, these policies typically do not pay for punitive damages, or civil or criminal fines.

Employment practices liability policies provide protection
from the following wrongful employment practices:

• Harassment
• Discrimination
• Actual or alleged wrongful dismissal, discharge or termination
• Employment-related misrepresentation
• Employment-related libel, slander, humiliation, defamation or invasion of privacy
• Wrongful failure to employ or promote
• Wrongful deprivation of a career opportunity, wrongful demotion or negligent evaluation
• Wrongful discipline
• Vicarious liability for intentional acts
• Punitive damages
• Coercion or humiliation in relation to race, marital status, gender, age, physical and/or mental impairments, pregnancy, sexual orientation, and any other protected class established by federal, state and local statutes

Workers’ compensation is important in the event that an employee suffers a work-related injury or illness. This type of insurance is required in most states and is used to cover medical bills or wage replacement for employees who experience a work-related injury.

For example, if a worker pulled a back muscle at work and was unable to perform their duties, workers’ compensation would help in covering any physical therapy costs as well as compensating the employee for any lost wages.

Having worker’s compensation insurance can also protect your business from civil suits made by employees against your company related to their injuries.

Workers’ compensation systems are different in every state, as individual statutes and court decisions have shaped the way they handle claims, evaluate impairments, settle disputes, provide benefits and control costs.

Workers’ compensation rates and programs are managed by private insurers, state funds or the National Council on Compensation Insurance (NCCI).

If any part of your business is on an online platform, it is crucial to obtain cyber liability insurance. This type of coverage can protect your business from a cyber attack or interruption that can cause a loss in data, revenue and the trust between you and your customers. Cyber liability insurance is not only there to protect the internal information of your company, such as employees’ social security or finance al information, but it also protects your customers’ personal and banking information.

Most cyber liability policies include both first- and third party coverage:

• First-party coverage is for the business itself—helping the business recover from any losses after a cyber attack.
• Third-party coverage is to cover claims by people who have been injured because of your business being hacked.

Restoring compromised or lost data can be very costly, so cyber liability insurance is there to help cover financial losses to your business and the costs of claims made against your company by clients or other third parties who were affected.

A traditional business liability policy is extremely unlikely to protect against most cyber exposures. Standard commercial policies are written to insure against injury or physical loss and will do little, if anything, to shield you from electronic damages and the associated costs they may incur. Exposures are vast, ranging from the content you put on your website to stored customer data. Awareness of the potential cyber liabilities your company faces is essential to managing risk through proper coverage.

Possible exposures covered by a typical cyber liability policy may include the following:

• Data breaches: Increased government regulations have placed more responsibility on companies to protect clients’ personal information. In the event of a breach, notification of the affected parties is now required by law. This will add to costs that will also include security fixes, identity theft protection for the affected and protection from possible legal action. While companies operating online are at a heightened risk, even companies that don’t transmit personal data over the internet, but still store it in electronic form, could be susceptible to breaches through data lost to unauthorized employee access or hardware theft.
• Intellectual property rights: Your company’s online presence, whether it be through a corporate website, blogs or social media, opens you up to some of the same exposures faced by publishers. This can include libel, copyright or trademark infringement and defamation, among other things.
• Damages to a third-party system: If an email sent from your server has a virus that crashes the system of a customer, or the software your company distributes fails, resulting in a loss for a third party, you could be held liable for the damages.
• System failure: A natural disaster, malicious activity or fire could all cause physical damages that could result in data or code loss. While the physical damages to your system hardware would be covered under your existing business liability policy, data or code loss due to the incident would not be.
• Cyber extortion: Hackers can hijack websites, networks and stored data, denying access to you or your customers. They often demand money to restore your systems to working order. This can cause a temporary loss of revenue plus generate costs associated with paying the hacker’s demands or rebuilding if damage is done.
• Business interruption: If your primary business operations require the use of computer systems, a disaster that cripples your ability to transmit data could cause you, or a third party that depends on your services, to lose potential revenue. From a server failure to a data breach, such an incident can affect your day-to-day operations. Time and resources that normally would have gone elsewhere will need to be directed towards the problem, which could result in further losses. This is especially important as denial of service attacks by hackers have been on the rise. Such attacks block access to certain websites by either rerouting traffic to a different site or overloading an organizations server.

With ransomware attacks on the rise, the role of insurance is becoming more robust. And, although ransomware coverage has been traditionally sublimited within cyber policies, stand-alone cyber policies that cover ransomware are becoming more necessary.

Since cyber insurance isn’t standardized, organizations should review all policy language with a broker before choosing a plan that effectively covers ransomware. Policies can vary significantly in their language and coverage options, so insurance experts recommend policies that—at the very least—provide coverage for extortion demands and payments as well as lost income resulting from an attack.

Organizations should also take a close look at the following definitions, terms and conditions when choosing a policy:

• Sublimits and deductibles—Most policies set a sublimit for covering ransomware. It is important to review this limit carefully, considering that demands may start on the low side, but can increase quickly. Also, since making a ransom payment may make organizations a target for subsequent ransom demands within the policy year, the deductible amount should reflect that risk.
• Payment terms—Most policies require prior written consent before the insured can pay any ransom. This can result in payment delays and increased demands by the hackers. If an organization pays a ransom in order to resume business, without prior written consent by the insurer, there’s a chance that it may not be reimbursed. Therefore, organizations need to be comfortable with a policy’s terms in order to avoid compromising coverage.
• Definition of extortion—It is important for organizations to fully understand and agree with their insurance company’s definition of extortion, since the definition dictates the trigger for coverage. For example, although hackers may intend to sell or misuse information, the ransom demand may only involve a countdown timer and demand for money. While the combination of the two may seem like an obvious threat to the insured, a carrier could possibly deny coverage on the basis that there was no explicit threat to sell or misuse information—all because of its unique definition of extortion.

Ransomware insurance is most effective when coupled with an effective risk management program, as there are many components in the fight against cyber crime.

Commercial auto insurance helps cover the costs of an auto accident if you or an employee is at fault. This coverage can help pay for damaged property and medical expenses.

Your business should consider a commercial auto policy if any of the following are true:

• Your business owns, leases or rents vehicles such as cars, trucks or vans.
• Your business has employees who drive their own vehicles to conduct business.
• Your business has employees who operate leased, rented or owned company vehicles.

Professional liability insurance, also known as errors and omissions (E&O) insurance, can protect your business against claims that a service you provided caused a client to suffer due to a mistake on your part or because you failed to perform a service. Professional liability insurance can cover the cost of defending your business in a civil lawsuit for an alleged error or omission. What’s more, depending on your industry, professional liability insurance may be required by law.

While many types of businesses need professional liability insurance, you should especially consider this type of insurance if your business works directly with customers while providing services. Service professionals, such as accountants, computer consultants, software developers, planners, architects, real estate agents, contractors, etc., are prime candidates for carrying E&O insurance.

E&O coverage kicks in where your Commercial General Liability policy does not provide coverage, such as for service errors, contract performance disputes or any other professional liability issues. These policies also include defense costs, which can be quite substantial even if liability is not found. Policies typically do not provide coverage for non-financial losses or for intentional or dishonest acts.

E&O policies generally have both a claim limit and an annual limit, which is based on the insured’s exposure.

Employee benefits liability (EBL) is insurance that covers businesses from errors and omissions that occur when employee benefit plans are administered. These errors and omissions may include failing to enroll, maintain or terminate employees in a plan, and failing to correctly describe benefit plans and eligibility rules to employees.

EBL insurance covers a wide range of plans, including health, dental and life insurance, profit-sharing plans, workers’ compensation and employee stock plans. EBL insurance is typically sold as a standalone policy.

Many people confuse EBL insurance with fiduciary liability insurance. While there are some similarities between the two types of insurance, EBL insurance is designed to protect businesses from errors and omissions in a wide range of plans. Fiduciary liability insurance, on the other hand, aims to protect businesses from Employee Retirement Income Security Act (ERISA) exposures for specifically designated plans that result from a wrongful act.

Fiduciary liability insurance is broader than an EBL insurance policy because it covers not only administrative errors and omissions, but also liability for a breach of fiduciary duty from negligent acts in the administration of employee benefit plans. In addition, many EBL insurers specifically exclude any claims resulting from ERISA violations.

EBL insurance can help protect your business from mistakes made during benefits administration.

Unlike a commercial general liability policy that provides coverage for claims arising from property damage and bodily injury, a D&O policy specifically provides coverage for a “wrongful act,” such as an actual or alleged error, omission, misleading statement, neglect or breach of duty.

A D&O policy provides defense costs and indemnity coverage to the entity listed on the policy declarations, which may include the following:

• Coverage for individual directors and officers
• Reimbursement to the organization for a contractual obligation to indemnify directors and officers that serve on the board
• Protection for the organization or entity itself

Indemnification provisions are typically included in the charter or bylaws of a corporation. While an important risk component, small to midsize privately held companies or nonprofit organizations often do not have the financial resources to fund the indemnity provisions, making the bylaws hollow. A D&O policy can provide an extra blanket of security in the event of a covered loss.

A “fraud” exclusion is typically included in a D&O policy, which eliminates coverage for losses due to dishonest or fraudulent acts or omission, or willful violations of any statute, rule or law.

D&O coverage can be tailored to your needs, but be aware that D&O carriers are not consistent with their policy forms. This fact, plus the complexity of D&O claims, requires the carrier to have market commitment and deep expertise, as well as the financial resources to handle potential claims.

There are also additional forms of coverage to protect directors and officers, including the following:

• Entity coverage
• Payment priority for insured persons
• Severability of the insured as well as severability of the application
• Coverage over time, meaning coverage responds to past, present and future directors and officers
• Pay on behalf clause
• Duty to defend clause

In addition, some D&O polices can be endorsed to provide employment practices liability (EPL) coverage and/or fiduciary liability.

• While EPL endorsements under a D&O policy broaden coverage, they often do not provide a duty to defend clause and are subject to a substantial deductible. Many EPL endorsements do not provide for a separate limit of liability in addition to the limit available under the D&O policy. If the D&O limit is reduced or exhausted by payment of an employment practices claim involving the wrongful conduct of an employee, a director’s or officer’s personal assets may be at risk.
• Fiduciary liability provides coverage for liabilities arising out of ERISA, where fiduciaries are personally liable for losses to a benefit plan incurred because of alleged errors, omissions, or breach of their fiduciary duties.

Who can bring a D&O lawsuit? According to St. Paul Travelers, statistics show that shareholders and employees are the most likely groups to sue private companies. Other parties may include corporations against themselves, and a variety of third parties, such as competitors, creditors and regulatory bodies.

Excess liability insurance (ELI), more commonly known as umbrella insurance, is one of the most important types of insurance your company can buy. It protects your business from holes or limits in existing policy coverage as well as from financially draining lawsuits. Just as you carry an umbrella to protect you from a potential downpour, ELI protects your company from the types of claims that could close your business.

All types of companies would benefit largely from ELI. Because it extends coverage so dramatically at a relatively small additional cost, many choose to pay the extra price. The amount of coverage needed will always depend on the total value of your assets.

Ultimately, ELI acts as a sort of dual policy, providing coverage in two ways:

1. Paying liabilities in excess of existing policy limits
2. Providing coverage in areas not included with existing policies

ELI is also beneficial because an effective policy can save your business money and cover more assets by using fewer individual policies. However, depending on your policy, some coverage may be excluded under ELI. Common exclusions include employment practices liability, professional liability and product recall coverage.

CPL policies provide contractor-based insurance for third-party coverage for bodily injury, property damage, defense, and cleanup as a result of sudden and gradual pollution incidents arising from contracting operations performed by or on behalf of the contractor. CPL insurance is intended to provide coverage to all types of contracting operations, including contractors who are involved in building construction and environmental firms that remediate polluted sites.

CPL policies are offered on either a claims-made or occurrence basis. What’s more, CPL policies are nonstandard, meaning each policy is different and can be modified to cover the various needs of the contractor purchasing the policy. Policies can be offered on a project or blanket program basis.

In some instances, CPL policies can also be used to cover losses from civil fines, penalties and punitive damages.

Contractors should keep in mind that CPL insurance policies differ in regard to the types of pollution incidents that are covered. Two important considerations when evaluating CPL insurance policies are:

• Whether or not the policy will respond to gradual releases of pollutants, as opposed to sudden and accidental releases
• The types of substances that are considered “pollutants” under the terms of the policy

Generally, policies that cover both gradual and sudden releases of pollutants provide contractors with a broader scope of coverage. In addition, policies that provide a broad definition of pollutants are considered superior to those that contain a narrow definition. Accordingly, it is important that contractors work with their broker to find a CPL policy that is tailored to their needs.

Today, ocean marine insurance is not just a single coverage, but actually a group of three coverages that address the primary areas of loss for vessel owners.

Hull insurance provides coverage for physical damage to a vessel and any of its operating equipment and machinery. Any vessel, not just ocean-going commercial crafts, can benefit from the coverage. Tugboats, barges, other miscellaneous floating equipment and even some fixed properties, including offshore oilrigs and similar installations, are all candidates for hull insurance.

Cargo that is waterborne during any part of the shipment process can be covered for physical damage by an ocean marine cargo policy. Some policies may also offer protection from theft and other forms of loss besides just physical damage. Policies can be taken out for individual shipments or, in the case of open policies, can cover any and all shipments made during the policy period.

Marine liability is most commonly known as protection and indemnity, or P&I, Coverage. It covers the wide variety of third-party liabilities that an owner is exposed to during a vessel’s operation. Some things covered by P&I include:

• Injury, illness or loss of life caused by a vessel’s operation
• Medical expenses relating to any injury, illness or loss of life
• Damage to other vessels or property caused by collision
• Damage to other vessels or property caused by incidents other than collision
• Wreck cleanup and removal
• Damage to cargo in certain situations
• Expenses resulting from quarantine

DIC insurance is intended to supplement a business’s property policy, offering protection against perils not typically accounted for in standard coverage. It’s commonly used to broaden protections, providing additional limits of coverage for certain perils (i.e., insuring the difference between covered causes of loss under a commercial property policy and covered causes of loss under a DIC policy).

Most DIC policies can cover income loss and other expenses that result from physical damage to the insured’s property. Notably, DIC insurance may pay losses based on either the actual cash value or the replacement cost of the damaged property.

The specific perils covered under DIC insurance will differ depending on the policy language. However, many insureds use DIC coverage to protect their business from major natural disasters, including floods, mudslides and earthquakes.

DIC policies are typically provided as a separate policy and are very customizable. As a result, DIC policies will vary depending on an organization’s needs and the insurance carrier writing the policy. Still, DIC policies have similar features—features businesses should be aware of before purchasing coverage:

• Covered perils—Similar to standard commercial property insurance policies, DIC coverage can be written on either a named-perils or all-risk basis. If written on a named-perils basis, DIC insurance only provides coverage for perils explicitly specified in the policy. If written on an all-risk basis, DIC insurance provides coverage for any loss that isn’t specifically excluded in the policy language. When securing a policy, it’s important for businesses to work alongside a qualified insurance broker who can explain what is and isn’t covered. Additionally, insureds should seek clarification on what constitutes as a flood or earthquake under their DIC insurance, as definitions of these perils can vary between policies.
• Limits—There will typically be separate limits for floods and earthquakes under DIC policies. The types of limits within a policy will vary, but will likely include a combination of per-occurrence and aggregate limits:
  • Per-occurrence limits define how much a policy will pay for any one incident or claim.
  • Aggregate limits define how much a policy will pay over the policy’s duration.
• Deductibles—In addition to different limits, DIC policies will have a set deductible the insured must meet before coverage kicks in. DIC deductibles are often a percentage of the value of the insured property. The deductible may apply to every property and location listed in the policy, or it may apply to each building and location separately.

Because standard commercial property insurance often excludes certain natural disasters, DIC coverage is crucial for businesses located in flood- or earthquake-prone areas. In particular, DIC coverage may be a good fit for businesses if:

• The commercial property insurer is unable or unwilling to provide the business with insurance for certain perils.
• The business’s commercial property insurer offers insurance for certain perils, but the premium is outside the organization’s budget.
• The business has insurance for natural disasters but needs additional limits.

Occupational accident and contingent liability insurance are two specially designed coverages developed to protect motor carriers and the owner-operators they contract with from the unique risks they face.

Since those listed as independent contractors are excluded from workers’ compensation benefits, occupational accident insurance offers owner-operators protection from eligible, on-the-job accidents they suffer while under contract with a motor carrier. This coverage is an alternative to individual workers’ compensation coverage, which can be expensive or even unavailable to a self-employed driver.

The policy primarily includes coverage for the following:

• Accidental death or dismemberment
• Survivor’s benefits
• Accidental medical expense
• Temporary or continuous total disability

It is important to note that while it does include many of the same benefits, occupational accident insurance can never fully replace the extent of protection offered under workers’ compensation.

Terrorism insurance is similar to other commercial insurance policies. However, since terrorist attacks are relatively unpredictable and can cause tremendous losses, terrorism coverage has some key differences that you need to be aware of.

A regular insurance policy can provide coverage for terrorism as long as it doesn’t include a specific exclusion for terror-related incidents. However, as a result of the 9/11 attacks, most commercial policies now include these exclusions.

Some states do not allow insurance companies to include terrorism exclusions in specific commercial policies. For example, if a state does not allow exclusions for damage caused by a terror-related fire, then a standard commercial fire policy would provide coverage. This principle also applies to other types of policies, such as business interruption and cyber security insurance.

The Terrorism Risk Insurance Act

Insurance companies currently offer standalone terrorism insurance largely because of the Terrorism Risk Insurance Act (TRIA). Under the TRIA, the federal government shares the financial loss from a terrorist attack with insurance companies. As a result, the companies will not be solely responsible for a potentially monumental financial loss and can safely offer terrorism policies. However, the government will only provide reinsurance under specific conditions that are detailed in the TRIA.

For standalone terrorism insurance to be triggered, the U.S. Secretary of the Treasury must certify that an event meets the qualifications to be considered an act of terrorism. These qualifications, found in the TRIA, include the following:

• The attack must be committed as part of an effort to coerce U.S. civilians or to influence either policy or conduct of the U.S. government.
• The attack must cause at least $5 million worth of aggregate property and casualty losses to be certified under the TRIA. Then, federal funds will be provided to insurers once losses across the insurance industry reach a certain threshold.
• The attack must not include any damage as a result of a nuclear, biological, chemical or radiological attack, or as a result of war.

If an attack does not meet these qualifications, insurance companies can choose to decline coverage.

Motor truck cargo insurance covers all of the liability for goods in transit if they’re lost or damaged due to events such as fires, crashes or collisions. These policies may also compensate you for charges such as removing debris from public roads, preventing further damage to cargo and legal defense costs.

Because the price for cargo can vary significantly, the premiums and coverage limits for cargo insurance is largely dependent on the cargo itself. When buying a policy, insurers usually determine the cost based on the specific trucking operation, the number of vehicles used and the type of cargo. However, it’s also possible to purchase blanket coverage that’s priced based on gross revenue. This can be especially helpful when carriers need to use large fleets to complete an order or if cargo needs to switch between different vehicles frequently.

One of the most important topics when considering cargo insurance is the party that actually owns the goods you’ll be transporting. Your clients may require you to purchase this coverage as part of your contract to protect their own interests, and any unexpected losses can severely damage your business’s reputation and relationship.

Before you buy a cargo insurance policy, you should work with your clients to agree on a mutual value for the cargo. If any goods are damaged in transport and your policy doesn’t provide you with enough coverage, you could still be responsible for the remaining costs. You should also ensure that all of the client’s cargo declarations are accurate, since any significant errors could lead insurers to deny a claim.

Common Exclusions

Since cargo insurance is so common, policies are usually available for a wide variety of operations and cargo.

However, most policies will exclude coverage for the following:

• Any goods kept in a transporter’s warehouse for over 72 hours
• Shipping containers
• These types of vehicles:
  • Garbage trucks
  • Passenger vehicles such as buses and limousines
  • Hearses
• These types of cargo:
  • Art
  • Jewelry
  • Money
  • Paper
  • Animals
  • Contraband
  • Pharmaceuticals
  • Alcohol
  • Tobacco
  • Explosives
  • Radioactive material

Alternative Risk Transfer (ART) means using techniques other than traditional insurance and reinsurance to provide your business with coverage. Alternative risk transfer is typically available to companies with low risk profiles and a dedication to maintaining safe operations; in ART the insured party assumes a portion of its own risk in exchange for lower premiums or a reduction in net cost of insurance. In many cases, ART gives capital market investors a more direct role in providing protection.

What does ART Look Like?

Risk-financing vehicles used in ART can take on several different forms, with varying degrees of risk. As a strategic enterprise risk management process, ART can blend traditional insurance and reinsurance with forms of self-funding. Logically, the plans with the least risk, complexity and expense generally provide the least coverage. The more risk retained, the greater the benefits. Complexity and administrative expenses can grow as well. Common ART strategies include the following:

• Loss-sensitive insurance plans, in which your premiums are based on your losses
• Risk-purchasing groups of individuals purchasing liability insurance
• Self-insured retention plans
• Protected cell captives, which allow you to rent a captive while ensuring complete separation of assets, capital and surplus between you and other participants.
• Self-insured groups and pools
• Captives, which are owned and controlled by their insured parties
• Group captives, which are owned and controlled by multiple insureds. Often firms of a similar size pool risks in an industry captive with customized insurance plans.
• Agency captives, which are typically structured like rent-a-captives
• Risk Retention Groups, which are insurance companies domiciled and regulated by a single state

Benefits of ART

Alternative risk transfer has gained popularity in part because of the following benefits:

• Does not subsidize others whose premiums are inadequate to pay their claims
• Gains access to profits generated from current insurance premiums
• Has more control of who shares your risk
• Is not subject to market swings, and provides stability and predictability in premiums

On top of your deductible, coinsurance is a provision in your health plan that shows what percentage of a medical bill you pay and the percentage a health plan pays.

An OOPM is the maximum amount (deductible and coinsurance) that you will have to pay for covered expenses under a plan. Once the OOPM is reached the plan will cover eligible expenses at 100 percent.

An EOB is a description your insurance carrier sends to you explaining the health care benefits that you received and the services for which your health care provider has requested payment.

An HDHP is a type of insurance plan that offers a low premium offset by a high deductible. Because of the low cost of the plan, the insurer will not cover most medical expenses until the deductible is met. As an exception, preventive care services are typically covered before the deductible is met. HDHPs are often designed to be compatible with heath savings accounts (HSAs), which are tax-advantaged accounts that can be used to pay for qualified out-of-pocket medical expenses before the HDHP’s deductible is met.

Your HSA dollars may be used on a tax-free basis for qualified medical expenses incurred by you, your spouse or your dependent children.

Qualified medical expenses include payments for medical services rendered by physicians, surgeons, dentists and other medical practitioners. They also include the costs of equipment, supplies and diagnostic devices needed for these purposes. Medical care expenses must be primarily to alleviate or prevent a physical or mental disability or illness. They don’t include expenses that are merely beneficial to general health, such as vitamins or a vacation.

In addition, the following insurance premiums may be reimbursed from an HSA on a tax-free basis:

• Health care continuation premiums (for example, COBRA premiums)
• Health insurance premiums while receiving unemployment benefits
• Qualified long-term care premiums
• Any health insurance premiums paid, other than for a Medicare supplemental policy, by individuals ages 65 and over