An insurance policy is the contract that you take out with an insurer to protect you against specific risks under agreed upon policy terms. When you buy a policy you make regular payments, known as premiums, to the insurer. In a perfect scenario, if you make a claim your insurer will pay out for the loss that is covered under the policy. Simple, right? If only it were that easy. The key here is the “agreed upon policy terms”. They are often plentiful, misleading, including endorsements that reduce coverage and are hard for the average person to understand. And it’s in the agreed upon policy terms that your insurance program may become inadequate.
Endorsements, Exclusions and Policy Conditions
Insurance policies are complex documents that either sit in a drawer, never to be looked at, or a misfortune occurs and they are scrutinized from beginning to end, sometimes ending up in court to determine what it all means. Many brokers don’t properly negotiate with the insurance company to enhance or customize the boiler plate policies in order to address their clients unique needs. These boiler plate policies are filled with endorsements, exclusions, and policy conditions that all reduce the risk for the insurance company.
An endorsement is an amendment to a property and casualty insurance policy which can add, enhance, remove, reduce, restrict or simply change coverage in the policy.
An exclusion is a provision within an insurance policy that eliminates coverage (unless some coverage is given back within the exclusion).
Some common General Liability exclusions include but are not limited to the following:
- Expected or intended injury
- Pollution liability
- Workers compensation
- Employers liability
- Contractual liability (other than liability assumed under an insured contract)
- Liquor Liability
- Aircraft, Autos and Watercraft
- Damage to property (exceptions within the policy or negotiated via endorsement may apply)
- Damage to your product (exceptions negotiated via endorsement may apply)
- Damage to your work (exceptions negotiated via endorsement may apply)
- Personal and advertising liability including libel or slander
- Unlawful acts
- Recall of Products, work or impaired property
- Operations conducted on or over the internet (Cyber coverage is needed for this exposure)
- Electronic Data Liability
- Bodily Injury to the insured, their tenants or employees
Policy conditions are requirements that need to be met for coverage to be valid. They may address issues like how notice of a claim should be given and what the insured party should do in the event of a loss.
Language and Wording
Do you understand the policy language and what it means? Most people do not. It can be very confusing and difficult to understand. Are you insured for what you think you are insured for? Your broker may tell you that you are insured for something, and they may believe it to be true. Do not wait until a claim is made to find out that coverage does not apply even though premiums have been paid. This is where an insurance advisor is an asset. Having someone who understands the language used in an insurance policy and who is looking out for your best interest is invaluable.
There are lots of good insurance brokers out there. But for every good broker, there is a broker that lacks industry knowledge or does not put the client interests ahead of their own. The industry is confusing and convoluted, even for brokers. Make sure your broker knows what they are talking about. Is now the time to mention that the higher your insurance premium, the more your broker makes? A confusing industry that is based on commission may be cause for concern.
Who is advising you?
Some businesses are big enough to have a risk manager or risk management team to manage their insurance. But even then, do they have the skills and understand the business strategy thoroughly enough to manage business insurance? Do they have the time to keep up with industry trends? What if you do not have an individual or team behind you to manage your insurance? Then it falls on someone who is uneducated to figure it out. Not the best risk management strategy.
The insurance industry is well known to have minimal oversight. It largely self regulates and is commission based. Whose best interest is at heart in the insurance industry? When insurers experience financial distress, and they do, they turn to government support. And not just a little support, billions in support. In the end the consumer is paying that support.
In addition, policy makers often use boilerplate policies rather than customizing them to their clients specific needs. Brokers rarely ask questions about the strategy of the business; they use a one size fits all approach which does not serve the client. Do not wait until you have an uninsured claim to find out that your insurance program is inadequate. Take the time now to review your insurance and understand the endorsements, exclusions, and conditions. Ensure your policy is aligned with your business strategy.
At Corporate Protection Group, our mandate is to ensure your insurance is adequate. We do this by reviewing your policies and ensuring they are in line with your business strategy. We don’t sell insurance and we don’t work on commission.