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Category: Risk Management

Why Do Natural Disasters Elsewhere Impact Insurance Rates Locally?

Posted on by Ownby Insurance Service

A hurricane in Florida. A flood in New York. A wildfire in Colorado. What do any of these have to do with Tennessee’s insurance rates? It would be easy to say, “Oh, that’s just the insurance companies charging us for money they had to pay for other claims.” However, it goes much deeper than that, so let’s discuss why losses elsewhere impact premiums here.

To start with what you probably did know – yes – there is an impact in premiums when companies lose money elsewhere. But it’s not as simple as “greed” for insurance companies. The way these companies make a profit is measured through a “combined ratio” – a metric that calculates their loss ratio and expense ratio. In other words, the amount they’ve paid out for losses is added to their business expenses and divided by the amount of premium they’ve “earned” from insureds. A combined ratio over 100 means that the company – in the most basic sense – is losing money.

Companies that continually lose money typically cease to operate after some time. That is one reason why there is an impact on your insurance rates based on losses in other parts of the country, but it’s far from the only reason. Here are three more:

Actuarial Predictions

Companies rely on actuarial science – the discipline that applies mathematical and statistical methods to the systematic observation of natural events to assess the risk of events occurring and help formulate policies that minimize this risk and its financial impact on companies and clients – to measure future risk. When there are more disasters, these measurements increase future predictions of risk, in turn resulting in filings for higher rates.

Claims Costs

When there are significant natural disasters, especially multiple disasters across the country, there is a major impact on the supply chain. The cost of materials and labor can increase significantly, as can the time for mitigation and repairs. This all adds up to higher claims costs, which in turn lead to a need for higher rates.

Reinsurance Costs

Insurance companies buy policies of their own – called reinsurance – to share the risks they insure. As claims and costs go up globally, the price of reinsurance goes up as well.

You might ask why these companies don’t just focus on areas of less risk – but it’s not that simple. A practice called “spread of risk” lessens the concerns of one major natural disaster impacting all or most of a company’s insureds. And there is risk everywhere. We may not be impacted by a hurricane, but a hailstorm, tornado, or wildfire is certainly possible.

All these factors go into ratemaking decisions for insurance companies. As we progress through hurricane season and other natural disasters occur, just keep in mind that the impacts from these events are not always immediate and not restricted to where they are happening.

If you’d like to know more, contact Brandon Patterson on our team at brandon@ownbyinsurance.com.

What Do Charities and Nonprofits Need to Know About Their Insurance?

Posted on by Ownby Insurance Service

We are lucky to have many charities and nonprofit organizations that serve a vital role in our communities. The services and resources they provide can be a lifeline of support for thousands of people. But even organizations with the best intentions, missions, and goals have risks to consider.

As you’d imagine, liability, workers’ comp, property, and commercial auto policies are often needed for most of these organizations. But what about other risks? Here are a few that nonprofits and charities should take into consideration:

Directors & Officers

Your organization likely has a group of volunteer leaders that help support the decisions and guide you in fulfilling your mission. However, they may be held responsible for some of those decisions if they have negative results. Directors & Officers (D&O) coverage may help with defense costs, settlements and judgments associated with claims against nonprofit organizations. It may also help protect their personal assets should legal matters implicate them.

Cyber Liability

Many organizations maintain sensitive data about those they serve. This may include medical information, personal details, addresses, and more. Having cybersecurity measures in place to protect this data is critical. But just as critical is having the right cyber liability policy in place. A data breach can cost thousands of dollars, even for a small organization. To help you respond and recover, consider a standalone cyber policy that provides the right coverage for your specific risks.

Vulnerable Groups Served

If your nonprofit or charity assists with support for children, the elderly, or mentally challenged individuals, it is an unfortunate reality that there is some risk for abuse. There are professional liability coverages that may help protect your organization if allegations of abuse occur.

Some may be specific to the type of charity work you perform, and it is best to consult with your agent on what is best suited for your risks. This may assist employees in the case of false allegations as well, even potentially providing defense funds and lost wages.

Additional Coverage Considerations

In some cases, insurers may offer specific coverages or umbrella policies that are more custom to the risks a charity or nonprofit is facing. Such coverages may help better protect your organization, your leadership, and the communities you serve.

Having an insurance agent who understands the risks of your charity or nonprofit is extremely important. The services you provide are often critical for the people who receive them. Not having the right insurance may leave the work you with vulnerabilities you never considered.

Brandon Patterson from our team would be more than happy to discuss these items with your organization and help you identify risks and coverages. Please contact him for more info at brandon@ownbyinsurance.com.

How Much Insurance Does Your Business Need?

Posted on by Ownby Insurance Service

Owning a business is a lot of work. It often involves managing people, making decisions, keeping track of many things at once, marketing, selling, and a slew of other tasks. When it comes to insurance, most business owners don’t have the time or resources to seek out what they need on their own. They rely on an agent to help them assess their risks and review their policy options. But even with an agent involved, it is best to understand your coverages and what insurance you may not have as well. So, how “much” do you need? Let’s review a few of the ways to find out.

Do You Sell Product(s) or Services?

Whether you offer products or services significantly affects your insurance needs. If you sell products, you may need product liability insurance to protect against claims related to product defects or injuries caused by your products. On the other hand, if you provide services, professional liability insurance (also known as errors and omissions insurance) can cover claims related to professional mistakes or negligence.

Do You Own or Lease Property for Business?

If you own or lease property for your business, you need to consider commercial property insurance. This type of insurance covers damages to your building, equipment, inventory, and other physical assets due to incidents like fire, theft, or vandalism. For those leasing property, make sure to check the terms of your lease to understand your insurance responsibilities.

Do You Have Employees?

Having employees introduces additional risks and responsibilities. You’ll need workers’ compensation insurance to cover medical expenses and lost wages for employees who get injured on the job. Additionally, employment practices liability insurance can protect against claims related to employee rights violations, such as wrongful termination or discrimination.

Do You Have Vehicles You Use for Business?

If your business uses vehicles for operations, commercial auto insurance is essential. This insurance covers damages and liability in case of accidents involving your business vehicles. Make sure to include coverage for all vehicles used for business purposes, whether they are owned, leased, or rented.

Do You Store Client/Customer Data?

In today’s digital age, data breaches and cyberattacks are significant threats to businesses. If you store client or customer data, consider investing in cyber liability insurance. This insurance helps cover costs associated with data breaches, including legal fees, notification expenses, and credit monitoring for affected individuals.

Additional Coverages

Apart from the key considerations mentioned above, there are other types of insurance you may need based on your specific business needs:

  • General Liability Insurance: Covers a wide range of risks, including bodily injury, property damage, and advertising injury. This coverage is often included in the base policy for your business, such as in a Business Owners’s Policy (BOP).
  • Business Interruption Insurance: Compensates for lost income if your business operations are halted due to a covered event, such as a natural disaster.
  • Directors and Officers (D&O) Insurance: Protects your company’s leadership against personal losses resulting from legal actions taken against them due to their corporate decisions.

What About the Dollar Amount?

Are recent Blog on Total Insurable/Insured Value (TIV) may be able to help you calculate the amount you should have for the total insured limits on your policy. There are many factors involved here, and we’d encourage you to read more about it!

Even with all the above in mind, there may be risks that are very specific to the work you do. It is best to discuss your business with a licensed agent to really determine what you may need. Contact Brandon Patterson on our team if you’d like to discuss your business’s insurance!

Why Total Insurable Value (TIV) is Important to Understand

Posted on by Ownby Insurance Service

Total Insurable Value (TIV) [sometimes called Total Insured Value] is the complete value of property, inventory, equipment, and business income covered by a company’s insurance policy(ies). Should one insurance company be the insuring carrier for all these policies, it is the maximum amount that they would pay out if there were a covered actual total loss. In other words, if your insured property was damaged or destroyed to the point it could not be restored or recovered.

Seems pretty straightforward, right? Yes, but as an insured, it is critical for you to understand the proper calculation of your TIV. Leaving out key pieces of equipment or inventory might result in an important difference in the amount you for which you are covered.

In most insurance policies, there is a Valuation Clause that will contain a formula for your TIV. You may need to review tax records, purchase orders, sales records, and other financials to properly calculate the amount. In the case of business income, a 12-month window is typical to determine revenue generated for insurance purposes.

As you might expect, a higher TIV comes with a higher insurance premium. Some business owners decide on a lower TIV amount or a higher deductible to offset costs. But there are concerns with both these approaches.

Choosing a Lower TIV

Opting for a lower than actual TIV may save you on the front end, but should you have a total loss, consider what you may be faced with:

  • Is your property completely paid off? If not, what might you owe?
  • Will you have bills for inventory, taxes, or other outstanding debts that still need to be paid?
  • Is there compensation for yourself, your family, and/or your team that will still be needed?
  • Will you want capital to restart this or another business?

Those items can add up quickly. Saving several hundred dollars per year could cost you thousands in this scenario.

Choosing a Higher Deductible

Similarly, costs might be high and money might be tight if you have a total loss that puts a stop to your revenue. A higher deductible might save you a small amount per year, and those savings may take many years to equal what you would forfeit should a total loss claim occur.

In addition, some policies contain co-insurance provisions for claims. This means that in addition, to your deductible, you are responsible for a certain amount of the TIV. Talk with your agency to better understand how co-insurance may factor into a potential claim, as it may give you a better perspective on how much money you might actually receive for a total loss.

When making your decision on TIV, start with the most accurate calculation possible. Then determine the amount of risk you want to take compared the amount you want to place on your insurance policies. This can give you a better perspective on the value of your coverage.

Reach out to Brandon Patterson on our team to discuss your TIV and better understand how you can be covered if the worst were to occur.

What is Business Income Coverage and When Do You Need It?

Posted on by Ownby Insurance Service

If you own, operate, or manage a business, you know how important it is to track revenue and financials. But what if that revenue stopped coming in due to a fire? What if a major theft prevented you from being able to pay your bills and payroll? Having business income (also known as business interruption) coverage in place may help lift the financial burden. But it’s very important to understand when and how it can be used.

Business Income Coverage Examples

Let’s take for example, Christina owns an independent bookstore and also owns the building where the store is located. A fire damages part of the store, and in the process of putting out the fire, her inventory is destroyed by smoke and water damage. It’s going to be several months before the property can be cleaned and repaired for patrons to safely enter, and new inventory must also be ordered and stocked.

The property policy on the business covers much of the physical damage, and there is also some coverage for inventory. However, Christina knows she’ll have trouble paying her employees and her bills without any revenue being generated. So, what does she need to know if she has business income coverage in place?

  1. What is the actual loss sustained? Christina will need to know the total of her covered losses and how much was covered by other insurance policies.
  2. What is the amount of income lost? Christina will need to be able to provide information on the amount of revenue she would have generated had the store been open as normal.
  3. What is the “waiting period” of the policy? Most business income coverage will have an amount of time that must pass before the coverage can take effect.
  4. What is the “period of restoration”? How much time will the policy cover while the business is closed?

These crucial factors will help determine when, how much, and for how long Christina can expect the policy will pay.

Named Perils

These policies typically have named perils as well. So, while a fire, theft, wind, etc. may be covered, you’d have to check your policy to see if a service line being damaged would be covered. In addition, civil authority may be covered as an interruption after a natural disaster. As an example, if a sinkhole damaged the only road leading to your business and the government ordered closure as a result, you might be covered for business income.

Understand Your Business Income Coverage

However, and as with any policies, it is extremely important to understand your coverage and limits. Don’t assume you’d be covered for certain situations, talk with your agent and get an understanding of what would trigger this coverage, for how much, and for how long.

To learn more about it, contact Brandon from our team at brandon@ownbyinsurance.com or 865-453-1414 today.

No Coverage for Earthquakes? Don’t be at Fault!

Posted on by Ownby Insurance Service

As you likely know, there are two fault lines that run through Tennessee. The first is the New Madrid Fault, which runs approximately 120 miles south from Charleston, Missouri, and part of West Tennessee, near Reelfoot Lake, extending southeast into Dyersburg, Tennessee. The second is the East Tennessee fault line, which runs from Chattanooga through Knoxville and on to North Carolina.

What you may not know is that most property insurance policies exclude damage from earthquakes. And while we haven’t had a major earthquake in Tennessee in the last 100 years, that doesn’t mean they can’t occur. So, what would you need for coverage, and how do these policies work? Let’s discuss it.

How Earthquake Insurance Works

Earthquake insurance provides protection from the shaking and cracking that can destroy buildings and personal possessions. And while there are certainly scenarios where major damage can occur, one of the more common issues is the damage earthquakes can cause to foundations and walls of a building. This shifting, cracking, and movement can be very costly and may also damage the structural integrity of your building(s).

If a fire, electrical damage, or water line damage occurs as a result of an earthquake, there is a good chance your current property policy may provide coverage for those losses. But direct damages from the earthquake, whether to your building, auto, or personal property, are unlikely to be covered by non-earthquake insurance policies.

It’s important to know that earthquake insurance carries a deductible, and this is generally in the form of a percentage rather than a dollar amount. That is somewhat unique compared to other coverages and could be an unpleasant surprise if you don’t understand it in a claims scenario. As an example, an earthquake insurance policy may have a 10% deductible, meaning that if the home is replaced at a cost of $250,000, the homeowner would have a $25,000 deductible. These deductibles may be as high as 20%, which can mean a very significant cost to the homeowner.

Earthquake Insurance Costs

The cost of earthquake insurance can also vary a lot, depending on location, how your structure is built, and the materials used. These policies are provided by private insurance companies, and not the government like many flood insurance policies. As such, earthquake insurance needs to be reviewed and compared to understand the coverages and costs.

Does your home or business property need earthquake insurance? It’s likely a good idea to have a policy in place for it. While we don’t expect an earthquake anytime soon, the science to predict them is not advanced enough to detect them in advance and one could occur at any time.

Contact Brandon Patterson on our team at brandon@ownbyinsurance.com or call 865.453.1414 and he’ll help you review your options.

Claims for Theft and Burglary: What’s Covered and When?

Posted on by Ownby Insurance Service

If you own a business, having something stolen from your company may be an unfortunate reality someday. But is there a difference in how it is covered based on how it is stolen? There may indeed be differences depending on your policy. Let’s review what you may find as you understand these coverages.

Insurance for theft typically covers any stolen property, regardless of where it was stolen. Insurance for a burglary may only cover property that was stolen when a forced entry into a building or structure was involved. If you have commercial property insurance, you may think theft is covered. But that isn’t always the case, especially for crime-related losses.

However, if you have a commercial crime policy, there is a good chance you are protected from losses occurring from business-related crimes, including:

Employee Theft Insurance

Protects you against dishonest acts committed by your employees, including theft of money or property.

Robbery and Premises Theft Insurance

Protects your property inside your premises while you’re open for business. You’re even covered if you or your employees are ever robbed while doing business offsite.

Computer Fraud Insurance

May help cover losses when employees or hackers commit fraud or theft via computers. As an important note, crime insurance will typically not cover losses as a result of data breaches. This type of loss would need to be covered by cyber liability coverage.

Forgery Insurance

Helps protect you if documents are forged or altered in schemes that typically involve the false acquisition of your funds.

Theft of Money or Securities

Protection for physical theft of money or securities and may help protect you even if this theft occurs off premises of your business.

As you can see, there is more than one may realize when it comes to protecting your business from theft, burglary, or crime. Contact Brandon Patterson on our team at brandon@ownbyinsurance.com or call 865.453.1414 and he’ll help you understand these risks and your options.

The Vacation and Cabin Rental Excess & Surplus Insurance Market

Posted on by Ownby Insurance Service

The property insurance marketplace remains in what is called a “hard market” as we progress through 2024. Factors including cost of materials, catastrophe losses, supply chain interruptions, and increased time and cost of labor have resulted in insurance companies reducing the amount of risks they want cover, restricting locations, and raising premiums.

These impacts are often higher in the areas that are popular for vacation and cabin rentals. For example, beach rentals are higher to insure due to coastal risks, and mountain rentals are often harder to insure due to wildfire risks. But there are still options for coverage and an independent agent can provide you with information on your choices, as they are not tied to a single insurance company like a direct writing insurance agent may be.

That being said, these options may have intricacies you are not aware of, as all insurance companies are not the same, nor or they regulated the same.

The Excess & Surplus Market

With fewer insurance companies willing to cover the risks of vacation and cabin rentals, some are turning to the Excess & Surplus (E&S) insurance market for coverage. These companies typically offer non-admitted insurance policies, which means they do not fall under the state regulations and have not been “approved” by the Department of Insurance. However, they are still reviewed by regulators, and the companies themselves may often have the same financial ratings and reviews as other companies on a national or regional level.

The positives of these options are the flexibility of the policies and rates. They can move quickly to adjust what they offer and respond to volatile markets like what we’re seeing now. They may have lower rates than competing programs, but it is important to understand if coverage differences are responsible for those rates.

The concern of these options is they are not subject to the states’ Guaranty Fund protections. This means, if the insurance company were to become insolvent, there would not be state government protection to pay claims from a fund that has already been established.

There are, however, ways to determine how great of a concern this should be for you. The financial ratings and reviews we mentioned can be reviewed by the public. Organizations like Fitch, AM Best, and/or Demotech may have reviewed the companies’ financial data and provided reports of their current standing and future outlook. These reports are fairly standardized and straightforward, often assigning letter grades like “A” to resulting reports.

So, is an E&S market the best option for your risk? In Tennessee, you may need as meaning as three admitted companies to decline your risk before you are eligible to access the E&S market. But in the current marketplace, that may not be much of an impediment. The key is to understand what is available to you, and what differences are in the policies you’re considering.

Our agents can help you do just that! We’ve been helping insure cabins and vacation rentals for many years, and we’re here to help you understand your risks and options. Contact Brandon Patterson to get started today – brandon@ownbyinsurance.com or 865.453.1414.

Steps for Better Personal Risk Management

Posted on by Ownby Insurance Service

You could probably guess that companies need to take steps to reduce their risks, including safety programs, cybersecurity, and more. But should you be taking risk management steps for yourself? Do you have ways you can lower your own risks and potentially reduce the chances you have a loss or an insurance claim? The answer to both these questions is “yes” of course!

Driving Risks

Over 36,000 automobile accidents occur every day1 in the U.S. Many of these accidents are caused by distracted driving. One of the simplest steps you can take for better personal risk management is to avoid using your devices while driving. And while texting may be the most obvious, many people are using their phones for searches, looking up directions, or even watching videos! Avoid these while you aren’t parked in your vehicle whenever possible.

In addition, keeping your car in good working order is also a way to reduce your risk. Keep your tires properly inflated, have brakes and safety mechanisms checked, change windshield wiper blades as needed, and keep up regular maintenance to prevent mechanical issues that could cause an accident.

Cyber Risks

The average American accesses the internet for around seven hours of their day!2 Much of that may be for work, but many Americans also work from home. If you’re using your personal devices, take steps to protect your data:

  1. Protect your passwords and create stronger passwords whenever possible.
  2. Use multifactor authentication when it is an option for logins.
  3. Avoid using “open” or unsecured internet network connections.
  4. Be careful visiting websites and especially entering data on sites that do not have SSL encryption (https://).

Liability Risks

Lawsuits are on the rise in our country, and larger verdicts and judgments are more common. You can protect your own liability at home by taking steps that include:

  1. Fence in your yard, especially if you have a trampoline, pool, treehouse, etc.
  2. Avoid “overserving” alcohol to adults at your home – even friends and neighbors.
  3. Monitor and control your dog and/or other pets, even if they haven’t been known to bite.
  4. Talk with your family about being careful in their interactions with others, and the importance of safety.

These are just a few of the examples of ways you can be safer and also lower your risks. But accidents can still happen, and you need to have the right coverages in place in case they do. Contact Brandon Patterson from our team to better understand what those coverage options may be for you – brandon@ownbyinsurance.com or 865.453.1414.

1-per Progressive Insurance data

2-per Forbes data

What Do You Need to Cover Business Auto Use?

Posted on by Ownby Insurance Service

If your business regularly uses autos for business needs, you likely have risks. Whether it’s a fleet of vehicles or just one, and whether it is vehicles you own, lease, or your employees own – having the right coverages for business-use autos is critical.

Employer-Owned Vehicles

If your business owns autos for business use, you likely need a Commercial Auto policy. This will usually provide you coverage for liability damages, collision, or comprehensive auto property damage, bodily injury coverage, and property damage for other vehicles/property.

Additional coverages may include reimbursement for rental vehicles, under/uninsured motorist coverage, and/or medical payments coverage. Personal use of the vehicle may also be covered, but typically not by others (such as family members using the auto).

Non-Owned Vehicles

There are plenty of scenarios where your business may be using vehicles it doesn’t own. Maybe you’ve rented, leased, or borrowed a vehicle. Maybe your employees are using their own vehicles. For these situations, the risks are different, as you likely need coverage for property damage or bodily injury that your business is at fault for in an accident.

Hired and Non-Owned Auto coverage is often the solution here. The “hired” coverage provides protection for your business when you’ve rented, leased, or borrowed a vehicle. The “non-owned” coverage extends protection from and for your business over the employee’s personal auto policy. This likely adds to the limit that could be paid in the cases of property damage or bodily injury.

However, this is typically a “liability” only coverage, and doesn’t coverage damage to the non-owned property (the auto itself). That’s why it’s important to understand the underlying property coverages, such as the employee’s personal auto policy or the auto’s rental agreement coverage.

HNOA coverage might be available to add your business’s general liability policy, or it might be available to purchase separately as a “standalone” policy.

Additional Coverages

If you have greater risk potential for your business’s use of autos, you may want to consider adding a commercial umbrella. This type of policy may give you higher limits that could be paid on a claim for property damage, legal costs, medical bills, or even legal settlement payments. A variation of this may be excess liability that is specifically added for commercial auto coverage.

Whatever auto use your business has, it is important to understand the risks and coverage options available for you. This is also a scenario where understanding the exclusions of policies is extremely important.

Contact Brandon Patterson from our team at brandon@ownbyinsurance.com or 865.453.1414 to discuss your options for covering business autos.