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Tag: Commercial Insurance

How Claims Impact Your Insurance Premiums

Posted on by Ownby Insurance Service

Your insurance premium is based on many factors, from the type of coverage you choose to your overall risk profile. But one aspect that often surprises policyholders is the impact of claims on their premiums. Whether you’ve recently filed a claim or you’re thinking about it, it’s important to understand how claims can influence the cost of your coverage.

Loss History: A Snapshot of Your Risk

Your loss history, or claims history, is a critical factor insurers use to determine your premium. This is essentially a record of all the claims you’ve filed in the past. Insurers view this as a representation of your risk level – policyholders who have filed multiple claims are generally seen as more likely to file additional claims in the future.

Each insurer has its own thresholds for how claims history impacts your premiums, but generally, past claims can lead to higher premiums.

Why Does Your Loss History Matter Impact Your Insurance Premiums?

Your loss history paints a picture for your insurer. For example:

  • If you’ve experienced multiple incidents, it could indicate a higher likelihood of future claims.
  • A long history of claims, even if they’re for relatively small amounts, can label you as a higher-risk policyholder.

While you can’t change your past claims, being aware of how your loss history is assessed can influence your approach to future claims.

Claim Frequency and Size Matter

Number of Claims

In insurance, the old saying “the fewer, the better” rings true. Filing multiple claims within a short time – even for small amounts – can signal a higher risk level to your insurer. Insurers often see frequent claims as an indicator of risk-prone behavior, even if the claims themselves are low-cost.

To manage your premium effectively:

  • Avoid filing claims for minor damages that fall close to or just above your deductible.
  • Consider whether the cost of repairing or replacing an item out-of-pocket is more affordable in the long run.

Claim Size

The size of the claim matters just as much as the number. Large claims require significant payouts from the insurer. When an insurer has to pay a big settlement for a loss, the chances are your premium will move upward to reflect the cost.

For instance, a single high-value claim – such as a major accident or property damage – might have a bigger impact on premiums than several smaller claims.

The Impact of Your Deductible Choice

Your insurance deductible – the amount you agree to pay out-of-pocket before your insurance kicks in – also plays a major role in claims and premiums. Filing claims for damages that barely exceed your deductible can lead to higher premiums in the future, meaning you’re left paying more overall.

The Value of a Claims-Free Credit

Insurance providers often reward policyholders who don’t file any claims over a certain period. This is commonly known as a claims-free discount or credit. Maintaining a claims-free record demonstrates a lower risk level, which insurers may reward with a reduced premium or special discounts.

Filing a claim could result in the loss of this credit, which can significantly increase your premiums in the long term. Depending on your provider, the impact of losing a claims-free credit can sometimes outweigh the benefit of filing a minor claim.

“Then Why Do I Even Have Insurance?”

All this doesn’t mean you should avoid filing claims entirely. Insurance exists to protect you in situations where the losses are too great to bear out-of-pocket. However, carefully evaluating the situation and considering the long-term implications can help you balance coverage with premium stability.

Smart Tips to Manage Insurance Claims and Premiums:

  1. Review Your Policy Carefully
    Understand your deductible amount, what types of incidents are covered, and how claims may impact things like claims-free discounts.
  2. Weigh Filing a Claim Against Out-of-Pocket Costs
    If the repair or replacement cost is close to your deductible, it may save you money long-term to pay out-of-pocket rather than file a claim.
  3. Keep Your Loss History in Mind
    Evaluate how additional claims could impact your overall risk profile and premiums.
  4. Focus on Preventative Measures
    Take steps to avoid future incidents, such as securing your home, maintaining your property, or installing safety features. Proactively reducing risks can help keep your premiums manageable over time.
  5. Bundle Your Insurance Policies
    Many insurers offer discounts for bundling, which can offset increased premiums due to claims.
  6. Ask About Claims Forgiveness
    Some insurers offer “claims forgiveness” features, where your first claim won’t impact your premium. Consider whether this add-on is available and worth adding to your policy.

When to File

Ultimately, balancing the cost of a claim versus the long-term implications for your premium is key. By thinking strategically and being proactive, you can ensure your insurance remains both effective and affordable. If you’re unsure, discuss the deductibles and potential impacts of filing the claim with our team and we’ll help you understand your options – but we won’t make the choice for you. That’s your decision!

Do You Know These 4 Often Overlooked Coverages for Property Managers?

Posted on by Ownby Insurance Service

When it comes to insurance, property managers and residential building owners often focus on general liability and property coverage. While these are crucial, there are additional risk exposures that need to be addressed. Here are four important types of coverage you might be overlooking:

  1. Errors & Omissions (E&O) Coverage

    What is it?

    Errors & Omissions insurance may help protect you against claims of negligence or inadequate work. If a tenant sues you for failing to perform your duties or for providing incorrect advice, E&O coverage might help with costly legal fees and settlements.Why you need it:
    Property management is a complex field where mistakes can happen despite best efforts. Whether it’s a clerical error that leads to financial loss or a misstep in tenant placement, E&O insurance provides vital protection.

  2. Tenant Discrimination Coverage

    What is it?

    This coverage offers protection if a tenant (or prospective tenant) alleges discrimination based on race, religion, gender, etc., during the rental process or tenancy.

    Why you need it:

    Even with the best intentions, discrimination claims can arise and lead to expensive lawsuits. Tenant discrimination coverage can help manage the financial burden of legal defense costs and settlements.

  3. Workers’ Compensation Coverage

    What is it?

    Workers’ compensation insurance can help cover medical expenses and lost wages for employees who get injured while working on your property.

    Why you need it:

    If you employ staff such as maintenance workers, cleaners, or security personnel, workers’ compensation is often legally required. But even office staff may have risk exposures such as moving large packages or injuries during on-site work. It can also protect you in lawsuits brought by employees for workplace injuries.

  4. Cyber Liability Coverage

    What is it?

    Cyber liability insurance protects against data breaches and cyber attacks, covering costs like legal fees, notification expenses, and compensation to affected parties.

    Why you need it:

    Property managers handle sensitive data, from tenant applications to payment information. A breach can not only damage your reputation but also lead to significant financial consequences. Cyber liability coverage helps mitigate these risks.Have you considered these overlooked coverages? We’re here to help you better protect your business and assets. For more detailed advice tailored to your needs, contact Brandon Patterson on our team at brandon@ownbyinsurance.com

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.

Risk Management and Your Team’s Role in Lowering Risk

Posted on by Ownby Insurance Service

Risk Management and Your Team’s Role in Lowering Risk

Workers’ compensation rates have been steadily dropping for the last decade in Tennessee and other states. And while factors like market competition and legal system improvements are factors, one of the biggest impacts has come from a reduction in claims frequency and claims severity. How has this been achieved? Safety and risk management programs. When better procedures are in place to protect employees, fewer accidents – or less damaging accidents – occur. So, could this be applied elsewhere to lower your businesses risks?

Preparing Your Team for Success

Onboarding, training, screening, and testing of employees and potential hires can help you lower risk. And this isn’t just for jobs with physical risks. Training your employees on cyber risks, onboarding them for customer interaction, screening them for past loss history, and intermittently testing them on what they’ve learned can all help with your risk management. Let’s review some examples of how this approach can be impactful.

Cyber Liability Prevention

Most businesses store customer data or personal info in some fashion. Whether it be loyalty info like names and birthdays or financial info like credit cards stored for recurring payments, this data is sensitive and must be protected. If you train and test your employees on avoiding cyber risks like phishing, hacking, and human error, you’ll be helping lower your cyber risk.

Third Party Liability Prevention

How does your team interact with customers? If there is a physical location that customers visit for goods, services, or transactions, is it well-maintained? Does your team know to clean up spills, report malfunctioning equipment, or notify management of unsafe conditions? Quickly acting on these concerns not only makes for a better customer experience, it may also reduce your risk.

Property Damage Prevention

If you work on or interact with customer property, having your employees properly trained is critical. Whether it be a $20,000 car or a $1,000,000 piece of equipment, the work your employees do shouldn’t put position you for a claim. And while accidents happen, the better the training, the less likely they are to occur.

Good risk management leads to better options for your insurance, especially as your business’s loss history continues to be good or improves from prior claims. Contact Brandon Patterson at 865.453.1414 or email brandon@ownbyinsurance.com to discuss how it could help your business.