Tuesday, August 23, 2016

Injury at Work – The Risk and Cost

Insuring your business and the people who work for you is just common sense. Besides, the obligation you have towards your employees, claims for compensation for sickness or injuries in the workplace, can be huge. But your employees may not be the only ones who work in your business premises. What about contractors and their subcontractors?

It Could Happen To You

Compensation to employees of contractors and their sub-contractors who are injured while working at site is a complicated and often contentious issue. The contractor may claim that all the required coverages are in place, but if an accident occurs and they are not, the liability could fall on you, and the primary employer. That is what happened recently at the new Tesla electric vehicle plant. A worker of a subcontractor working on the expansion of the factory was injured while on the job. It soon emerged that the subcontractor was in violation of employment laws and in breach of regulations regarding wages, overtime and workers comp.

Tesla had no knowledge of this, but when the facts came to light, they were dragged to court along with the subcontractor. The end result? The injured employee was awarded a $550,000 settlement.

Tesla is a huge organization with a vast amount of financial muscle. They will be able to absorb the monetary shock of the settlement. But what if something similar happened to you? The courts do not award settlement based on the ability of the employer to pay. It is on the basis of the amount of injury and the liability for it. In the Tesla case, the worker had fractured legs and ribs and a concussion. These are major injuries but, sadly, not uncommon in such cases. Would you be able to absorb a half million dollar payout? Or would that ruin you?

Get the Protection You Need

The vast number of insurance products available can be confusing to anyone who is not an insurance professional. Many business owners think they have the coverage they need when they do not. Part of the reason is the confusion that exists about coverage types. For example a person may read about employment practices liability insurance (EPLI) coverage and presume that since he has liability coverage, he is already protected. Not so. Liability coverage and EPLI are different and both are critical to protecting your business.

Remember that insurance is not a gamble, a luxury or just an expense. It is the shield that will protect you when you are faced with liabilities that could ruin you and your business.

When business imperatives demand that contractors need to be employed, the amount of paper work involved can be voluminous. Issues like workers compensation can easily fall through the cracks.Therefore, you as the principle employer must ensure that the contractors provide proof of their insurance coverage and that they add you as an additional insured party on the policy so that you are not in the firing line if things go wrong. In addition talk to your insurance agent to understand your possible liability and the claims that could be raised against you and get the insurance coverage you need to protect yourself and your business. If you do not have workers comp, liability coverages and EPLI you are leaving yourself dangerously exposed.

Tuesday, August 16, 2016

Include Home Protection in Your Remodeling Plans

There is more to home remodeling than giving the house a makeover and adding new features together with creature comforts. These are the main considerations, of course, but overlooking the protection of your renovated home could be a big mistake, one that may lead to massive financial loss. You have your home insurance policy, but that will not cover all your expenses if your home is damaged or destroyed. And then there are the hassles of repairing or rebuilding it, which are too many to list. That is why building in protection as part of the remodel is so important. Here are some factors to keep in mind when doing the planning.

Fire Protection

  • Wherever possible, install a full residential sprinkler system with a water flow alarm. Ensure that the system is checked annually to keep it in working condition.
  • Replace existing smoke or heat detectors with multi-criteria systems that detect combustible gases, carbon monoxide, smoke and heat. This will significantly increase the level of protection.
  • Install centrally monitored fire detection units in areas where the fire risk is the greatest – attics, garages, kitchens, laundry rooms and other similar places.
  • Where water based latex paint, stains, and polyurethane / acrylic coatings have been used, use fire retardant additives to reduce the fire risk.
  • A whole house surge protection system will protect electronic equipment from damage if there is power fluctuation or surging.

Protection from Water Damage

  • To prevent major water damage install a whole house automatic shutoff system which will detect and turn off water if the flow is excessive or if water is collecting in the wrong places.
  • Water leaks commonly occur below HVAC units, skylights, terrace doors, washers, sinks and wherever, other such appliances, are installed. Installing moisture detection devices at these points will provide an immediate alert of a leak, when it is detected.
  • Replace rubber hoses at water supply points for washing machines, dishwashers, sinks, toilets and so on with steel braided hoses which are less prone to damage, leaks and failure. All hoses should be replaced every 5 years or as advised by the manufacturer.
  • Install floor drains in the laundry room and other places where there are water connections to carry away water in case of pipe or tank failure.
  • Protect yourself from equipment damage by installing point-of-use water shutoff systems at the water supply points for HVAC units and similar devices.
  • Install the washing machine at the lowest level to minimize damage if a major leak occurs.
  • Install a sump pump of the right size, to remove water that may enter the basement after heavy rains.
  • An automatic backup generator will ensure that all protection devices and equipment will function, in the event of a power outage.

Factoring in these changes as a part of remodeling your home may increase the cost, but the peace of mind that follows, makes it worthwhile. Talk to your remodeling contractor about the many options available. In addition, it is possible that having theseproactive measures in place, could result in a reduction on your insurance premiums. To know more about how safety features can reduce your insurance costs, contact your insurance broker.

Thursday, July 28, 2016

Home Insurance: What is Covered and What is Not (Part -1)

Many people who have insured their homes tend to become complacent and think that they are covered, no matter what happens to the house. That is the biggest misconception. There are thousands of different types of home insurance and policy options. You should not take the nature and extent of your coverage for granted. Study your policy carefully and do not hesitate to ask your insurance agent for clarifications if you are not sure of anything. You can then modify the policy or take additional coverage to give you the protection you need.

Here are some of the coverages found on most policies and what you should know about them.

The Dwelling

The word Dwelling refers to the house itself and any structures, like a garage, that may be attached to it. The Amount of Insurance (Or Dwelling Limit) as stated on the policy document will show the maximum amount that the insurance company will pay if your home is destroyed by causes or actions covered by the policy. Check to see id f the amount is enough to get you a new home. If not, you need to increase your coverage.

Other Structures

Other structures, as referred to in the policy, will mean a structure not attached to the house. This covers, sheds / barns, pool houses, standalone garages etc. The cover limit for these is separate from that of the Dwelling and is usually much lower – often around 20% of the Dwelling coverage. Check to see if the coverage you have is adequate. You can buy additional coverage if required.

Personal Property

The term personal property on the insurance policy refers to all your belongings in the house – furniture, clothes, appliances, electronic items and so on. Here too there will be a specific coverage limit which is typically about 75% of the Dwelling limit. You can increase the coverage by paying more. There is an important issue to note here. There are two types of protection – “actual cash vale” and “replacement cost.” If the protection is for actual cash value, depreciation will be calculated and what you get for a 5 year old refrigerator that has been destroyed will be less than the cost of buying a new one.  If you are covered for replacement cost, the coverage will be for the cost of buying a new refrigerator at current prices.

Loss of Use

Where will you stay, till your home is repaired or till you find a new one? You are going to have to pay rent while continuing to pay your mortgage. The Loss of Use coverage will pay your rental expenses. There are two types of protection available.There is a payment limit that is the amount that the insurance company will pay, irrespective of how long you need to pay rent. Otherwise, if it is time based, all expenses will be paid, regardless of the amount. But the coverage is only for a specified time after which it will stop and you will not be paid anything.

In the next blog we will look at what is typically not covered by a home insurance policy.

Thursday, July 14, 2016

New Eligibility Criteria for End of Life Care

Talking about one’s last days is not a pleasant exercise. We all know that we will die one day, but it is human nature to try and avoid discussing it. However, thinking about it, talking about it and planning for the end, unpleasant though it is, can take away some of the pain, both for you and those you leave behind.

Preparing For the End

Millions of California residents are eligible for health care benefits that will affect the nature and quality of care they will receive in their last day. The problem is that many of them do not know about it. Both Medicare and Medi-Cal (the state version of Medicare aimed at those with low incomes) are now offering coverage for discussions between patients, or their family members, and medical professionals on end of life care. This does not mean finding and moving to a nursing home or assisted living facility – those options can be exercised at the patient’s discretion. What Medicare and Medi-Cal are now offering, is planning for what happens if you are unable to communicate your wishes for treatment. For example, if you have a stroke that leaves you unable to communicate, and unconscious, do you want to be placed on a ventilator or would you prefer to pass on naturally? Who will make these decisions for you? The quality of your life, or of your death, could depend on this.

You Can Talk To Your Doctor

Medi-Cal, which covers 13 million Californians covers advance care planning between doctors and patients / family members. Doctors can bill for these discussion twice every year without prior authorization. There is no patient age limitation for this. Medicare, with 5 million members in California, offers covers for these planning discussions for those over 65 years of age and also for younger people with specific disabilities. There is no limit on the number of discussions with the doctor.

The aim of this coverage is to enable people to prepare an “Advance Care Directive” that will dictate the course of their medical treatment if they are unable to communicate these themselves. You can state what treatment is acceptable, under what conditions and when a DNR (Do Not Resuscitate) will come into force.

Many doctors are uncomfortable initiating these discussion, both on a personal level and because they feel that a patient may misunderstand the intent and become upset. If your doctor is hesitant to discuss these issues, it is up to you to carry the conversation forward, understand the options for you and your family and then formally document the decisions that have been made. You have the freedom to change your decisions at a later date if so desired.

Talk To Your Insurance Agent

Along with Medicare and Medi-Cal, some private insurance plans also cover end of life planning discussions. If you are not covered or unsure of your coverage, talk to an insurance professional to know what your status is and if needed, get an insurance plan that provides you this coverage. You owe it to yourself and those you love.

Tuesday, June 28, 2016

Ride-share companies riding on the American society?

Uber, Lyft and SideCar are companies that provide an app which is downloaded by both drivers and passengers seeking a taxi, to make it easy for them to engage. Traditionally, these companies should be regarded as software companies. However with megabucks riding on the transportation business, these companies have morphed into full-fledged Transportation Network Companies (TNCs), but would prefer to be called as ‘ride-share services provider’.

However, the problem does not lie merely in the nomenclature for these companies. A larger problem is the dubious means employed by these companies to dodge regulatory policies that govern all TNCs. One such regulation pertains to the insurance cover provided to drivers of their cabs.

Lyft is a conventional TNC but Uber works on a sub-contracting model. That is, their drivers are mix of owner-driven personal vehicles (called UberX) and fleet-owned commercial cabs (called Uber).  The fleet-owned commercial cabs are covered by commercial insurance but the owner-driven independent contractors are covered in a different way. Such drivers are offered non-primary coverage with $1 million coverage for driver liability and $1 million to cover uninsured or underinsured drivers. However, this cover only applies when a passenger is being driven.

During times when the cabbie is looking for a passenger or responding to a hail, a much lower insurance cover is provided to the driver:
  • $50,000 injury,
  • $100,000 injury total, and
  • $25,000 in property damage
This means that when cabbies are not driving a passenger around, they are at the mercy of their own personal insurance which puts them at risk.

Thankfully, the Federal and State Governments have woken up to what looks like a scam, and are passing bills to regulate these companies. Two such bills being passed by California state senate are:
  • AB 2293: This would eliminate the double-layered insurance cover for cabbies and require all kinds of TNCsto mandatorily have taxi-like primary insurance. This will protect the drivers against lawsuits for loss of life, and/or injury whenever they are on road, irrespective of whether a passenger is being driven or not.
  • AB 612: A more important bill, this mandates these companies to conduct alcohol and drug tests on drivers at regular intervals of time. Also, no drivers can be contracted, unless a thorough background check is conducted on them.
While the ride-share companies may fall in line on the above requirements, there are other questions to be asked. Do they provide workers compensation;do they pay payroll taxes; are they avoiding the normal costs of doing business; are they taking the American society (not just the passenger) for a ride? Questions one must ask oneself before hailing these taxis.

Thursday, June 16, 2016

Affordable Care that American economy can ill-afford

“The best customer service is one where the customer doesn't need to call you, doesn't need to talk to you. It just works”. - Jeff Bezos, Founder and CEO of Amazon

There is little doubt that President Obama is inspired by the Amazons of the world. That is why; he is trying to create an Amazon of sorts to hawk insurance products to the American citizen. This is what the insurance industry is calling the Healthcare Exchanges that are mandated to be setup under the Affordable Care Act (ACA), nicknamed ‘Obamacare’.

The intent behind setting up these exchanges may be a good one, albeit: to reduce dependence on insurance agents. The exchanges will help buyers compare different insurance covers and choose the one which works best for the individual/small company. Not only is the argument flawed for various reasons, Obamacare has created various other issues, which don’t make sense for the American economy.
  • Reduced subscription to insurance cover: It’s well known that insurance agents act as motivators, pulling buyers out of their inertia and getting them to buy cover. With ACA slashing the commissions doled out to agents, the motivation to push insurance cover reduces, leaving more Americans uninsured.
  • Replace insurance agents with Navigators: ACA aims to create a new breed of advisors called Navigators who just need to take up an online examination and pass the same to qualify.
  • Poor service: These navigators will not receive commissions like agents but will receive ‘grants’ from the ACA program. This will dilute the quality of service provided and open up doors to new problems like wrong products being purchased, inadequate cover etc.
  • Higher costs to small companies: Insurance agents often act as the HR departments by managing all the formalities required while selling cover to their employees. Now, with agents out of the picture, either companies will have to invest more time into the exercise, or let employees manage everything at their own risk.
  • Impact on (un)employment: With more people coming under healthcare insurance, the cost to employers increases making them restrict new hiring even more. This will have an adverse effect on the economy which is already reeling under heavy unemployment.
What Obamacare fails to recognize is that health insurance contracts are complex and it needs an agent’s expertise to advice buyers on the same. It’s one thing to buy pantyhose on an e-shoppe, another to put your health and life at risk on a do-it-yourself portal. Which is why; it’ll do good to the Obama administration to remember another quote by Jeff Bezos:

“I think that, ah, I'm a very goofy sort of person in many ways.”

Tuesday, May 24, 2016

Do You Need Professional Liability Insurance?

Running a small business can be very satisfying. You are your own boss and can do things the way you want with, generally speaking, and no one to answer to. However, the situation also has its downside. When something goes wrong, you are the one responsible. No matter how careful you are, mistakes and errors can occur. Even if nothing is wrong, a client could feel that he has suffered because of an action on your part. Or it could be a case of malicious intent. Whatever be the reason, you could be exposed to liability that could ruin you and the business you have worked so hard to build. Thatis why Professional Liability Insurance (PLI) is essential.

What Is PLI?

Professionals are expected to possess extensive knowledge in their field of specialization. They are expected to use this knowledge and their skills to perform services for which they are retained and do it at accepted industry standards. If the services are not up to standard or if the client thinks that is the case, the business can be taken to court for the damage that the client has suffered. This is professional liability.

Professional Liability Insurance is also known as Errors and Omissions Insurance (E & O Insurance). It protects you from claims of negligence or inadequacy of service when the advice or professional services given to a client do not meet the client’s expectations. There are various coverage options including:
  • Negligence (either actual or alleged) –You are covered against claims for deficiencies in professional service, such as failure to deliver, providing incorrect advice and omissions.
  • Personal Injury (libel or slander) –This protects you against both libel and slander claims if the actions were committed as part of your professional services.
  • Copyright Infringement – If any copyright infringement occurred during the course of your professional services, you are protected from claims for damages or expenses.
  • Defense Costs – When legal defense has to be mounted against claims for activities or actions covered by the policy, the costs of the defense are covered.
It should be noted that a client may require your business to carry PLI before entering into a contract with you. This will provide him the comfort of knowing that if he should suffer on account of any acts or damage on your part, compensation will be available.

Professional liability is a serious subject and a complicated one and having insurance cover to protect you from claims and lawsuits is the best way to protect your business. Remember, even if the case goes to court and the verdict is in your favor, the costs of defending yourself could be huge. The advice of an insurance professional will guide you to the right type of cover and the amount of protection you need. Even if you already have PLI, has it kept pace with the growth and changes in your business? A professional will be able to work with you to examine your existing coverage and recommend the modification you need to remain fully protected. Consulting your insurance broker about PLI coverage is not something you want to delay.