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Are you underinsured?
By Chock Chapple, Managing Partner
Is your commercial building or residential property correctly insured? This can be confusing and expensive to figure out. The vast majority of  commercial and residential insurance policies are written on a replacement cost (RC) basis. RC is defined as the cost to replace with like kind and quality without reduction for depreciation. Using the RC valuation provides the policy holder the protection that the property will be rebuilt to like kind and quality. However, many insurance policies contain a co-insurance clause which requires that the property being covered is properly insured to value.
In the event that an insurance carrier feels that a property is underinsured, they will evoke the co-insurance penalty, which is figured based on the following formula:
What you did insure it for divided by what it should have been insured for. Did / Should have
Here is an example of the negative result when a property is underinsured:
Replacement cost is $1,000,000 but was only insured for $800,000. The formula is as follows:
Did: 800,000
Should have: 1,000,000 = 4/5 or 80% of any loss is paid to the policy holder
Therefore there will be a 20% penalty for underinsurance. A $100,000 roof claim would net the policy holder $100,000-$20,0000- $1,000 (ded)= $79,000 meaning a $20,000 penalty for being underinsured.
The moral of co-insurance: the policy holder must insure to value or assume the potential of paying the price on the back end.
The second issue is Inflation and the increased costs of construction. As we are all aware, the price of fuel, steel, concrete and lumber, to name a few, are all rising. The cost to reconstruct a business or home is also increasing at a faster than normal pace. Here at CIG, we recommend applying an annual inflation factor to both your business and personal property. This will vary by construction type (ie, frame, steel, brick) and age of structure and location. While there is no exact science to estimating a true replacement cost (other than an actual bid from a contractor), we recommend that you review your values and methods of insurance at least annually with your insurance agent. |
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Workers Compensation - Control your own Destiny
By Brian Martin, Vice President
I am sure that most of you already know that workers compensation usually accounts for a large portion of the total premium a company will pay for its property and casualty insurance each year. But, did you also know that most companies have some control over what their workers compensation premium will be?
One of the components involved in developing your workers compensation premium is called an Experience Modification Factor (Mod). The Mod compares your company's actual losses with expected losses, using a three-year history. If actual losses are greater than expected, your Mod is a debit (or over 1.00) - if actual losses are lower than expected, your Mod is a credit (or under 1.00). This Mod is then applied to the estimated payrolls and rates. By lowering the frequency and severity of your claims, you can reduce your Mod; by lowering your Mod, you can lower your actual workers compensation premiums.
The best way to control your Mod is through managing claims. Successful claims management requires a long term commitment to creating a "Safety Culture" within your company and by implementing programs that will help reduce claims. Emphasis should be placed in three basic areas:
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Review your personal insurance needs annually
By Brent Wasson, Vice President
The amount of insurance you need can change a great deal from year to year. As a result, evaluating your insurance coverage should always be added to your list of annual reviews. To refresh your memory about the amount of insurance you have and its coverage limits, carefully re-read both your auto and homeowners or renters insurance policies. Be sure you are familiar with their provisions and exclusions.
Auto Insurance
Check the types and amounts of insurance you have, and make sure that your liability limits are sufficient should you be involved in an accident. If you wish to save money on your premiums, consider increasing your collision and comprehensive deductibles.
Homeowners and Renters Insurance
Unfortunately, no one's home is immune to the possibility of a burglary or destruction from a natural disaster. Therefore, you need to be prepared. It is essential to have enough insurance coverage to rebuild your home and replace its contents at today's costs. An independent appraiser can help you estimate the current cost of rebuilding your home. A home inventory and appraisal of valuable, unique items may be beneficial to this task, especially if you are unsure about the value of your possessions. Make a detailed list of all your personal belongings, then photograph or videotape each room in your home, including closets and cabinets. Be sure to keep important receipts, document the serial numbers of your appliances and electronic equipment, and store a copy of the final inventory in a safe place away from home.
Are There Gaps in Your Coverage?
As part of your insurance review, you need to recognize that your basic homeowners policy and auto policy may not be enough to cover your current needs. For instance, you may need additional insurance to protect your home and its contents against a flood or earthquake. If you own antiques or other valuables, you might need to insure them separately. Most people, especially homeowners or those with substantial assets, should consider a personal umbrella policy. Personal umbrellas provide at least one million dollars in excess liability limits and broaden protection to include many situations that basic policies do not cover. This coverage is becoming more and more important as individuals are becoming increasingly willing to initiate litigation aimed at recovering large damage awards.
We would be happy to answer any questions you may have and help you fill in any gaps in your coverage.
Brent Wasson is vice president specializing in construction risk management, manufacturing, property management, and non-profit commerce insurance coverage needs. He can be contacted at brent@cigcorp.com or 316.440.3503. |
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Construction Contracts
The Ongoing Additional Insured Debate
By Lance Spence, Vice President
"Additional Insured" endorsements continue to be one of the hottest topics in construction risk management. And you as a contractor or subcontractor should ultimately be aware of what they are and what they mean to you. These documents have the effect of adding the party requiring the endorsement to the second party's commercial general liability (CGL) insurance policy, and, in some cases, providing the first party coverage for the second party's sole negligence.
The Insurance Services Office (ISO) is a group that the insurance industry founded and continues to fund for the purpose of developing standard forms of insurance, and, today, many insurance carriers use these forms and are influenced by their terms and conditions.
Most discussions regarding the standard form additional insured endorsement begin with the version that ISO adopted in 1985. That version was very broad and granted the additional insured coverage for both property damage resulting from construction defects and third-party-over actions. The later versions of the form, however, began to narrow the coverage afforded. In an effort to cut off coverage for completed operations, and, in turn, construction defects, ISO revised the form in 1997 and again in 2001. The 1997 version limits coverage to "ongoing operations", and the 2001 version further provides that it "does not apply" to events that occur after the named insured has completed its work, or the relevant portion of the project has been put to its intended use.
Click here to continue article... |
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Are You Underinsured?
Workers Compensation:Control your own Destiny
Review your personal insurance needs annually
Construction Contracts- The Ongoing Additional Insured Debate
Customer Spotlight: Mull Drilling |
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Customer Spotlight
Our Customer Spotlight for this issue is Mull Drilling Company, Inc. (MDC). MDC is a privately owned energy company headquartered in Wichita. Lewis Mull is the Chairman of the Board and the Chief Executive Officer of the company. MDC's exploration, operations and acquisitions efforts are focused in the Mid-Continent and Rocky Mountain region with particular emphasis in Kansas and Eastern Colorado. They are the 5th largest oil producer in Colorado and have a total of 250 operated wells. Lewis Mull is also the founder of Backwoods, one of Wichita's premier outdoors apparel and equipment stores. Thanks for your business Lewis!
Mull Drilling Company's lobby is uniquely decorated with animal mounts from Mull's different hunting expeditions.
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Meet Kevin, the newest member of the CIG team! 
Kevin VanWey is the newest addition to the CIG team. Kevin started last month as a producer and he brings with him many years of experience in the commercial insurance marketplace. Kevin entered his insurance career in 1989 as a multi-lines agent and migrated into the specialty of commercial insurance in the 1990's. Kevin comes to us from Missouri where he was born and raised. He specializes in workers compensation as well as manufacturing, trucking, and retail. Kevin can be reached at (316)305-3800 or Kevin@cigcorp.com.
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In_the_News
For concert tickets, he feels better now
HARTFORD, Conn. - Prosecutors say a video shows a Connecticut correction officer running a 40-yard-dash in women's clothing and high heels- at a time he had claimed he was too injured to work.Garrett A. Dalton of Naugatuck has been charged with workers' compensation fraud. He's accused of taking part in a radio station's contest for Hannah Montana concert tickets last year. Not only did he have to dress in drag but he had to carry an egg on a spoon. Authorities were alerted after someone saw Dalton in a TV news report. Prosecutors say the 41-year-old collected more than $5,000 in workers' compensation after he reported a work-related injury in June. Court documents do not list an attorney for Dalton, and his phone number is unlisted. And no, he didn't win the contest.
-Associated Press
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