Long gone are the days, when you could shop around for your home insurance policy and just look at the bottom line premium to make a decision. It’s no longer just about price! I don’t know any two insurers whose insurance policies, wordings, limitations and deductibles are exactly the same. To help you out here’s some things you need to look for.
We all know that over the past couple of years, the cost of lumber, labour, delivery costs and everything that could go into building a home have skyrocketed. Make sure that you are buying the right amount of insurance. If you have a claim the insurance is meant to repair or replace your home. It’s not about market value or the municipal tax assessment value. Have your insurance provider provide you with an Industry approved Replacement Cost Evaluation and make sure you review the details for accuracy. Ask if you qualify for Guaranteed Rebuilding Cost.
If you are under-insured, you will pay for part of your loss. You might save a few bucks on your insurance premium but could lose thousands if you have a claim.
Since the Calgary Flood of 2013, many insurers have dramatically changed coverage for water claims. Did you know that there are multiple variations of coverage you may qualify for and some you won’t depending on where you live? There’s Sewer Back-up coverage, overland water coverage, flood coverage, underground water coverage. Once you determine what coverage you want, watch for limitations on water damage coverage. For example, your policy may include Sewer Back-up coverage but there may be a sublimit on it. That means, you may only have $10,000 coverage. If your basement is finished you could be way underinsured.
Make sure that you have your provider review ALL of the possible discounts. To name a few….
- Alarm systems
- Water sensors
- Package discounts for home and auto
- Mortgage free
The list goes on and varies between insurers and discounts can save you hundreds of dollars.
If you have a business in your home, you may be jeopardizing your insurance protection. Make sure you have that discussion with your provider. Check out this blog for more information.
Hail and windstorm claims have seriously impacted loss ratios for all insurers, especially in Alberta. It’s not uncommon, to have to pay for part of your roof replacement in the event of a claim depending on the age of your roof. Did you know that some insurers are now depreciating the siding as well? That means, if you are one of the unlucky windstorm or hail victims you could end up paying thousands to have the roof and siding replaced. Ask your insurance provider if those clauses exist in your policy before you buy!
And finally, if I’ve said it once, I’ve said it a million times – READ YOUR POLICY. Here’s a blog that might be helpful.
Remember: Education is what you get from reading the small print; experience is what you get from not reading it.
At first blush the package policies offered by many of the insurers in the commercial insurance market space look really attractive because of all the various extensions of coverage that are automatically included. Its no longer just a policy that insures your building and equipment against the risk of fire or hail damage. Some of the more common extensions are;
- building upgrades
- environmental upgrades
- landscaping and growing plants shrubs or flowers
- business contents away from premises and while at employee residences
- valuable papers
- accounts receivable
It looks great, but what does all this mean? How much of the total amount of insurance would apply to any one of these extensions? Some of it? All of it? Or are there specific sublimits? Do you even need all of them?
The fact is that most of these ‘add on’s’ do have real and important value.
Another truth is that most consumers have no idea what the value or relative importance of any of these extensions are to their particular needs. As an experienced broker, I know that these extensions are what are often referred to as ‘talking points’. That is to say, each one of these extension of coverage needs to be addressed individually and the correct amount of insurance allocated for each.
One of the notable examples from my own experience was a small consulting firm that suffered severe damage to the contents of their rented office due to sprinkler leakage. The stuff that comes out of a sprinkler pipe isn’t just water, and makes a real mess. This particular client had been referred to me by another much, much larger firm that had been an important client to me for many years. The consultant, albeit a very small one-person operation, was an important asset to the larger company who relied upon their essential services.
All they wanted was enough insurance to satisfy the provisions of their lease for the rented office space.
This is a very common scenario and one of the reasons we review lease agreements along with other contract our clients enter in to from time to time. The review of the lease started a cascade of issues as far as risk and assumed liability were concerned. The landlord was responsible for nothing other than providing space within four bare walls and heat. Any risk of loss even if it was due to the negligence of the landlord was pushed back upon the tenant.
We explained this to the consultant and advised them that we recommended a full suite of coverages with specific amounts to expand on many of the ‘add on’s’ as illustrated above. It came at a price higher than the $500.00 online quote they had received for ‘similar’ coverage. Three times a much in fact. They told us they wanted to do business with us but to reduce coverage to the ‘basic’ package as they felt that was all they needed. We responded by saying we were unable to do that and warned them of the potential consequences if they opted for the other quotation. We would close our file and wish them well. (Failing to warn them would open us up to liability for failing to do so even though we had no formal relationship with them. But that’s another story.)
As professionals and Trusted Advisors, we rely on referrals from our existing client base,
so, we always let out clients know what happens to their referrals. In this particular case the response was one of surprise and dismay. They wanted to know the whole story which we of course could not discuss in detail other than to say our advice was not accepted and the consultant was left seriously exposed.
Our client had been with us long enough to become educated on risk and contingent exposures in their supply chain and key service providers. The result? The consultant was asked to furnish a Business Recovery Plan with details of their risk management program and details of how they would finance their risk. They were no longer able to qualify as a preferred vendor.
They came back to us and not only did they take up the offer we had made, but asked us to advise them on the proactive steps they needed to take to mitigate their risk. We did so and for no additional charge, which makes no sense either, but that’s what we do.
Several years later…..
The building suffered a serious failure in the sprinkler system and the consultants’ office was deluged with the mixture of sludge and water from the piping. Everything in the office was rendered unusable. The consequences to our client were minimal with completely appropriate insurance and adequate coverage amounts for the so called ‘add on’s’. The cost of reproducing the paper records alone were ten times greater than the basic amount provided by the extension. The Extra Expense insurance made it possible for the consultant to engage the resources needed to get their physical plant up and running in a new location as well as the temporary space from which the business continued to run. There was virtually no interruption in the business or revenue stream.
We also coached them on the term of their new lease.
This is just one area where the commercial insurance package policies fall short. I should stress that this is not the fault of the insurance companies who offer these products. The opposite is true in that they are striving to offer the most appropriate coverage and service that they can. Its is up to the consumer to make sure they understand the product and how well it meets their needs and risk appetite.
Who should you go to concerning risk and risk financing?
We go to accountants for tax advice and lawyers for guidance in legal matters. Licensed and educated Insurance Brokers should be your Trusted Advisors for mater concerning risk and risk financing. Many people like to go to their lawyer or accountant for this kind of advice which makes about as much sense as taking your Lexus to your barber for service.
This is just one example of the pitfalls of the typical package policy, and this story is just as much for the average inexperienced broker who handles insurance transactions as a commodity instead of a matter that requires close analysis. The reason for this is simple; there is no money in it. On average, premiums are too low to generate enough revenue per transaction to make it worth handling this kind of business. The downside risk for failing to do so is out of all proportion to the percentage of revenue for the average brokerage firm where 20% of the clients generate 80% of the revenue.
Let’s have a look at some of the other policy segments and the various extensions of coverage that in a perfect world would be addressed in more specific detail;
Liability. The big question here is; ‘How much is enough?’
- bodily or mental injury
- property damage liability
- personal and advertising injury liability
- libel and slander
- tenant’s property damage liability
- voluntary medical payments
- non-owned auto
- legal liability for damage to rented automobiles
- contractual liability
- employers’ liability
- employment practices
- errors and omissions (professional liability)
- Loss of profits or gross earnings
- Extra Expense
- Rental Income
- Key Payroll
- Accountants’ fees
- Restricted access to business
- Key supplier
- Mortgage rate guarantee
- electrical arcing
- mechanical breakdown
- computers, photocopiers, production machinery,
- heating and air conditioning,
- point-of-sale (POS) systems and
- refrigeration equipment
- pressure explosions – hot water tanks, boilers
- centrifugal force
I have decided to save the best for last. Crime is one of the most underserved risk segments and I haven’t even begun to talk about Cyber Liability or Environmental. The number of businesses who suffer a crime loss only to learn the basic policy sub-limit is $10,000 or less should be a wake-up call, but for some reason the average business owner does not take up the coverage, or if they have, for an inadequate amount.
- employee dishonesty
- money, securities and other property
- counterfeit currency and money orders
- forgery, alteration, credit cards and automated teller cards
- electronic fraud and funds-transfer fraud
- professional fees
- incoming cheque forgery
In closing I can only repeat my opening comment;
Beware the Package Policy! Yes, the various extensions are important and valuable, but the amounts are basic and only serve to establish a basis for further dialogue.
Thanks for reading and have a great day!
Insurance companies are starting to see profits after several years of disastrous results. Maybe now we consumers will start to save money on our insurance.
“The 2021 industry combined ratio was 85.2%,” PACICC chief economist Grant Kelly and research assistant Zhe (Judy) Peng write in the latest Solvency Matters quarterly report, released Wednesday. “This is the lowest combined ratio ever recorded by Canada’s insurance industry, beating the previous best of 87.5% recorded in 2006.”
Not so fast!
Inflation – that ugly word we all hate. You ask, how on earth could inflation affect insurance rates?
Here’s a few reasons why we won’t be seeing much rate relief.
The CPI (Consumer Price Index) is at 5.7% which is close to a 30-year high. That means costs to us are increasing.
- Labour costs are on the rise due to one of the lowest unemployment rates Canada has seen in many years.
- The supply chain disruptions have led to limits in production which means higher costs.
- Consumer demand has also driven prices up – the standard supply and demand curve.
- Prices for new and used vehicles has increased and repair costs are also on the rise.
What can you do?
There are several ways you can save money on your insurance. Here are three of them!
Review the values on your property
With costs rising, you must increase the amount of insurance to reflect those costs. Most policies provide replacement cost coverage which means if you replace the property or your contents that have been destroyed you will be compensated accordingly. If you don’t review your values, you may find yourself under-insured. Coinsurance Penalties Yes, you may pay a bit more in premium but you could save thousands of dollars in the event of a claim.
Practice loss prevention.
Having a loss is not fun. It creates stress, loss of income, impacts the time you have to spend on your business. Many of those costs are recovered because of your insurance however you will not be covered for your stress or your time. For more information check out some of the recommendations at the Insurance Bureau of Canada Risk Management and Loss Prevention For more information, please reach out to email@example.com
Save money on your insurance premiums
You will notice that I put this last. Many consumers say they want to save money on their insurance and that becomes their first priority. However, if you haven’t completed steps one and two, you are putting yourself at risk. Speak to me about how implementing loss control measures, increasing deductibles and self-insuring might help you save money on your premiums. Reducing Premiums not Protection
Your insurance protection needs to keep pace with the changes – economic, political, competitive and insurance company results. An annual review with a qualified insurance professional should be part of your business plan.
For more information and a no-obligation, no-pressure review, please reach out. I’m always happy to provide information to help you and your business survive in the event of a loss.
Effective January 1, 2022, the Direct Compensation for Property Damage Regulation will change the way vehicle damages are handled in Alberta. Why is the Government changing auto insurance in Alberta and how does that impact you, the consumer?
Why is the Government changing auto insurance in Alberta?
Auto insurance premiums continue to escalate in Alberta for a number of reasons including:
- Newer model vehicles involved in a collision cost more to repair because of the sophisticated computer systems. A small bump can easily cost $2,000 just to reset the systems.
- Alberta is now the vehicle theft capital of Canada. Although Alberta represents only 12% of the Canadian population, we represent 27% of all vehicles stolen across Canada. In 2019 Ontario logged 23,992 stolen vehicles while Alberta came in at 23,535!
- Alberta has more catastrophe claims than any other province in Canada. That includes flood, fire and hail claims.
The Government of Alberta in conjunction with industry realized that streamlining the claims process could save money and help stabilize or even reduce premiums.
How does the Government changing auto insurance impact you, the consumer?
Effective January 1, 2022, if you are involved in an auto collision, you will deal with your own insurance company with respect to your vehicle damages.
- If you are at fault, you must carry collision coverage to recover your losses, subject to your deductible.
- If you are not-at-fault, DCPD will apply and you will still deal with your own insurance company. All insurers must offer a zero deductible option for DCPD.
- If you choose a deductible, this would help reduce your premium, however the deductible will apply to a claim, and you can’t recover the deductible amount from the at-fault driver.
- Fault and/or the degree of fault is now clearly outlined in the Regulation.
How will this affect my claim and my premium?
Because you are now dealing directly with your own insurance company, your damages will be handled more efficiently and without the complications of dealing with the at-fault driver’s insurance company. It also eliminates the costs involved with subrogation. That’s where insurance companies have the right to recover the vehicle damage costs from the negligent at-fault driver.
It is estimated that 42% of drivers will see a reduction in their premiums, 15% no change and 43% will see an increase of premium. These changes will more accurately reflect the cost to repair your vehicle. Owners of less expensive vehicles that cost less to repair will typically pay less for their insurance. Similarly, owners of more expensive vehicles that cost more to repair may pay more. It’s a fairer system for everyone.
Do you have to do anything with regard to your insurance?
No, as the DCPD legislation is automatically effective January 1, 2022. One word of advice, however. If you do not carry collision coverage in your auto insurance contract and you are at-fault for a collision, you will have to deal with your repairs out of your own pocket, just like you do today.
In Alberta, it is the law that you carry a minimum of $200,000 Third Party Liability, Accident Benefits, and soon DCPD coverage. All other coverage remains optional. However, it is important that you understand what the optional coverage includes and also what extensions of coverage you may need. Always speak to your insurance broker to review the options.
Heather Cournoyer, CIB, CIP, is a seasoned insurance professional specializing in serving the
needs of business in Alberta and BC. She believes that consumers need to understand their
insurance program so that there are no surprises in the event of an unfortunate unforeseen loss.
Contact her at firstname.lastname@example.org or 587-597-5478 for further information.
Many business owners are struggling with decreased revenue and increased costs as a result of COVID. They are asking themselves “Where can I reduce expenses?”
Should I cut staff, reduce wages, downsize my location, reduce marketing and advertising costs? What about insurance? I’ve never had a claim and the premiums keep going up?
When COVID hit in the spring, I was able to save a number of my valued clients money. Many were closed so obviously revenue was down. Because Commercial General Liability premiums are normally rated based on your Gross Revenues and the class of business, reduction in revenue equates to a reduction in risk.
Many business owners are now back in business albeit not at pre-COVID revenue levels. A review of your insurance can help you reduce premiums. Here are some of the things to consider:
- Have your stock levels decreased?
- When was the last time you had a replacement cost appraisal on your building?
- Are there optional add-on coverages that you could do without?
- Are your Gross Sales down considerably?
- Have you changed the use of your automobiles?
- Can you afford higher deductibles?
When and if you do reduce coverage, make sure that you don’t jeopardize your protection. It may be tempting to reduce the amount of coverage on your larger assets. However, remember that most if not all insurance policies have a co-insurance clause. https://heathercournoyer.ca/category/coinsurance/
The few hundred dollars you save could cost you thousands in the event of a claim.
I make it a practice to offer a comprehensive review of any business owners’ insurance at any time. It doesn’t have to be on renewal. In many cases, cancellation fees may outweigh any savings in premium. What I do provide are my recommendation on how to protect yourself by making changes to your existing policy. Because of the value-added provided, many clients choose to utilize my services at the expiry of their insurance.
Reach out anytime! Happy to help.
Heather Cournoyer, CCIB, CIP
In my May article “What’s going on with my Property insurance? Where’s my quotation?” we talked about increased premiums and the number of insurers no longer writing certain classes of business in property insurance.
Is pricing and availability for Liability Insurance any different? No – not really.
There are certain classes of businesses where many insurers who may have offered coverage are lapsing renewals and not offering quotations for new business.
And here’s news hot off the press. Insurance companies are in business to make a profit just like any other business owner. When a certain class of business is not generating enough revenue to pay for the claims, they will stop writing that class. It’s no different than any other business owner who can’t sell a product at a loss.
Is there anything you can do? Yes. Here are a few tips for you and some examples of classes of business that are prone to higher losses.
1. Know your premises. Are there areas that could lead to a slip and fall claim? Stairs, parking lots. Keep maintenance logs that record time, dates, conditions of inspections. Normally you will want to have one person or department responsible and keep those records for up to 5 years!
Lawsuits arising from slip and fall claims continue to increase both in frequency and severity. Building owners and snow removal contractors are feeling the pressure of increased premiums. As recently as six months ago, I was aware of several Lloyd’s Syndicates and a number of domestic insurers who were still providing coverage for snow removal. The premiums were increasing however coverage was still available.
Now there are fewer domestic insurers writing this class and many of the Lloyd’s Syndicates have pulled out as well. This is not the first time and it won’t be the last. In a Canadian Underwriter Article in 2002, https://www.canadianunderwriter.ca/features/snow-no-mercy/ they speak to some of the issues; under-priced premiums, increased claims for slip and falls and loosely-worded contracts.
2. Be careful when preparing or signing any contracts. Are their ways of limiting your liability or perhaps transferring that risk? Are you assuming a risk you shouldn’t be? Does a Hold Harmless Agreement work for or against you?
Recently I went to use the services or firm who wanted me to sign an agreement holding them harmless should they cause damage to my property, whether they were responsible or not? Do you ever read those agreements before signing them? Might be a good idea.
3. Obtain Certificates of Insurance. You want to ensure that all suppliers and sub-contractors carry their own Liability insurance. In some cases, you may wish to explore being an additional insured on their policy.
Whether you are a business owner or homeowner, anyone hired to work on your premises must carry insurance. Let’s take the example of the homeowner who decides to create that awesome “great room”. The contractor removes the bearing wall and without the proper support, the entire structure of the roof is compromised. Without insurance to back up the subsequent property damage, the homeowner can be stuck with a huge repair bill.
Hot Tar Roofing can not only cause fires but also bodily injury as evidenced by an incident at a school where two children were injured by dripping hot tar. https://globalnews.ca/news/4132444/children-injured-hot-tar-school-roof/
Be proactive in protecting yourself from liability claims. Insurance is not a “guaranteed product”. The inability to get affordable insurance coverage could put you out of business.
Heather is a commercial insurance broker with over 35 years of experience and welcomes any questions or comments you may have. Email her at email@example.com