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Certificate of Insurance

It is good risk management for customers to check and make sure their vendors have insurance.

Because of this small business owners are often asked to prove to their customers they do indeed have insurance. When customers ask for proof of insurance what they are often asking for is a form called a certificate of insurance. A certificate of insurance gives the basic information of a business insurance policy. It tells things such as the insurance company's name, dates the policy covers, name of the insurance agency who handles the policy and highlights the different types of liability coverages the policy has and the limits or amount of insurance in each of those coverages.

Any type of business can be asked to provide a certificate of insurance. Three areas where you see certificates of insurance most commonly asked for are construction and maintenance contractors, businesses that lease space and consultants. The reason that construction and maintenance contractors are often asked to show certificates of insurance are because their customers want to be sure if they cause injury around their premises or damage around their premises that they are covered. Also, many contractors are acting as subcontractors to other construction and maintenance companies. If their subs cause damage or injury, they want to be sure they have insurance because if they do not, they will then be the responsible ones.

People that lease space are asked for certificates because the owner of the building wants to make sure that if they cause damage to the building, they have insurance to put the building back as it was prior to incident that caused damage. They also want to make sure if the person leasing space is responsible for someone’s injuries while they are visiting the building that they have insurance in place to cover those injuries.

Consultants are asked to provide certificates of insurance in order to meet contract requirements. Often, consultants sign a contract with their customers and in the contract, there is always an insurance section that outlines the required coverages they must have. The best way for that customer to make sure the consultant is meeting the requirements is to ask for a certificate of insurance.

So, the next time you are asked by a customer to show proof of insurance you will understand that you are being asked for a certificate of insurance. Contact your agent and let them know you need a certificate of insurance. Make sure to provide them with the name and address of the company or individual that is asking you for the certificate.

A homeowner policy is made up of two sections, Section 1 Property and Section 2 Liability.  This blog post will focus on Section 1 which outlines the four property coverages provided by a homeowner policy.  Those four coverages are as follows: 

Coverage A Dwelling:  This coverage pertains to the actual house itself.  The limit shown on the policy in this section is the amount of insurance the policy will pay out if the house was totally damaged.  It Is important to understand that this limit of insurance should be based on Reconstruction Costs (the amount it would take to rebuild the house) instead of Market Value (the amount you can buy or sell the house on the real estate market).  For more details on this check out our Reconstruction Cost vs Market Value article.  The dwelling limit of insurance will drive the other three parts of Section 1 Property so for example purposes let's say our Coverage A Dwelling limit is $200,000. Homeowner Insurance: Property Coverage

Coverage B Other Structures:  Other Structures are property located on your land that are not permanently attached to your home.  This would be things like detached garages, fences, sheds, barns and pools to name a few.  Back in the 50's this was a much more common concern to have Other Structures coverage because the norm was to have a detached garage.  Today many garages are part of the house, so this coverage is not as much of a focus on new homes.  The homeowner policy, however, automatically includes this coverage in most cases so even if you do not have a need for it, still it is there.  The limit for this coverage is usually 10% of the dwelling limit so if our Coverage A is limit is $200,000 then our Other Structures limit is $20,000.   

Coverage C Personal Property:  This section covers your contents, your personal belongings inside the house, such as TVs, clothes, furniture, pictures, etc get its coverage.  The important thing is to be sure that you have replacement cost coverage for your Personal Property and not actual cash value.  If you have actual cash value, it means they will consider how old your stuff is and not give you enough money to go out and replace your items without having to go buy used.  If you have replacement cost coverage you can go replace your furniture with new furniture from a store and the policy will reimburse you the full amount.  Coverage C Personal Property is also derived from the Coverage A Dwelling and usually is 70% or 75% of the amount.  This means that if our Dwelling limit is $200,000 then our Personal Property limit would normally be $140,000 or $150,000. 

Coverage D Loss of Use:  Loss of Use means that if you have a claim on your house that makes it so that you cannot live in the house for a period of time, the homeowner policy under this section will help pay for your lodging expenses and some of your eating out expenses (usually 1/3rd of your meal expenses).  This loss of use might be for a few days or a few months depending on the extend of your homes damage.  The limit of coverage given under this section can vary from company to company.  Some companies give a time period they will cover it for (example 2 years) or they will just pay whatever the amount of loss is (actual loss sustained).  Some companies, like how they do it on the Other Structures and Personal Property section, give a percent (usually 10%-20%).

Uninsured MotoristsIn today’s economy where many people are looking to cut any costs they can, the number of drivers driving around without insurance has increased. Also, drivers are driving around with lower liability limits than maybe they had during good economic times. This makes the coverage of uninsured and underinsured motorist even more import. So I thought with this blog post, I would take the opportunity to explain a little bit more about what exactly that coverage does.

Uninsured motorist coverage protects you if you are hit by someone who has no insurance (up to your uninsured motorist limit) where as underinsured motorist protects you if you are hit by someone who has very low limits, limits lower than your own liability limits. Both of these coverages should be included in your typical auto insurance policy.

The best way to explain what these coverages do is to give you an example of situations where this coverage comes into play.

Say that you were to be driving down the road and an individual ran a red light and slammed into you causing you bodily injury. Say that they also didn’t have any insurance to help pay for your $40,000 of medical bills from the resulting injuries. This is where your uninsured motorists coverage on your personal auto policy steps up. Under that coverage they would pay the bills of $40,000 along with other expenses such as lost wages.

Using the same example as above but lets say this time the person who ran the red light does have insurance but they have state minimum limits. The most that will pay out under a state minimum limit policy in Ohio is $25,000 per person. That means you would be left with $15,000 in medical bills plus your lost wages. However, this is where underinsured motorist coverage helps. As long as your auto policy has higher limits than the individuals who hit you, it will pay the extra costs (up to your policy limits).

One last thing to note, on this type of coverage you can purchase even more coverage on an umbrella policy in increments of $1million dollars.

Property InsuranceArctic temperatures can have a dramatic effect on your building — and your livelihood. Regular maintenance and a winter weather plan can help you avoid any negative impact.

Winter storms frequently cause electrical power failure, which in turn can disable your heating system. If this happens, water-filled piping (such as sprinklers, domestic water pipes and heating, ventilation and air conditioning systems) may freeze and rupture. It is important to assess the potential for this hazard.
     1. Inspect all safety shutoff valves and cutoff switches on combustion equipment such as rooftop units, boilers and ovens, including water main shutoffs and main electrical service   disconnects.
     2. Have qualified contractors or staff properly inspect heating, air-handling units and space heaters on at least an annual basis. Assure that space heaters are monitored for fire safety.
     3. Review the location and storage of flammable liquids such as propane, gasoline and diesel fuel. Should your sprinkler system freeze and require that it be disabled, it is recommended to reduce this storage to a minimum to minimize the amount of fuel in a fire.

Without proper winter weather preparation, your business could experience property damage — roof collapse, pipe rupture and more.

There are some strategies you can implement to protect your facility and minimize the impact of severe weather on your business:
     1. Maintain building temperatures above 55 degrees. Plan for maintenance personnel to properly monitor buildings during cold snaps, making more frequent visits to buildings or areas of buildings not normally occupied.
     2. Inspect all areas along the inside and outside perimeters of the building to ensure they are sealed and there are no drafty areas.
     3. Maintain roofs in good condition, including repairing leaks, securing flashing and clearing debris from the roof, roof drains and overflow scuppers.
     4. Check that downspouts are secured to buildings and clear of leaves and debris. If they iced over during a previous winter, consider properly installing heat trace to prevent major icicles and dams.
     5. Make sure all building openings are weather-tight so they do not admit cold air.
     6. Consider how you’ll address removing snow accumulation on your roof. If you or a contractor use a snow blower, make sure the height of the snow blower shave plate is adjusted higher as to not damage the underlying roofing material.

Gusting winds, heavy snow and bitter temperatures can create catastrophic property losses and havoc in your life, but a little preparation can prevent losses, saving you time and money.

Directors and Officers InsEvery corporation relies on the guidance of its board of directors for success. Although lawsuits against larger, publicly traded companies receive the lion’s share of media attention, privately held corporations are also vulnerable to lawsuits by competitors, government agencies, creditors and employees. You can protect your hard-earned success by purchasing directors and officers insurance (D&O) coverage for your company.  Having directors and officers insurance coverage in place can help you attract the talent you need for your board. Directors or officers of privately held companies who do not insist that the company purchase D&O insurance are putting themselves, their spouses and their estates at financial risk. D&O insurance minimizes risk to their personal assets.

Not having D&O coverage can have a serious impact on a company’s viability. Even a financially sound business may have insufficient funds to defend officers and directors in the event of a lawsuit. A D&O policy will take care of defense costs and settlement, even if the company ends up in bankruptcy.
States impose statutory duties on corporate directors. D&O coverage protects the company and its directors from claims arising from alleged or actual failure to uphold those duties.

Directors are under legal obligation to govern their corporation and carry out their responsibilities of office:
- in good faith
- in the best interest of the corporation
- with the care that an ordinary prudent person in a like position would exercise under similar circumstances

Similar duties are imposed on officers of a corporation who may or may not serve on the board. Both directors and officers share the duty to:
- grow the company by prudently managing the affairs of the business
- exercise due diligence that is standard for operating the business
- maintain loyalty to the corporation to avoid conflicts of interest
- obey the corporate charter and state corporate statutes

Policy limits and other factors can vary. Your legal advisers and local independent insurance agent can help you determine how much coverage you need. Premiums are based on the coverage limit requested and other factors such as type of business, financial strength, claims history and deductibles.

Additional coverages, such as employment practices liability, fiduciary liability and cyber liability insurance, may also be available to eligible companies for an additional premium.

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