Commercial Insurance

Running a business is no easy feat. Whether you are considering a fresh venture, just stepping into the realm of entrepreneurship, or have been a business owner for an extensive duration, commercial insurance is an indispensable financial commitment that shouldn’t be overlooked. The tumultuous nature of business operations often brings uncertainty, and worrying about the potential devastation caused by unexpected events can be overwhelming. Commercial insurance acts as a safety net, playing a crucial role in safeguarding your company’s financial stability and ensuring peace of mind.

Business owners can shield themselves from various common losses by acquiring commercial insurance. This insurance provides coverage for property damage, business interruption, theft, liability, and worker injury. By selecting the right commercial insurance coverage, entrepreneurs can safeguard their businesses from potentially devastating financial setbacks. Without adequate protection, a severe loss could lead to the downfall of a business, while with the appropriate coverage, recovery can be smoother with minimal disruption to operations and financial stability.

What is the process for acquiring commercial insurance?

Typically a first step to buying commercial insurance for your small business is to reach out to a certified broker-agent who is ideally an expert in commercial insurance. A productive and trustworthy partnership with a dependable and skilled broker-agent is as significant for your business as having a strong accountant, attorney, banker, business coach, or life mentor.

Business contacts can be invaluable when it comes to finding a commercial lines broker-agent. This is especially true if the contacts you have are in a similar industry or a related one. They can provide excellent referrals for your business needs.

If you’re on the lookout for a licensed commercial insurance broker-agent, don’t fret! There are professional associations that specialize in connecting people like you with the right professionals. The West’s Insurance Brokers and Agents (IBA West) and the Western Insurance Agents Association (WIAA Group) are just a couple of examples. They can help connect you with a commercial insurance broker-agent who operates in your local vicinity.

If you are interested in contacting the IBA West or the WIAA Group, please refer to the Resources section of this brochure. Additionally, consulting the insurance category in the local yellow pages can assist you in finding the contact details of broker-agents who specialize in commercial insurance.

Expectations from a commercial insurance broker-agent

Ensure the legitimacy of your chosen broker-agent by confirming their insurance license with the California Department of Insurance (CDI). The CDI serves as the governing body for granting licenses to broker-agents engaging in insurance sales and marketing activities within California. These dedicated individuals are granted a fire and casualty license, authorizing them to facilitate the sale of commercial property and casualty insurance.

In accordance with Section 1725 of the California Insurance Code (CIC), it is necessary for a fire and casualty broker-agent to conspicuously exhibit their license within their office. Moreover, in compliance with CIC 1725.5, a licensee of the CDI must prominently indicate their license number on business cards, written insurance price quotes, and print ads for insurance products disseminated in California.

Once you have completed interviews with multiple broker-agents and verified their license status through the CDI, you will gain a clearer perspective on which broker-agent you prefer to engage in business with. Although the CDI assigns the label of broker-agent as a distinct license designation, brokers and agents display differential approaches when it comes to procuring insurance coverage for customers.

Insurance brokers have the ability to represent numerous insurance companies, and their compensation typically comes directly from you in the form of a broker fee for handling and maintaining your insurance affairs. Conversely, insurance agents are selected by specific insurance companies and receive a commission from said company for placing and managing your insurance policies.

To procure quotes for your commercial insurance business, one can adopt the strategy of reaching out to multiple agents, considering that each agent may be affiliated with just a few insurance companies.

A broker-agent will first arrange a meeting with you to extensively deliberate on the intricacies of your business operations and the vulnerabilities inherent to your industry and business category. Should you already possess business insurance, the broker-agent will request to examine your existing policy. This customary procedure aids in ascertaining the extent of your current coverage.

The broker-agent carefully evaluates the boundaries, foundations, categorizations, exceptions, and enhancements to identify and assess any potential deficiencies, inaccuracies, or redundancies in your existing commercial policy. While there is no need to disclose the specific amounts you have paid for your current or previous business insurance, it is important to openly share any other relevant details that impact your business functioning.

By offering the broker-agent a wealth of reliable information during the application process, you enhance their ability to evaluate your unique insurance requirements. Consequently, they can offer you the finest available choices to fulfill those needs and safeguard your business against unforeseen losses.

Which insurance policies are essential for safeguarding my business?
The broker-agent will offer various commercial insurance options based on the unique risk factors of your business. However, it is important to remember that their recommendations are merely suggestions. Ultimately, it is your duty to carefully consider and select the insurance policy that aligns perfectly with your business strategy.

Establishing a strong bond with a broker-agent is of immense significance when navigating through this pivotal process of decision making. Drawing from their extensive expertise, a seasoned broker-agent has encountered a myriad of businesses akin to yours. As commercial insurance tends to be intricate, it is imperative that you feel at liberty to engage in conversations with your broker-agent, seeking clarification on any ambiguous terms, conditions, or notions.

The broker-agent’s duty entails responding to your inquiries and offering assistance in comprehending the insurance you seek to acquire.

Although it may not be necessary for your company to have every kind of commercial coverage, having a fundamental understanding of the different types of insurance options is highly beneficial. This knowledge will prove valuable as your business grows and evolves, enabling you to make informed decisions when it comes to purchasing the appropriate coverage for new risks. The subsequent categories of commercial insurance encompass a wide range of common exposures encountered in various business operations.

Insurance for properties

Non-residential Real Estate

Interior Waterside

Boiler and Equipment

Felony 

Protection for unexpected events resulting in loss or harm.

Business Vehicle Insurance

Business Liability Insurance

Additional Business Protection

Employee Injury Coverage

Insurance for assets

The realm of commercial insurance can be split into two primary divisions: property insurance and casualty insurance. Property insurance offers protection for assets that may suffer from theft, damage, or annihilation resulting from covered risks. The scope of property insurance encompasses a multitude of available insurance options. Commercial Property, Inland Marine, Boiler and Machinery, and Crime are prevailing forms of coverage within the realm of commercial property insurance. We will now delve into the specific details of each of these property coverage lines.

Business Real Estate

Sections for Coverage, Insurance Limits, and Coinsurance.

Commercial property insurance encompasses three main areas of coverage: the buildings you possess or rent for your business operations, your business personal property, and the personal property belonging to others.

Commercial property insurance is available as a monocline or as a Commercial Package Policy (CPP). The CPP is a comprehensive policy that combines multiple commercial coverages such as commercial auto, commercial property, and general liability.

Coverage for buildings under a commercial policy includes all structures, completed additions, and any other buildings mentioned on the declarations page. Additionally, equipment, machinery, and fixtures that are permanently installed are also covered. The insurance limit for building coverage is determined based on the estimated cost of rebuilding the building and replacing permanently installed equipment, machinery, and fixtures in case of a complete loss.

It is essential to comply with the insurance policy by insuring your buildings at their full value. Failure to do so might result in a monetary penalty known as coinsurance when facing a loss. Familiarize yourself with the coinsurance clause in your commercial property policy and consult your broker-agent for any clarifications or concerns.

Business Personal Property refers to the assets exclusively belonging to your business, including but not limited to furniture, fixtures, machinery, and equipment that are not affixed permanently. This term also encompasses inventory and any other personal property that is owned and utilized within the premises for business purposes.

The possession of belongings belonging to others, colloquially known as Personal Property of Others, pertains to any property held under the responsibility and jurisdiction of your enterprise. The necessity to safeguard the personal belongings of individuals hinges upon the particular kind of business you undertake.

Covered Property Losses

Covered property losses can be determined by the wording, exclusions, and additions present in the policy. When it comes to your property policy, you have the freedom to select the causes of loss that will be covered. The causes of loss can be classified into two primary groups: specified perils and open perils.

Specified Perils insurance offers protection against a defined set of risks you choose to include in your coverage, such as fire, explosion, windstorm, vandalism, and more. You have the option to select either basic specified perils or broad specified perils coverage. The latter expands upon the list of perils covered under the basic option.

Open Perils coverage provides protection for all types of losses, except for those that have been explicitly excluded. Two of the perils typically excluded under open perils coverage are Earth movement, including earthquakes, and floods. Despite offering more extensive coverage, open perils policies tend to be more expensive compared to specified perils policies.

Classification of Appraisals

The inclusion of a provision within commercial property coverage aims to establish the methodology employed for compensating losses. The prevailing approach typically adopted is Actual Cash Value (ACV). In California, this is deemed to equate to Fair Market Value, unless explicitly specified otherwise in the policy. Besides ACV, two additional property valuation techniques exist: agreed value and replacement cost.

Agreed value eliminates any coinsurance penalty and ensures that the entire agreed-upon amount for a covered loss is paid without any deductions. Replacement cost provides coverage for the full amount needed to replace your property with brand new items of similar quality, up to the insurance limits. Similar to ACV, replacement cost is also affected by the coinsurance clause.

Coverage Options and Additions

Commercial property insurance policies offer a range of coverage options beyond the standard property coverages mentioned earlier. These additional coverage forms and endorsements can be tailored to meet the specific needs of a business. The following coverage forms and endorsements are commonly utilized in commercial property insurance policies:

The main time-related coverages that are most frequently encountered are business interruption, where lost business income is replaced following a covered loss. In certain cases, specific employees can be identified, enabling the employer to continue paying their salaries while the business resumes operations after a loss. Additionally, extra expenses can be covered, such as office space, equipment rentals, advertising, or any other reasonably necessary costs to ensure the company can continue functioning following a covered loss. Lastly, loss of rents and rental value coverage addresses the loss of rental income for property owners due to damage or destruction of a building that renders it unsuitable for occupation.

Builder’s Risk

One-year minimum addendum to cover a new building, structure under construction, or an existing structure undergoing additions, alterations, or repairs. This addendum can be canceled on a pro rata basis provided project is completed subject to a short rate penalty. Typically a reporting or renovations form allows coverage to be appropriately adjusted through the project based on the stage of completion.

Fire Legal Liability

Legal liability coverage for your negligent acts and/or omissions resulting in loss or damage to real and personal property of others. There are a few caveats to this including but not limited to:

The loss must be accidental
The coverage has been purchased for tenants in commercial buildings
The loss or damage must be caused by a covered peril, including loss of use
Building Ordinance or Law – This provides coverage if the enforcement of any building, zoning or land use law results in a loss to the undamaged portion of the building, also known as Coverage A; demolition and removal costs of undamaged parts of the structure (Coverage B); or any increased cost of repairs or reconstruction (Coverage C). Replacement cost coverage must be in effect for Coverage C to be applied.
Improvements and Betterments – Usually added by a lien holder. Covers all permanently installed improvements and betterments, which cannot be removed when a tenant vacates the building.
Glass – Basic specified perils for glass coverage include any resulting damage to other property from broken glass due to vandalism and also vandalism to glass building blocks. Broad and specified perils covers $100 per pane of glass up to $500 per occurrence. A glass form must be added for scheduled glass coverage when there is a significant glass exposure to insure.
The glass form includes the number of panes, dimensions, location, lettering, and ornamentation. A separate glass deductible may be scheduled as well.

Peak Season

An endorsement that provides additional limits on personal property inventory during a designated period of time. This is specifically used to cover fluctuating inventory values before and during peak shopping seasons.

Inflation Guard

Automatically adjusts the limits of insurance to keep up with inflation. The adjustment can be tied to the construction cost index in a regional area or a specified percentage per year. This endorsement can be very important in helping to maintain adequate coverage limits, which can protect against potential coinsurance penalties in a property loss.

Time Element

Insurance that covers other losses stemming from a direct loss by a covered peril to business property. Business interruption, extra expense, and loss of rents and rental value are the most common time element coverages. Business interruption coverage replaces lost business income after a covered loss.
Certain key employees can be named, allowing the employer to continue to pay their salaries until the business restarts operations after a loss. Extra expense can pay for office space, equipment rental, advertising, or most costs considered reasonable for keeping the company operating after a covered loss.

Loss of rents and rental value cover loss of rental income to the property owner caused by damage or destruction of a building rendering it unfit for occupancy.

Inland Marine

Inland marine insurance may appear to be associated with transporting goods via boats, if one lacks familiarity with the subject. However, it is crucial to note that this insurance category encompasses various transportation risks, excluding boating transportation which falls under the domain of ocean marine insurance.

In transit, inland marine insurance is a distinctive form of property coverage dedicated to safeguarding your business assets from harm or loss. Not only does it extend protection to your property during transportation, it also assumes responsibility for any liability arising from potential damage or destruction to property under your supervision, custody, or authority during the journey.

Reasons for Loss Covered Or Causes Included in Loss Coverage

Common risks encountered in Inland Marine may comprise of fire, lightning strikes, windstorms, flooding, earthquakes, landslides, theft occurrences, collisions, derailments, the overturning of transporting vehicles, as well as catastrophic bridge failures.

Forms of Insurance Coverage and/or Unique Coverage Options

Inland marine insurance provides extensive coverage options for various transportation risks. It offers a wide range of policies, including protection for accounts receivable, consigned goods, equipment, installations, cargo, trip transit, and important documents. Should you require specific details about a particular business, feel free to reach out to your broker-agent and obtain further information.

Boiler and Machinery

Boiler and machinery insurance, a valuable addition to any insurance policy, offers a significant level of protection. Presently, there are various names by which this insurance is marketed, including systems protector, systems breakdown, and machinery breakdown insurance. By encompassing business property, losses of other assets, and potential legal expenses arising from the malfunction of boilers and machinery, this insurance safeguards against potential setbacks.

Boiler insurance encompasses the expenses related to the examination and frequently the upkeep of boilers. On the other hand, machinery insurance includes various classifications of equipment utilized across retail, office, and manufacturing environments. It also incorporates vital machinery systems found in nearly all commercial structures, such as heating, ventilation, and air conditioning systems.

It is crucial to acknowledge potential risks related to boilers and machinery that might not be covered in commercial property policies. Therefore, it is vital for business owners to identify these risks and have a conversation about them with their broker-agent.

Crime

Crime insurance is a safeguard that shields your business assets, encompassing goods for trade, tangible possessions, cash, and securities. This insurance classification primarily focuses on protecting property. Depending on the specific crime coverage acquired, you may receive coverage against various events that can cause financial loss, such as theft, break-ins, theft by deception, counterfeit activities, and misappropriation of funds.

Additional coverage options can be included depending on specific requirements and vulnerability to potential losses. Examples of these specialized coverage parts encompass open-stock protection for retail businesses, insurance against burglary incidents, safeguarding against robbery specifically in mercantile establishments, insurance coverage against burglary of safes in mercantile premises, comprehensive policy for money and securities, insurance for burglary and robbery incidents in office settings, as well as insurance against burglary and robbery specifically tailored for storekeepers.

Casualty

Casualty insurance is mainly designed to protect individuals, businesses, or organizations from potential liability issues. It specifically covers situations where their actions or lack thereof may lead to bodily injury or property damage to others. Commercial Automobile, Commercial General Liability, Commercial Umbrella, and Workers Compensation stand as the leading categories in casualty insurance when it comes to businesses.

Commercial Automobile

Insurance coverage, the manner in which policies are categorized, and the extent of protection provided by insurance are all important aspects to consider.

Commercial auto insurance is comparable to personal auto insurance, but it necessitates additional coverage options to cater to the intricate nature of business-related automobile risks. In essence, commercial auto insurance shields your company against liability arising from the use of vehicles for business purposes, as well as any potential damage inflicted upon the insured vehicles.

The versatility of a Business Auto Policy (BAP) allows for the inclusion of coverage for various types of automobiles, such as those used for business purposes, personal use, non-owned vehicles, or hired vehicles. These coverages are applied individually to each specifically scheduled automobile. Essentially, each vehicle can be designated separately and assigned its own unique coverage based on the applicable symbols.

The covered auto symbols are known as symbols of distinction and are represented by a numerical system that spans from 1 to 13. Categorization of vehicles on the basis of weight (light, medium, heavy, extra heavy) and purpose (private passenger, service, commercial) creates a comprehensive classification structure. It’s worth noting that, in contrast to personal auto policies that set apart bodily injury and property damage limits using split limits, BAPs commonly opt for a more streamlined approach by implementing a Combined Single Limit (CSL) that encompasses the overall insurance coverage limit.

Insurance coverages now have extended boundaries in terms of their limits, encompassing both overall limits and limits specific to individual incidents. In the realm of commercial automobile insurance, it is typical to find Combined Single Limit (CSL) options ranging from $500,000 to $1,000,000.

Commercial General Liability Coverage

Liability coverage encompasses a crucial principle – its all-inclusive nature. In essence, this implies that the policy, known as the insuring agreement, safeguards against all risks specified within its boundaries, unless specifically exempted. Furthermore, it extends its comprehensive protection to incorporate any additional sites or undertakings that emerge during the policy duration, starting from its commencement and persisting throughout.

The typical insurance policy for businesses is the Commercial General Liability (CGL), covering their commercial liability needs.

A CGL policy comprises three main coverage sections: premises liability, products liability, and completed operations. Premises liability provides coverage for unintentional injuries or property damage caused by conditions on your premises or ongoing operations, regardless of whether they occur on-site or elsewhere. On the other hand, businesses involved in the manufacturing, selling, handling, or distribution of goods or products face the risk of products liability.

Your goods or products pose a risk in terms of potential liability for bodily injury or property damage. However, completed operations protect you from potential liability for bodily injury or property damage that may arise from the work you have finished.

A CGL policy has specific exclusions that are worth noting: purposeful harm, insured contracts, alcohol-related liabilities, workers’ compensation and employer liability claims, pollution incidents, aircraft accidents, automobile mishaps, watercraft incidents, mobile equipment failures, wartime events, care, custody, and control responsibilities, damages to your own work, impaired property issues, sistership liabilities, and failure to fulfill obligations. It is crucial to thoroughly comprehend all the exclusions mentioned in the policy, but it becomes exceptionally vital when dealing with liability coverage.

Should you find yourself unable to comprehend the coverage exclusions or limitations outlined in the CGL policy, it is imperative that you promptly get in touch with your broker-agent. Engage in a thorough and comprehensive conversation until such time that both parties have reached a mutual and satisfactory level of comprehension.

Classification
The classification of a CGL policy depends on the nature of your business. Typically, a specific code or codes are assigned to reflect the common risks associated with your particular type of business. This classification plays a crucial role in determining the premium and is an integral component of the rating formula.

Further information about calculating commercial rating and premium will be provided in subsequent sections of this brochure.

Insurance Limits
The CGL policy ensures that different aspects of liability, such as general liability, fire legal liability, products and completed operations liability, advertising and personal liability, and medical payments, have their own insurance limits. Additionally, there exists an overall limit of liability for general liability, fire legal liability, advertising and personal liability, and medical payments claims.

Once the cumulative claims across all these sectors surpass the designated yearly limit of liability, the policy reaches its maximum capacity and ceases to cover any further claims throughout its term. Moreover, there exists an independent limit of liability specifically allocated to handle claims concerning products and completed operations liability.

Commercial Umbrella

If a liability claim surpasses the overall liability limit, the policy’s coverage is depleted. The acquisition of a commercial umbrella ensures that your business remains protected from assuming responsibility for any additional liability costs. This expansive policy covers any losses that exceed the limits of a standard liability policy, regardless of whether it pertains to commercial automobiles, CGL, workers compensation, or any other liability policy.

If a standard liability policy is not in effect, a commercial umbrella can still offer coverage. Furthermore, commercial umbrellas can fill in the gaps in coverage that may exist under basic liability policies. However, it’s important to note that when a commercial umbrella covers a basic liability loss, it doesn’t immediately cover the entire loss. Instead, there is typically a Self-Insured Retention (SIR) amount, which is commonly set at $10,000 or more.

The concept of Self-Insured Retention (SIR) bears resemblance to a deductible in insurance. In the event of a commercial umbrella loss where there is no active underlying policy, the policyholder is responsible for covering the initial $10,000 of the loss before the umbrella policy kicks in.

Workers Compensation

If an employee experiences an injury or sickness related to their job, workers compensation insurance comes to their aid by offering benefits according to the nature of the ailment. Workers compensation operates on a no-fault principle, implying that an injured employee is not required to establish blame on someone else’s part to be eligible for compensation pertaining to an on-the-job ailment.

As per the regulations delineated in California Labor Code Section 3700, it is mandatory for employers based in California to procure workers compensation insurance from a licensed insurance company or the State Compensation Insurance Fund (State Fund). Alternatively, employers may have the choice to self-insure. To aid in the procurement of workers compensation insurance from a licensed insurance company or to provide insight on the State Fund and self-insurance, your broker-agent can offer invaluable assistance.

Founded by the state legislature, State Fund reigns as the dominant supplier of workers’ compensation insurance in California. Tasked with ensuring equal opportunities for all employers in the state and upholding fair competition, the company serves as an economic force that bolsters stability. By offering reasonably priced workers’ compensation insurance, State Fund aids in mitigating costs while actively promoting safety in Californian workplaces. Moreover, the organization places a strong emphasis on rehabilitating injured workers, thus contributing to their overall recovery.

For any inquiries or assistance, feel free to reach out to the State Fund directly. Information on how to do so can be found in the Resources section of this brochure.

Coverage Sections
Workers compensation insurance is comprised of two distinct coverage segments. Within part one of workers compensation, the insurance provider obliges to expeditiously provide all necessary benefits and reimbursements owed to a worker who has been injured, as dictated by the workers compensation statutes of the state specified on the policy’s declarations page. In part two, known as employers liability, the employer is safeguarded against instances where an employee can file a lawsuit seeking compensation for injuries sustained under common law liability principles (i.e.

Injuries resulting in physical harm, damages to personal relationships, double roles, or legal actions against another party are not included in the workers’ compensation law. Consequently, such injuries are not eligible for compensation under the workers’ compensation part one coverage.

Classification and Rating
Workers compensation insurance is categorized depending on the tasks carried out by your workforce during their tenure at your organization. The Workers Compensation Insurance Rating Bureau (WCIRB) is responsible for establishing and assigning these classifications in most instances. When evaluating your policy, your workers compensation insurance provider must adhere to the classification codes stipulated by the WCIRB in collaboration.

It is not very common for insurance companies to create and propose their own classification system to the CDI. Once a classification is established, the insurance company will assign a rate to it, which plays a crucial role in calculating your policy’s total premium. Additionally, it is the WCIRB’s responsibility to generate the experience modification that should be applied to your policy.

The WCIRB calculates the experience modification by utilizing loss data that your insurance company is obligated to provide on a yearly basis. To assist employers in understanding classification, experience modification, and rating matters, the WCIRB has designated a policyholder ombudsman who can be reached for inquiries. Contact details for the WCIRB and their policyholder ombudsman can be found in the Resources section located at the conclusion of this informational booklet.

Claims
Please be aware that workers compensation claims are not within the CDI’s jurisdiction. If you have any questions or concerns about workers compensation claims, the Division of Workers Compensation under the California Department of Industrial Relations is available to assist you. The contact details for the California Department of Industrial Relations can be found in the “Resources” section of this brochure.

Additionally, it is essential to have open lines of communication with both your broker-agent regarding any general concerns relating to workers’ compensation claims and the claim adjuster specifically assigned to your case by the insurance company for addressing issues pertaining to a particular claim.

Business Owners Policy

A unique insurance solution tailored to small enterprises, the Business Owners Policy (BOP) encompasses property, general liability, and business interruption coverage in a comprehensive commercial package. This policy adheres to precise underwriting criteria, specifying the maximum permissible square footage for office spaces, retail stores, or apartment buildings. Ideal for small ventures rooted in local communities, the BOP is especially suited for businesses like hardware stores, barber shops, gift shops, accounting firms, and less crowded apartment complexes.

Engage in a conversation with your broker-agent regarding the possibility of a business owner’s policy (BOP), as the rates offered for eligible businesses can be extremely competitive.

How Are Commercial Policies Rated, Deductibles Selected, and Premiums Calculated?

The development of a policy’s premium hinges upon the assessment of the policy’s rating. The rating criteria differ depending on the specific type of insurance being obtained. For example, when acquiring commercial property insurance, the formula for determining building ratings takes into account various factors like the size of the property, the type of construction utilized, whether or not there are sprinkler systems in place, and the classification of fire protection measures.

When it comes to acquiring general liability insurance, the rating formula is determined by the general liability classification codes, which can consider factors such as square footage, payroll, or gross sales. These factors are referred to as rating exposures.

After determining the identified rating exposures and selecting the deductibles, which is typically based on the information provided in your application, the premium can be accurately calculated using a straightforward formula: multiplying the rate by the exposure equals the premium. Interestingly, the chosen deductible amount is factored into the rate calculation, resulting in a lower rate when a higher deductible is opted for. Essentially, the higher deductible allows you to take on a greater self-insurance responsibility, leading to a reduction in the premium rate.

Reducing your premium cost can be achieved by opting for higher deductibles, but it is crucial to avoid compromising your company’s financial stability with excessively large deductibles. When acquiring commercial insurance, it is advisable to consult your broker-agent regarding the various deductible options at your disposal.

Your broker-agent can provide you with valuable insights into how your policy premium is calculated using the rating equation, which often incorporates different modification factors such as experience modifications, schedule rating, or judgment rating. This equation can be relatively simple or quite complex, depending on the specific line of insurance. Hence, it is essential to have a detailed discussion with your broker-agent regarding the rating formula applicable to your policy.

Commercial Claims

The multitude of obligations you may face in handling a claim for your business varies depending on the nature of the loss incurred. It remains crucial to bear in mind that your broker-agent is there to provide support and guidance throughout the entire claims procedure. For most instances, your broker-agent will serve as your initial contact when initiating an insurance claim.

When it comes to filing a claim, whether you reach out to your broker-agent or contact the insurance company directly, it is necessary as per the insurance contract to report all claims promptly. This ensures that the insurance company can expedite the claim processing and carry out their investigation swiftly.

Considering the intricate nature of commercial claims, prompt evaluation by the company becomes imperative to prevent any circumstances that might lead to greater loss. This becomes even more critical in liability claims where significant financial stakes are involved. Failure to address claims at an early stage can result in legal disputes from external parties during the claims procedure.

When embarking on litigation, costs can soar and outcomes may result in considerably higher judgments compared to cases managed by skilled claim representatives from the outset. Consequently, it becomes imperative to promptly hand over all claims to either your broker-agent or insurance company as soon as the claim comes to your attention.

Taking on the responsibility of managing your own claim is a breach of your obligations within the insurance agreement and may prove to be financially burdensome in the future.

The impact of claims loss experience on premium costs is a well-known fact among business owners. Adhering to the obligations specified in your contract regarding claims plays a crucial role in minimizing costs for both parties involved. By actively collaborating with your insurance company in this regard, you effectively contribute to reducing claims expenses and consequently enjoy the benefit of lower premium costs.

Contact your broker-agent as soon as you receive your policy to discuss the obligations and responsibilities outlined in the contract. The extent to which you can modify and reduce your premium is directly correlated to the quality of your claims experience.

Deductible
When filing a claim under a commercial policy, the upfront payment known as the deductible is your responsibility before the insurance company steps in. The extent of coverage by your policy and subsequent payment by the insurance company depends on the deductible amount specified. As long as the claim is eligible and you have fulfilled your deductible payment, the insurance company will cover the claim up to the policy’s limits.

The commercial policy uses a deductible called an absolute dollar amount. As the absolute dollar amount (deductible) increases, your premium decreases.

Loss Control

Reducing the occurrence and potential magnitude of claims can be effectively achieved through the implementation of loss prevention and control measures. Many commercial insurance companies possess their own dedicated departments specializing in loss prevention, while others opt for contracted services to fulfill this crucial role. Typically, loss control services are integrated into insurance packages for high-risk and high-premium accounts, forming an integral component of the comprehensive coverage provided.

As a small business owner, there are still valuable loss control methods that you can take advantage of. Your broker-agent has the knowledge to provide tailored recommendations on effectively mitigating the common loss exposures specific to your type of business.

The alliance of the broker-agent, underwriter assigned to your account, claims representative, and loss control representative possesses the power to design a comprehensive loss prevention program that comprises of tailored alterations and guidelines for you to adhere to, thus enhancing workplace safety. These initiatives may encompass an employee safety initiative that integrates both acknowledgment through awards and involvement in suggesting improvements. Engaging your staff in the pursuit of loss control logic aligns with astute business practices. Establishing a secure working atmosphere yields advantages for all parties involved.

Effective implementation of loss control methods ensures enhanced protection for both the public and workers, leading to reduced premium expenses as your loss experience progressively improves.

Issues with getting Commercial Insurance

Securing insurance for your business is usually a smooth process, facilitated by a skilled broker-agent in the standard insurance market. Yet, if your business has encountered considerable losses, is involved in high-risk activities (increasing the likelihood of frequent or severe claims), or is a recently established venture, finding insurance in the regular commercial insurance market might be challenging.

Feel free to consult your broker-agent for a thorough understanding of the various possibilities that exist when it comes to exploring alternative avenues for obtaining and protecting commercial insurance.

Surplus Line Insurance

If you’ve experienced three rejections from a licensed commercial insurance carrier, with documented proof of their refusal to insure, you are then eligible to seek insurance from the surplus line market. Also known as the non-admitted market, surplus line companies cater to businesses struggling to find insurance under the traditional line insurance market.

Despite the absence of CDI licensing, these companies must still undergo a rigorous approval procedure involving the submission of documentation demonstrating their compliance with minimum capital and surplus prerequisites. If the CDI is satisfied with these requirements being met, it may grant approval for these companies to operate within California and subsequently include them in the LESLI list, designated as the List of Eligible Surplus Line Insurers.

To gain entry into a surplus line company, you must exclusively rely on the services of an authorized broker. This broker, required to possess a surplus line license from the CDI, holds the authority to offer surplus line insurance. Prior to procuring insurance from a surplus line insurance company, your designated broker is obligated to furnish you with a disclosure notice in accordance with CIC Section 1764.1. This notice explicitly informs you that the insurance you are seeking is sourced from a surplus line company.

Surplus line insurers are required to adhere to the Fair Claims Settlement Practices Regulations, which oversee their claims handling procedures. However, the jurisdiction of the CDI in overseeing surplus line insurers is restricted. In the unfortunate event of the company’s insolvency, legal recourse through the courts is the only available option. It is important to note that the California Insurance Guarantee Association (CIGA), designed to safeguard claims with admitted insurers, does not provide coverage for surplus line insurers.

The expertise of a surplus line broker lies in their ability to provide valuable insights into the financial stability of the surplus line companies they represent. Alternatively, you can refer to the Resources section of this brochure to access various independent rating organizations specializing in analyzing the solvency of insurance companies.

In addition to assessing the fiscal stability of the surplus line company, it is advisable to ensure that the company holds an approval from the CDI and features on the LESLI list. For confirmation about a surplus line company’s inclusion in the LESLI list, kindly reach out to the CDI using the contact details available in the Talk to Us section at the conclusion of this informational booklet.

California FAIR Plan

Since its inception in 1968, the California FAIR Plan has served as a means for property owners who have struggled to secure insurance in the mainstream market to obtain basic property coverage. It is important to note that, despite being established by the legislature, the California FAIR Plan does not operate as a state agency. Rather, it functions as an association comprised of all licensed property insurers within the state. These insurers participate in the plan based on the proportion of property insurance they underwrite in California.

The purpose of creating the California FAIR Plan was to ensure that property owners have reliable access to property insurance, promoting stability in the industry. The primary focus of the California FAIR Plan lies in serving designated urban areas, inner cities, and regions prone to devastating wildfires. Although its main clientele consists of homeowners, the California FAIR Plan also extends its services to a limited number of commercial property owners.

A commercial property policy with the California FAIR Plan can be easily obtained with the assistance of any broker-agent. Alternatively, you have the option to directly reach out to the California FAIR Plan for an application and informational pamphlet. The contact details can be found in the “Resources” section of this brochure.

Cancelation and Non Renewal of Commercial Insurance Policies: What you should know?

The regulations stated in the insurance code dictate the procedures that commercial insurance companies must adhere to when it comes to canceling or not renewing commercial insurance policies. Different sections of the insurance code specifically address cancellation and nonrenewal for various types of commercial insurance, such as workers compensation, auto, ocean marine, surplus line, reinsurance policies, and others. If you encounter any difficulties with cancellation or nonrenewal notices, it would be beneficial to reach out to the CDI for a comprehensive explanation.

In case you find yourself unsure about your entitlements as per the insurance code, feel free to get in touch with the CDI.

In conclusion, Commercial insurance is inherently intricate, but fear not. With the guidance of a knowledgeable broker-agent, one can navigate the complexities and make wise choices while procuring insurance for their business. This pamphlet serves as a preliminary resource for small business owners delving into the world of commercial insurance policies.

Should you require more detailed explanations on any commercial insurance topic, feel free to reach out to the CDI.