Monthly Archives: December 2017

Earthquakes Can Have You Shaking in Your Shoes

Those who have gone through an earthquake know these natural catastrophes can leave severe devastation — destroying buildings, homes, vehicles and possessions.

From the business insurance standpoint, earthquakes represent the worst kind of risk — the one that could happen “someday.” Even high-risk areas along fault zones can go decades with no activity. Out of sight, out of mind.

Commercial earthquake insurance can be very important in helping your clients impacted by earthquakes pick up the pieces.

earthquakeAnd yet, despite the growing frequency of earthquakes and tremors, because of the nature of the risk, most commercial property policies exclude coverage for earthquake damage (including earthquake sprinkler damage, etc.). Coverage is usually only available for earthquake damage in the form of a supplemental policy.

And, while the USGS is cautious about making predictions, if you have any doubt that earthquake activity is on the rise, just run a Google search. There has been news coverage of quakes in California, Oklahoma, Oregon and Nevada (to name a few) in the past couple of months alone, not to mention the study that was recently released, confirming that the New Madrid fault zone, one thought to be dying, is active and could “spawn” future large earthquakes. The New Madrid spans 150 miles, crossing parts of Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

Earthquakes can strike suddenly, without warning and can occur at any time, and in any season of the year. That’s why UIG recommends that regardless of location, at some point, you should highlight earthquake insurance awareness for your clients, including the options available, the amounts needed and timeframes that claims can be made in.

The Earthquake Endorsement

Earthquake coverage can be purchased as an endorsement to the standard commercial policy. The endorsement covers damage caused by shaking during an earthquake including structural building damages and the damage to property, contents, business income or other scheduled limits.

As a Separate Policy

Earthquake insurance can be purchased as a standalone policy. Many standard markets either do not offer earthquake as a peril or only offer low limits. A standalone or mono-line earthquake policy provides coverage for this gap.

Costs and Deductible

Earthquake insurance is purchased as a premium per $1,000 of valuation. Premiums vary per location with the western United States having premiums ten times as high as those in the eastern United States. The premiums also take into account age of the buildings and types of structure with wood frame buildings being the cheapest to insure.

Earthquake insurance carries a percentage deductible ranging from 10 percent to 15 percent. This means if the business suffers an earthquake loss of $1 million, the business would be responsible for the first $100,000 to $150,000. A separate deductible buy back product is available for insureds that wish to reduce the deductible exposure on larger properties.

Other Business Policies That Cover Earthquake Losses

Other common business insurance policies may cover earthquake losses without additional endorsement:

  • Commercial Auto — Most standard commercial auto policies cover loss or damage from earthquakes. This can include damage from falling debris, fire, or other events.
  • Workers’ Compensation — Injury to employees at work by earthquake effects is a covered loss under workers’ compensation insurance.

Business Interruption — Some business interruption policies do not exclude earthquakes as covered events, but check with your insurance professional.

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Deductible Buy Back For Wind, Earthquake, Flood and Other Perils

At a time when policyholders are facing higher premiums and a greater probability of hurricane and wind damage, agents need as many tools as possible to help ensure they provide adequate coverage for their clients.

Wind

Higher property values and higher wind deductibles are increasing the overall exposure for insureds, especially in coastal, hurricane prone states. In today’s litigious environment, it is important to regularly advise clients of all the optional coverage available to reduce the potential for financial loss in the event of a storm. The same can be said in earthquake or flood prone areas.

Deductible buy back (DBB) insurance is one product that you can offer to your clients, which provides an option for them to reduce their financial burden following a loss by lowering their deductible under a separate policy.

For example, on a $1,000,000 property, a five percent wind deductible equals $50,000. Let’s say your client would like to reduce that to a one percent wind deductible. Under a wind buy-back policy, the insured, under a separate policy, could cover four percent of the five percent deductible. Instead of the insured having a $50,000 out of pocket exposure it would now be $10,000.

The price of a deductible buy-back policy varies greatly based on the specific COPE information and perils covered. That being said, pricing can range from four percent — 12.5 percent of the DBB policy limit.

In the above example ($40,000 DBB limit), the four percent rate would equate to a premium of $1,600 whereas the 12.5 percent rate would equate to a premium of $5,000.

This product is an excellent solution to reduce out of pocket costs for property owners that may need to comply with mortgage or loan terms.

To find out what UIG can do you for you, please download our Deductible Buy Back app. You can return the completed form to info@uigusa.com.

We’ve also started a Young Agent’s Resource Group on LinkedIn. Whether you’re new to insurance or are just looking for a few new ideas, be sure to connect with us!

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Fido May be Part of the Family, but is He Covered?

While your clients may consider dogs to be a part of the family (at UIG, we certainly consider Luigi part of ours) as an insurance agent, it’s your job to be wary of them —especially if the dog’s breed happens to appear on the “aggressive,” “dangerous” or “bad dog” lists that are generally prohibited under homeowners insurance policies.

In 2016 alone, dog bites and other dog-related injuries accounted for more than one-third of all homeowners liability claim dollars, costing more than $600 million, according to the Insurance Information Institute (I.I.I.) and State Farmthe largest writer of homeowners insurance in the United States.

I.I.I.’s analysis of homeowners insurance data found that the number of dog bite claims nationwide increased to 18,123 in 2016, compared to 15,352 in 2015 — an 18 percent increase. The average cost per claim, however, decreased by more than 10 percent. The average cost paid out for dog bite claims was $33,230 in 2016, I.I.I. found, compared with $37,214 in 2015 and $32,072 in 2014.

Being in the business of mitigating risk, it becomes easy to understand why certain dog breeds are widely considered to be a financial risk to insurers, making them hard to cover and usually at a higher premium if coverage is provided at all.

The specific dog breeds prohibited by insurers vary from company to company, but at least five appear on every list, including both purebreds and mixed breeds:

  • Pit Bull
  • Rottweiler
  • Doberman
  • Presa Canario
  • Chow Chow

Statistics show these are among the most aggressive breeds associated reported attacks, some of which are fatal. According to the Centre for Disease Control, dog attacks resulted in 279 human deaths in the U.S. over a 20-year period. Pit Bulls and Rottweilers accounted for more than half of those deaths.

While owners of these types of dogs may feel discriminated against, it’s good to note that the use of such lists is not acceptable everywhere. In the U.S., Michigan and Pennsylvania have restricted the use of dog breed profiling by insurance companies. Ten other states have pending legislation that would similarly prohibit companies to deny insurance to someone based only on the breed of dog owned by their household. These laws propose that insurance companies should only be allowed to deny or revoke a policy or to increase the premium, based on the risk associated with a specifically named dog. That means that the individual dog must have a known history of being aggressive or must have been officially designated as dangerous.

To find out more about dog breed coverages in your area, drop us a line at info@uigusa.com or call 800.385.9978.

 

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