CHEAPEST INSURANCE vs LEAST EXPENSIVE Presented by: Bill Velin

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1 Presented by: Bill Velin

2 1. Nowhere in your business today is there more of a lethal combination of both opportunities to SAVE money on the front end, but also situations that can arise AFTER the purchase that can result in financial ruin. The old adage the cheapest insurance policy is not always the least expensive has NEVER been so true as it is today. The ultra-competitive nature of the insurance marketplace today has led the insurers to offer coverages that were NOT generally offered in the past, but also to add exclusions and limitations that REMOVE coverages you may have thought you had! The smart insurance buyer knows what his policy contains and where to look for coverages he or she knows are needed to protect the business.

3 2. The policies written for todays automotive recycling exposures are particularly tricky to construct and read due to the myriad of exposures found in a typical recycling operation. These exposures can range from dismantling and recycling cars and trucks to the sale of new and used parts, to the sale of used cars and trucks not to mention self-service yards and the crushing and recycling of scrap metal. The coverages for these exposures all have idiosyncrasies that, if not written properly, could mean the difference between a claim being paid or denied outright. Additionally, each of these exposures have different coverages needed including but not limited to Property, General Liability, Auto, and Workers Compensation that, if not covered properly, could contain exclusions or limitations that could render your perceived coverage very restrictive or make it very broad depending on the carrier and the policy forms.

4 For example, just a simple property policy for a typical recycler CAN be a trap even though you might THINK you are covered properly. That is because most property policies are written with a coinsurance clause. If a policy is written, for example with a 90% coinsurance clause, that means you need to insure your property for at least 90% of what it would cost to actually REPLACE IT! So, if you have your building insured for say $900,000 at 90% coinsurance and a fire damages one section of the building and you get an estimate to repair it for $300,000.. At this point the insurance company will come in and do a replacement cost analysis. Lets say they come up with a replacement cost of $1,200,000. In this case, the coinsurance clause will be enforced - since your were required to have your building insured for 90% of what it will cost to replace it, you would have needed to have it covered for $1,080,000. However, you only had it insured for $900,000 83% of what you should have had it insured for. Therefore, in this case, you will receive a check from your insurer for $250,000 (83% of the repair cost) minus your deductible. This is a perfect example of a situation where the cheapest insurance policy is not always the least expensive.

5 3. Another example is in the garage liability section of the policy. Many recyclers perform mechanical repairs on customers vehicles, which means they may have several customers vehicles on their premises at any given time some-times overnight. This creates a bailees exposure for customers cars in your care, custody and control. You buy garagekeepers liability to cover this exposurdirect Primary. Legal Liability ONLY provides coverage for claims covered by your negligence. Do you think a tornado that damages your building would be deemed to be your negligence? Of course not so no coverage under Legal Liability. This WOULD be covered by Direct Primary however another case of the cheapest coverage not being the least expensive.

6 So my point here is that by becoming a smarter insurance buyer, you not only create opportunities to save money when you PURCHASE your insurance, but you could also maximize your coverage you paid for when you DO have a claim. This may be the difference between your business surviving a catastrophe or NOT!

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