FAQ

Is Business Insurance Required by Law?

Business insurance is required by law, but only under certain conditions. The following business insurance is required by law if it is applicable to your situation:

Unemployment insurance: Applies to a business that has employees and may be obligated to pay unemployment insurance taxes under prescribed conditions; if these conditions are applicable to your business, then you must register your business with the state work force’s agency.

Workers compensation insurance: If your business has employees, you are most likely legally obligated to carry workers’ compensation insurance, either on a self-insured basis or through a commercial insurance carrier or a state worker’s compensation program. Workers compensation laws vary by state.

Professional liability insurance: Some states require specified professionals to carry insurance against professional liability.

Disability insurance: Several states require that a business have partial wage replacement insurance coverage for employees eligible for non-work related injury or illness. These states include California, Hawaii, New Jersey, New York, Puerto Rico and Rhode Island.

What Business Insurance Do I Need?

Depending on the nature of your business and any insurance which you are legally obligated to carry, the following types of business insurance should be considered essential:

General liability insurance: Coverage against accidents, injuries and negligence claims

Product liability insurance: Coverage against product defects

Professional liability insurance: Covers professionals against malpractice, negligence or errors

Commercial property insurance: Covers against damage to your business property, such as from fire or a severe storm

Business interruption insurance: Protects your business if you are no longer able to conduct your business because of a loss

Home-based business insurance: Covers against general or professional liability.

Employment practices liability insurance: Coverage against claims for labor violations and harassment.

Cyber liability: Coverage against breaches of privacy and cyber crimes

Because commercial insurance is subject to various exclusions, it needs to be tailored to each business based on risks and exposures. It is critical to work with an agent who will get to know your company and ensure that your coverage adequately protects your business investment.

Can I Get a Policy that Combines Different Types of Insurance?

Yes. A business owner's policy (BOP) or a Commercial Package policy usually include property, casualty, liability, and business interruption coverage.

Does Business Insurance Cover Flood Damage?

Typically, a commercial property insurance policy covers specific types of water damage but excludes flood. If you have a loan on mortgage, the bank may require you to protect their interests in your property with a flood policy. To insure your business against flood damage, your company must carry a separate flood insurance policy or endorsement.

How Much Does Workers Compensation Cost?

Similar to any insurance policy, workers comp rates will vary depending on the unique characteristics of your business and the State your employees are located in. Each state has specific rate structures and classification systems to develop workers compensation insurance quotes. For every $100 of an employee’s salary, a specific cost is assigned to that individual. If that employee is working a particularly dangerous job, the cost of the policy will typically be higher. Some carriers can offer discounts or premium credits if a company has a good loss history and a strong safety program.

My policy is in the “surplus lines”. What does that mean?

When you need insurance, your Agent will try to find you a policy from one of the insurers that is licensed to operate in your state. There are some cases, however, where the licensed insurers will not accept a risk because it does not meet their internally established guidelines. The risk may be too big, too unusual or too risky. In these cases, a specially licensed producer called a surplus line producer gets involved. Their special surplus line license allows them to procure a policy for you from an insurer that is not licensed in your state. Your Agent will work directly with the surplus lines producer to place your insurance in the surplus or non-admitted market.

Since this insurer is not licensed in your state, they are not regulated by your state's Department of Insurance in the same way licensed insurers are regulated. This doesn’t mean there’s no regulation though. Each surplus lines carrier is regulated in the state or country they’re domiciled in. Since they are not strictly regulated by your state, they are generally free from the form or rate regulations imposed on licensed insurers. This gives them the freedom to maintain broader internal guidelines for accepting risks. They have more flexibility to design and price their policies and can, therefore, accept risks that licensed insurers will not.

What can I do to keep my insurance costs under control?

The surest way to control your insurance costs is to use what insurance professionals refer to as "risk management." Using risk management methods, you determine the probability of your business facing a loss, and consider whether or not it needs coverage for that loss. This is a process that large companies use, and one that small businesses can practice to ensure they don't over or under-buy insurance.

Risk management is basically a four-step process:

  1. Identify sources of potential losses. Examples would include casualty and theft losses, fraud and embezzlement, injury claims, etc.
  2. Evaluate the financial risk posed by each exposure. How frequently might the event occur? How severe would its impact be?
  3. Determine how to treat the risk. Can it be eliminated or controlled? Can you transfer the risk to your insurance company?
  4. Monitor the results of your analysis. You may need to review steps 1-3 annually.

By using risk management to avoid or reduce losses, you can lower the number of insurance claims your business may make. This, in turn, lowers your coverage rates, which are based on your claim history. You may also find that your out-of-pocket expenses for uninsured claims are lower.

Somebody is requesting a Certificate of Insurance. What is it and how do I get one?

A Certificate of Insurance acts as proof of coverage. It does not alter or amend your insurance coverage. It is a single-page document that lists the type of coverage you have and other pertinent policy information. You may need to provide your certificate to sign client contracts that require a certain amount and type of liability insurance.

To request a Certificate, please email your request to certificates@fostersullivangroup.com, or use the online “Request a Certificate” link.

Is Business Insurance Tax Deductible?

Yes, because the IRS considers insurance a “cost of doing business”, you can deduct the cost of some of your business insurance premiums from your taxable income. We recommend that you work with a qualified CPA or tax advisor to ensure you fill out the proper paperwork so that you don't pay too much in taxes or end up with fines for not paying enough.

I Hired Contractors to Help with My Business. Are They Covered by My Business Insurance?

Not necessarily, no. Some of your most basic insurance policies, such as General Liability Insurance, may expressly exclude independent contractors. Other policies, such as Workers’ Compensation Insurance, may mandate their inclusion if they don’t already have coverage.

Before a project starts, have your contractors provide you with their Certificate of Liability Insurance. If they don’t have coverage and you still want to hire them, you may be able to add contractors and subcontractors as “Additional Insureds” to your General Liability policy for additional premium.

What do I do if my company has a claim?

CLAIM GUIDELINES

  • Address medical emergencies immediately.
  • Photograph any property damage.
  • Try to prevent further damage to your property.
  • Do not make any repairs to the property before an adjuster has viewed and assessed the damage.
  • Address medical emergencies immediately.
  • Photograph any property damage.
  • Try to prevent further damage to your property.
  • Do not make any repairs to the property before an adjuster has viewed and assessed the damage.

REPORTING YOUR CLAIM

  • Report your claim directly to your insurance carrier. ADD HYPERLINK TO CLAIMS PAGE.
  • Save receipts and invoices for all costs associated with your loss.
  • In the event that you need further assistance or have questions regarding your claim, we are happy to assist you. Call us at 978-686-2266.

How does Foster Sullivan Insurance get paid?

Commission Income - Commission, normally calculated as a percentage of the premium paid to the insurer for the specific policy, is paid to us by the insurer for the distribution and servicing of your insurance policy. Our commission is included in the premium paid by you.

Contingency Income - We also receive income through contingency arrangements with most insurers. They are called “contingent” because to qualify for payment we normally need to meet certain criteria, usually measured on an annual basis. Contingency arrangements vary, but payment under these agreements is normally the result of growing the business by attracting new customers, helping the insurance company gather and assess underwriting information, achieving certain loss or claims results and/or working to renew the policies of existing insureds. There is generally no meaningful method to determine the exact impact that any particular insurance policy has on contingency arrangements; however, brokers tend to receive higher contingency payments when they grow their business and retain clients through better service. In other words, the amount of earned contingency income depends on the overall size and/or profitability of a group of accounts, as opposed to the placement or profitability of any particular insurance policy. For this reason, the individuals involved in placing or servicing insurance are rarely, if ever, compensated directly for the contingent income that we receive.

Supplemental Commissions – Some insurance companies have recently replaced contingent commissions with supplemental commissions. These commissions, in fixed amounts, are established annually in advance based on historical performance measured by criteria comparable to those by which contingent commissions are calculated. We refer to these commissions as guaranteed supplemental commissions, or “GSCs”.

Fees Paid by Clients - On occasion, with more complex business insurance programs and where additional resources, products or services are appropriate, a fee may be negotiated for placement of insurance coverage or additional services. Fees charged for the placement of insurance will be outlined in a proposal and approved, usually in writing, prior to the insurer binding coverage. On occasion, we may receive both commissions and client-paid fees for placing insurance, which generally will be disclosed in writing to you in advance.

Other Compensation and Benefits - We may receive revenue or further benefits from our insurance activities in other ways, including, but not limited to, from insurance company promotional events, payments from insurers for promotional marketing and/or employee training and development, fees or a percentage of the interest paid to us for the administration of premium finance contracts, and fees paid to us for policy and/or claims administration and/or loss control services that we provide

What is the difference between Comprehensive and Collision coverage?

Comprehensive insurance covers damage to your automobile caused by an event other than a collision, such as fire, theft or vandalism. If you hit an animal or if your auto is flooded or stolen, comprehensive coverage applies.

Collision insurance covers damage to your car when you collide with another vehicle or a stationary object, such as a tree or a bridge.

What is the process for buying business insurance?

The buying process typically begins with an in-person meeting between the insurance buyer and the agent. An agent needs to understand your business and risk so that she can identify the best carrier and coverage available. In order to make the meeting more productive, it’s good for the buyer to have a copy of their current policies on hand for the agent to review. By reviewing the current policies, the agent can determine if there are any coverage gaps or retroactive dates that need to be documented. There will be a series of questions you will need to answer regarding the business and you may be asked to complete one or more supplemental applications. Some of the most common questions include:

  • What is your Tax ID?
  • Yearly payroll
  • Number of employees
  • Yearly revenues
  • Questions regarding your building and contents

Carriers typically require 5 years of loss runs in order to provide a quote. Your agent may have you sign a letter authorizing the agency to obtain loss runs on your behalf. The agent may also walk around your building, taking photographs in order to document its condition and any protective safeguards.

Once the necessary information is compiled and the applications completed, the agent will submit your applications to the insurance carriers for quotes. Depending upon the risk, the carrier may want to conduct a “loss control” inspection prior to offering a quote. When the quotes come back from the carrier, which may take anywhere from 1-4 weeks depending on the complexity, your agent will review them to identify the best coverage available at the best premium, which she will present to you at another in-person meeting.

Why can’t more than one agent quote my insurance?

With very few exceptions, most insurance carriers only allow one Agent to quote a policy with them at any given time. Once a carrier accepts a submission from an Agent, all other agents are “blocked” from quoting with that carrier. For example, if ACME Insurance Company has three agents in an area and all three are bidding on the coverage for a client, ACME will only offer a quote to the first agent that submits an application.

Who is a Broker of Record?

A broker of record is the agent designated by the policy holder to represent and manage the policyholder’s insurance policy. The broker of record is allowed to quote policies and receive notices and communications on behalf of the policy holder.

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