 |
|
Choosing Your Insurance Coverages and BondingA Risk Assessment Overview (From Fundamentals of Power Sweeping.)
A Risk Assessment OverviewMaking sure you have proper insurance coverage is one of the most important aspects of your sweeper business. Being uninsured or underinsured can quickly wipe out a lifetime of hard work. Knowing what kind of insurance to carry and how much of it to purchase is an important aspect of good risk management. In making these determinations, you should consider:
No firm or individual can eliminate or transfer all of the risk faced in today's business world. Some of them obviously must be assumed. The most important factor in determining whether a particular risk should be transferred (to an insurance company) or assumed (by your company) is the maximim potential loss that might result from that particular risk. If you neglect to purchase insurance against severe losses, you'll be risking a lot (the possible loss) for a little (the premiums paid). There should be a reasonable relationship between the cost of transferring the risk (the cost of insurance) and the value that accrues to your company. For example, the additional premium required to eliminate or reduce deductibles in many types of insurance is quite high in relation to the added protection. Perhaps surprisingly, a high probability that a loss will occur does not indicate that the risk should be insured. In fact, the opposite is true: The greater the probability of occurrence, the less appropriate is the purchase of insurance to cover the risk. Losses that occur with relative frequency are predictable and, typically, small. They can be assumed by the business without too much financial difficulty, and are often budgeted as part of the normal cost of doing business. In service industries, probably the best example of such a situation would be bad debt losses. Where there are such probabilities of loss, it is vitally important that appropriate safeguards are taken to prevent the loss before it happens, when you can, and otherwise minimize occurrences. Evaluate Your Options Before BuyingThe key to purchasing business insurance is the same as that of personal insurance: Do not risk more than you can afford to lose. Clearly, the cost of fire, theft or casualty insurance is less important, for example, than the possible size of the loss in virtually all of these cases. To gain a consensus of information for this section, several commercial insurance professionals were interviewed, including ones that specialize in providing coverage for sweepers. As a result, they are more aware of some of the potential 'gray areas' which are sometimes encountered with agents who are not familiar with the industry. Their office will be glad to assist you with information and answers to questions, even if you are not in one of the several western states in which they write coverage.
Although the information to completely cover the topic of insurance would fill a book six inches thick, the following are some of the most important points to remember...
Often the sweeper itself will be covered under what is called an 'inland marine' policy, classified as 'contractor's equipment.' This type of policy is also sometimes called an 'equipment floater.' If coverage is provided under one of the above types of policy, you will want to 'schedule' all of your associated work equipment in addition to the sweeper body. This means simply that you submit a description and serial number for all of your owned work items, such as backpack blowers, pressure washers, steam cleaners, utility trailers, etc.
Not so with a claims made policy. It covers only while in force, and will leave you unprotected if a delayed claim is filed after you switch carriers. Some insurance companies agree to cover previous acts, however, to make it more tempting for you to switch to their policy. If not, an alternative is to buy an 'Extended Reporting Period' rider (known by agents as a 'tail') when you switch from the one type of coverage to the other.
Types of CoverageInsurance planning begins with a consideration of the insurable risks faced by your business. In general, the following risks can be covered by insurance:
Insurance can be purchased to cover almost any risk. The following types of coverage are most commonly considered by sweeper owners:
Although it is wise to be aware of all of these types of coverages, most contractors don't find it cost-effective to insure against each of these pitfalls. Some are not even pertinent unless you have employees. Most sweeping contractors do choose to obtain two basic types of coverage. These are: 
Commercial Auto InsuranceThis covers the sweeper in accidents or mishaps which happen during transit, not usually during sweeping operations. In transit accidents are typically covered under an automobile-type policy, which are designed to cover damage to your vehicle, to other peoples' property and to pedestrians. This type of policy is necessary for accidents that happen during transport of the sweeper from area to area.While you are actually sweeping, typically your General Liability policy is what will cover you in the case of an accident. Because of this split-up of liability, there can be gray areas in coverage. For example, the hypothetical situation where you get into an accident while you are not sweeping, but are going from one area of a client's property to another to empty your hopper into their dumpster. If your policy is unclear, ask your agent to show you how you would be covered in such a situation.
General Liability InsuranceA General Liability policy is designed to take care of damage caused during or at some time after the actual sweeping is done. This type of insurance will...We recommend that you discuss the above information with property managers who want you to carry this type of policy. It may be that they are still unaware of the current cost differential. This can have two positive effects: You will show your knowledge of the industry, for one, and you may also keep from having to take out your own coverage if you sweep their account.
Obtaining CoverageConsider the following when evaluating your business insurance needs... If you are at all unsure of the coverages you need, definitely spend some time with a reliable insurance agent who fully understands your business. For example, a standard fire insurance policy pays the policyholder only for losses that are directly due to fire. Other indirect losses, known as consequential losses, may be even more important to your firm's welfare. To protect yourself against this type of loss, you will need to obtain business-interruption insurance. For example, if your office or sweeper repair/storage facility burned, some examples of your consequential losses could include the following:
Under common law, as well as workers' compensation laws, you as an employer are liable for injury to employees at work, if the injuries were caused by your failure to provide safe tools and working conditions, hire competent fellow employees, or warn employees of an existing danger. In every state, an employer must insure against potential workers' compensation claims. Employee coverage and the extent of the owner's liability vary from state to state. When you shop for insurance you... The best form of general liability insurance for many sweeping contractors consists of... As your business grows, a good business insurance specialist should also be able to assist you in planning an overall risk strategy for your company.
BondingSome property managers may require that your company carry a 'fidelity bond.' This is a type of coverage you buy that insures the honesty of your company's employees. In essence, it will guarantee that repayment will be made in the event that an employee steals something from a customer's property, etc. Fidelity bonds are infrequently required in sweeping; if mandated, the amount of required fidelity coverage will vary, but the cost of this type of policy is relatively inexpensive. |
 © 2005 - 2012
|
Parking Area Sweeping Contents
|