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Got Mold? Find Out If Your Commercial Insurance Policy Covers It

If there’s one thing that can really wreak havoc on your business property, it’s water. Flooding, heavy rains that come with hurricanes, and burst pipes can all cause serious damage and cost you a lot of money in repairs and lost income. In fact, water damage is the second most common commercial insurance claim type, with an average claim amount of $17,000. But unfortunately, your problems might not be over after the flood waters have receded or after the burst pipe has been repaired. You might be left with a lingering, less noticeable form of damage: mold. Even if you have a solid commercial property policy, you might end up having to foot the bill for this common issue.

Why Is Mold a Problem?

How do you get mold on your property? For most businesses, a mold problem becomes apparent after a water damage-related event, such as flooding. But there doesn’t need to be a catastrophic event that sets off the growth of this fungus. All mold really needs to thrive is four basic things: food, heat, moisture, and oxygen. If mold spores are carried by the wind into your property, and they find an environment with these necessities, they will begin to grow.

Once mold starts to grow somewhere in your workplace, it can really do a lot of damage. Mold clean-up can cost anywhere from $500 on the very lowest end of the scale to $15,000 or even up to $30,000. Having an issue with mold is so problematic because it can grow on virtually any surface, including wood, drywall, paper, and carpet, but will often grow in places that aren’t immediately visible. That means that you might have a problem with mold before you even notice anything. And the real problem? Mold feeds on the material it’s growing on, and could eventually destroy it. In addition, while mold is probably not “toxic” to humans as some fear, it can cause health problems in some after long exposure, which could lead to liability claims from employees or others who spend time in your workplace.

caucasian hand touching a wall with mold all over it — *If you have a leaking pipe that you were unaware of until you finally notice that your drywall is getting moldy and rotting, you will have to pay for the damage yourself,*

Is Mold Covered by Commercial Property Insurance?

The bad news is that most standard commercial property insurance policies do not cover mold damage. Most have “fungus exclusions,” which specifically rule out coverage for loss or damage caused by: any fungus (including mold and mildew), spores, bacteria, dry or wet rot, toxins, scents, or by-products produced or released by fungi. That fairly exhaustive list means that if, for example, you have a leaking pipe that you were unaware of until you finally notice that your drywall is getting moldy and rotting, you will have to pay for the damage yourself, even if you have commercial property insurance that covers water damage.

There are a few exceptions to the mold exclusion. It does not apply to:

Fungus, mold, dry rot, etc that results from fire or lightning
A “specified cause of loss” that results from fungus. This means that if mold causes damage from something that is covered by your policy, then that damage will be covered. This, however, is unlikely to help much, as fungus is not very likely to actually cause things like wind damage, water damage, or vandalism.

What Can You Do?

Your first line of defense against mold is taking all possible measures to prevent it. Remember, mold can’t grow in a dry environment, so take the following steps to reduce your chances of developing a mold problem, as recommended by the Occupational Safety and Health Administration (OSHA):

Regularly inspect the outside of your building, checking all the vents, seals, and drainage areas, and clean up any excess moisture.
Have your ventilation systems, ducts, etc regularly inspected.
Try to reduce moisture in your workplace by using a dehumidifier or increasing ventilation, and always repair any leaks you find.
Have your ventilation systems, ducts, etc regularly inspected.
If you do see mold, clean it up and check for more. Call a professional if you think you’ve got a problem.

Even if you’re very diligent about trying to keep mold at bay, you could still end up with it, especially if your business is in a flood-prone area. While standard commercial insurance property policies don’t usually cover mold, you can purchase an “endorsement” or “rider” to your policy known as Limited Fungus Coverage. With this type of coverage, as long as you take all reasonable measures to save and preserve your property before and after the damage occurs, you will be covered for fungus damage, cleanup, and repair.

For example, let’s say that you find that leaky pipe and mold damage that we mentioned above. If you have Limited Fungus Coverage, your policy will cover the cost of cleaning up the mold, as well as the cost of replacing the damaged drywall. It would even cover replacing any undamaged drywall that needs to be removed to get access to the problem. Your policy should also cover the costs of testing for any residual mold after the damage is cleaned up.

It is important to note, though, that the damage has to be caused by a “specified cause of loss” in order to be covered – in other words, by something that your policy already covers, such as the water damage above. For example, if you do not have specific flood insurance, mold damage caused by flooding may not be covered even with Limited Fungus Coverage.

The ins and outs of what is and what isn’t covered by commercial property insurance can seem daunting, and when looking for a policy, you might feel like more is excluded than is actually covered. But we assure you, commercial property insurance is an extremely necessary thing for any business owner to have – you might just have to tweak your policy a bit to make it work for you. If you’re not sure where to begin, come to EZ – we’ll set you up with your own personal agent who will break everything down for you and find a commercial insurance package that suits your needs and your budget. Let us help you protect the business that you worked so hard to build. To get free commercial insurance quotes, enter your zip code in the bar above or to speak to an agent call 888-615-4893.

What Are Insurance Conditions?

Wouldn’t it be great if insurance was simple, and your policies were written in plain English? An accident wouldn’t be called a “coverage trigger” and you wouldn’t have to scramble to figure out if your policy was “claims-made” or “occurrence based.” Not to mention all that fine print about how flooding is only covered if the water rises up from below as opposed to falling from the sky. Let’s say that you do have to actually file a claim (as many businesses do): you’ll run up against what’s known as “insurance conditions,” which can also seem like they’re written in a language all their own.

These parts of your policy might seem complex, but they are the requirements that need to be met in order for your business to be covered. It’s vital that you have an understanding of what you need to do to have your claim honored, so below are some of the common insurance conditions that you will come across when reviewing your policy.

The Basics

When reading through your commercial insurance contract, you’ll find one or more sections that list insurance conditions. These conditions outline the various obligations that need to be fulfilled in order for you to maintain coverage, and for your insurance company to honor your contract and pay your claims. Some conditions will be things you need to do, while others apply to your insurance company. Generally, insurance conditions include things like:

How to report a loss
How long you have to report a loss
How your insurance company will value your property
How and when a policy can be canceled
How and when your insurance company can choose to not renew your policy

You’ll find these types of conditions in all insurance policies, but if you have a policy that has multiple types of coverage, such as a business owners policy (BOP), each separate part of your policy will have its own set of conditions. You may also have what is known as a Common Policy Conditions form as part of your package, which includes conditions that apply to all parts of your policy.

Some Common Insurance Conditions

While your insurance policy will be tailored to your business, many parts of it will be standardized, including the insurance conditions. The following are examples of common conditions that you will find in most commercial insurance policies:

Duties in the Event of an Occurrence or Loss: This is just a blanket term for the things that you need to do if a loss or a claim occurs. For example, a property or liability policy may have a condition that requires you to notify your insurance company as soon as possible if you need to make a claim. Failure on your part to follow these duties could result in your claim being denied.

Transfer of Rights of Recovery: Also known as the “subrogation clause,” this condition basically states that, if a third party is responsible for the damage or loss to your business, your insurance company has the right to sue that third party to get their money back after they pay out your claim.

Other Insurance: This condition explains what happens in case an occurrence could be covered by another policy that you have. For example, let’s say you lease your business’ building and are required to have both commercial property insurance and commercial liability insurance. If a fire breaks out in your building for which you are responsible, the damage could be covered by both the property insurance and the liability insurance, which might have “Damage to Premises Rented to You” coverage. In this case, it will have to be determined which policy is the primary payer. Depending on the language in your contract, your policy might provide primary, excess, or even no coverage if you have another policy.

Cancellation and Non-Renewal: This condition tells you the circumstances under which your insurance company can cancel your policy before its end date, or choose not to renew your policy. This part of your policy will also let you know your rights when it comes to your insurance company cancelling your policy. For example, your insurance company will have to give you written notification a set amount of time before they cancel, they will need to refund any premium difference on a prorated basis, and they will need to give you an explanation for the cancellation, if you request one.
Transfer of Your Rights and Duties: With this condition, your insurance company is reminding you that your policy is in your name, and belongs to you alone. You cannot transfer your “rights” (for example, the money you are owed for a claim) or your “duties” (for example, your obligation to submit a claim yourself) to someone else without the written consent of your insurance company. For example, you cannot transfer your policy to new owners if you sell your business. In addition, some contractors will suggest that you transfer your rights to make a claim to them so that they can quickly get to work repairing your property – if you want to do this, make sure that you contact your insurance company first to see if they will allow it. If you do it without their permission, they may choose not to renew your policy.
If you provide false information to your insurance company when applying for a policy or when making a claim, then they have a right to deny your claims.
Concealment, Misrepresentation, and Fraud: This is probably one of the easiest conditions to understand: if you provide false information to your insurance company when applying for a policy or when making a claim, then they have a right to deny your claims, and will most likely revoke your coverage.
No Benefit to Bailee: For this condition, you need to know that the term “bailee” here refers to someone who has possession of your property but does not actually own it. “Bailees” cannot file a claim for your property. For example, if you have inventory in a storage unit that is damaged, only you will get paid for the lost inventory, not the owner of the storage unit.

Commercial insurance may seem complicated, but when you break it down, most of it is pretty logical, and plowing through all of the dense language is worth it to protect the business that you’ve been working so hard to build. Remember, EZ is here to help answer any questions that you may have about commercial insurance. We can go over contracts with you, search for the best policies, get you fast, accurate quotes, and sign you up for a great plan – all for free! Don’t go it alone, get started with us today by simply entering your zip code in the bar above, or you can speak to an agent by calling 888-615-4893.

Small Business Owners: These Commercial Insurance Discounts Are Yours for the Taking!

Sometimes it feels like big corporations get all the breaks. They have the money and the leverage to get the best deals on everything. But small businesses like yours are what make up the backbone of our economy. In fact, did you know that over 99% of U.S. companies are considered small businesses, and over 88% have fewer than 20 employees? When you look at those numbers, you realize how important you and your fellow entrepreneurs are. So it stands to reason that you should get some perks, too! Think about that when you are shopping for your commercial insurance policies and remember that it’s not just the big guys who can get discounts. All you need is a little insider knowledge on how to lower your premiums!

How Business Insurance Discounts Work

Before we get to the discounts, let’s quickly review the basics of commercial insurance. If you’re a veteran business owner with a specialized business, you may have multiple types of specialized policies. But if you’re just starting out with your business, then the most important types of policies to be shopping for are commercial liability, commercial property, and workers’ comp (if you have employees).

Liability protects your business against any claims of injury or property damage and will cover legal costs; property insurance covers damages to your building and its contents; workers’ comp is required by your state and will pay for any medical bills if an employee is injured on the job. If you’re shopping for liability and property, it’s worthwhile to look into a Business Owner’s Policy (BOP), which could also save you money (more on that later).

It’s actually fairly easy to get other kinds of discounts on your commercial insurance premiums. But that doesn’t mean that insurance companies are always transparent about what kind of discounts they’re going to give you or how they calculate them. They don’t hand out coupons or give you a discount code, instead they take into account multiple factors (such as how safe and well-kept your business is) and then basically do a giant math problem to come up with your premium. If you know what kind of things they’re looking for when checking out your business, then you should be able to find at least several different ways to knock some money off of your premiums.

What Insurance Companies Want

As we have pointed out, insurance companies usually do not advertise or even make clear what discounts they offer, but some ways to save are more clear-cut than others. For example, you may be able to get discounts for:

caucasian hand holding a blue debit card. — *Some carriers will knock a bit of money off of your premiums if you pay annually as opposed to monthly.*

Bundling – If you’re shopping for more than one policy or if you are insuring multiple properties, see if the same insurer will cover it all and throw in an extra discount. As mentioned earlier, be sure to ask them about policies like BOPs.

Being loyal – If you’ve had insurance policies before, ask your insurance carrier if they’ll give you some money off for sticking with them. You can also refer friends and family to your insurer – they might end up rewarding your good deed!

Paying up front – Some carriers will knock a bit of money off of your premiums if you pay annually as opposed to monthly.

Being part of a group – Some business insurers specialize in insuring certain types of businesses, so shop around and see if you can find one that offers special group rates for your type of business.

The last way to get money off of your premiums is definitely less clear-cut, and more about how insurance companies view your business. This type of discount falls under the category of safety. Remember, insurance is all about risk, and if you can show your carrier that you’re minimizing risk every chance you get, then they’re going to charge you less. Here are some examples of ways to show insurance companies you’re serious about taking care of your business and keeping it safe:

Install an alarm system. Burglary is actually the number one business insurance claim, so it’s best to show that you’re being proactive, especially if you’re in a city.

Be fire safe. Fire is another big risk for businesses, so insurers will evaluate how flammable your property and inventory are. You may not be able to do much about that, but taking proper storage and layout precautions, as well as making sure you have working, visible fire extinguishers and a clear fire safety plan mapped out can work wonders.

Be prepared for natural disasters. If your business is an area prone to any type of natural disaster, it is vital that you have ways to reinforce your building, such as metal shutters.

Keep your servers secure. Hacking is always a risk to your business and your customers, so don’t skimp on cyber security measures like a VPN.

Minimize risk of employee injury. Workers’ comp is expensive, but necessary. Try to bring the cost down by showing you have proper safety equipment if necessary, as well as clear cut safety guidelines and evacuation plans. It may be worth your while to consult with the Occupational Safety and Health Administration (OSHA) about writing a safety manual for your business. And remember, even office jobs have risks: workers’ comp covers things like repetitive strain injuries, so consider streamlining your office with ergonomic desks and keyboards.

Minimize risk of customer injury. Even if you’re not offering something risky like skydiving lessons, you still need to make sure your customers are as protected as possible. For example, food service businesses need to show insurers they are strict about cleanliness and staff training. All businesses need to have clear safety signs for wet floors or easily missed steps, and need to do their housekeeping! Which brings us to…
Maintain your property. You may not think that a fresh coat of paint or some nice landscaping have much to do with your insurance, but they go a long way in showing the adjuster who inspects your property that you care about maintenance. And that just may get you a few dollars back in your pocket each month.

The Best Way to Get Your Discounts

So there you go. By evaluating your workplace and taking certain precautions – or just by sprucing things up a bit! – you could be looking at lower insurance premiums. But the best way to make sure you’re maximizing your potential for discounts? Speak with an insurance agent.

With EZ, you will work with one and only agent who will take the time to get to know you and your business, will make suggestions, and will get right to comparing quotes on all the available policies in your area. They know that ins and outs of how insurance discounts work and will make sure you get the best policies at the best price. Now that you are armed with all of this insider knowledge, get to work on getting those discounts – and get started with us by simply entering your zip code in the bar above, by calling 888-615-4893 to speak directly with an agent.

Business Owners: Don’t Make These Mistakes When Filing Your Insurance Claim!

We hope it never happens to you, but there might come a time when your business experiences an accident or loss. An unexpected storm could rip through your town and knock a tree onto your building, or a wet floor could send a customer to the hospital. But don’t worry, that’s why you have your commercial insurance policies! Having these policies in place will help you pick up the pieces, or make sure a lawsuit won’t shut your doors forever. It’s your insurance company’s job to pay out in these cases, but remember: it’s your job to file the claim, and make sure it’s filed properly. The last thing you want to do is make a mistake and have your claim delayed, or even denied. Avoid these 8 common mistakes so you can get your business up and running again!

1. Not Fully Understanding Your Policy

Having the right insurance policies for your business is great, but you also need to take the time to fully read and understand what is – and is not – covered in your policy. Many commercial insurance policies have specific exclusions, such as for flooding, and they are often worded in very complicated ways. Read everything in your policy (including the endorsements, which may add or remove coverage for certain things) when you purchase it, and re-read it before you file a claim. If you’re having trouble understanding it, one of EZ’s agents can go over it with you. It’s better to be armed with knowledge when you’re dealing with your insurance company!

2. Waiting to Notify Your Insurance Company

Things might get a little hectic after your business is hit with damage or a loss, but one of the first things you need to do is notify your insurance company. When reading your contract, you’ll probably find that your insurance company actually requires you to file your claim as soon as possible. Any unnecessary delays in contacting them could mean a claim denial. Delays could also signal to your insurance company that the loss you experienced is not as bad as you say it is. Don’t feel like you need to do everything immediately, but it won’t take long to pick up the phone and contact your insurer.

3. Getting Rid of Damaged Property

Disasters like fire can devastate a business, and your first instinct might be to start clearing up and moving on. But hard as it may be, you just have to leave everything as is until the adjuster can come. Most commercial property insurance policies require you to keep damaged property so that the adjuster can inspect it; you also need to keep any undamaged property in place so they can make a full assessment of the evidence.

4. Not Documenting Everything

You’re upset. You’ve just been burgled or a hurricane has destroyed half your inventory. But you need to put on your business owner’s hat, take a deep breath, and document everything. Your insurance company will need you to create a complete inventory of damaged and undamaged property, along with the value of everything listed. They’ll also need proof of loss, so pull out your phone and get photos or video that you can use to corroborate your claim.

Documenting your losses is extremely important – but don’t stop there. Keep records of every communication you have with your insurance company. Photocopy any papers you send to them, and write down the names and numbers of anybody you speak with. When it comes to insurance claims, you can never be too thorough.

5. Keeping the Police Out of It

Even if you’re willing to recoup your losses due to a burglary or theft from your insurance company and move on, that’s unfortunately not an option. If the law has been broken, your insurance company requires that you file a police report before you can file a claim. Think of it as a way to provide extra proof for your claim.

6. Admitting You Were at Fault

If you ever drove your parents’ car as a teenager, you probably remember them telling you not to admit fault if you were ever in an accident. The same goes for commercial insurance claims. Your instinct may be to take responsibility for an accident that injures someone or damages property, but hold off. You might not know all the details or the true cause of the accident. In addition, in most insurance contracts it’s a big no-no to take on any liability without your company’s consent. What feels like the right thing to you might result in your claim being denied.

7. Paying Claims Out-of-Pocket

Just as you should not admit fault if an accident occurs at your business, you should also not offer to pay an injured party without going through the insurance claims process. It may be tempting to leave your insurance out of the situation and write a check to a customer who slipped and sustained a minor injury, but remember – you’re not a doctor! Their injuries might end up being worse than they first appeared, and then you could be liable for a huge bill. Your insurance contract prohibits you from paying for anything other than first aid without their consent, so any claims you file at this point will be denied. You have insurance for a reason – let them handle it!

8. Not Questioning or Following Up with Your Insurer

Never take the first offer, right? Or, in the case of your insurance claim, don’t feel like your adjuster’s valuation is the final verdict. Don’t be afraid to get your own realistic estimates for the value of your property and the costs of any damages. If you disagree with the adjuster’s assessment, call your insurance company, or speak to your agent – EZ agents are always ready, willing, and able to discuss any questions you might have.

You should also not be afraid to follow up with your adjuster. Sure, they’re busy, but if you feel like you’ve been put on the backburner, then contact them again. You absolutely have the right to ask them for a progress report – the money you’re waiting on could make or break your business!

Having insurance means peace of mind, but it doesn’t mean you can sit back and relax – you’re the boss after all! If the worst does happen, remember to read, review, and document everything, as well as to follow your insurance contract to the letter. THEN you can get back to doing what you do best – running your business. And remember, insurance is what WE do best, so come to EZ.Insure to have your questions answered, or to review your commercial insurance policies. Our agents have the answers and can get you instant quotes, for free. To get started simply enter your zip code in the bar above, or you can speak to an agent by calling 888-615-4893.

How Much Is Your Business REALLY Worth?

There’s a lot to keep on top of when you’re running a small business, especially if that business is growing. Growth is great, right? If you’re not moving forward, you’re just standing still, so embrace all of the changes that come your way. But as your business grows and changes, don’t forget that your insurance policies need to keep up.

If you haven’t reviewed your commercial property insurance (or your business owner’s policy) lately, then it’s time to take a good look at whether it’s covering the full value of your property and business belongings. Doing a thorough valuation of your business and your insurance options may take some time and effort, but with a few helpful tips, you can get it done and have peace of mind knowing that you’re fully insured!

What You’re Valuing

conference room with table and chairs and a laptop on the table. — *Anything that you own in relation to your business is considered business personal property.*

First, let’s take a look at what your commercial property insurance actually covers, and what you need to determine the value of. The term “property” in the insurance industry doesn’t just refer to the land that your business sits on, it refers to anything of value that would need to be repaired or replaced in case of a disaster, like fire, theft, or extreme weather. Property can be broken down into two categories:

Real property – refers to everything that is permanent about your business: the building, outdoor fixtures, and any permanent equipment that cannot be moved.

Business personal property – anything that you own in relation to your business and that would not be considered real property. This can include computers, furniture, inventory, small kitchen equipment, or anything that can be easily moved.

How to Value Your Property

Next, it’s time to think about how much your property is worth. This shouldn’t be overly complicated, but it does require a little work on your part.

For real property: As we will see later, valuing your building does not mean simply telling your insurance company how much you paid for it, or how much you would sell it for. The best way to value your real property is to contact a local contractor and discuss the size and function of your space. They will be able to give you a more accurate estimate based on location and function. Don’t forget to include any special features that might add to the cost of rebuilding. Remember, too, that you should revisit this figure every year, especially if you are growing and adding on to your business!

For business personal property: This is when being a well-organized business owner pays off. As long as you’ve kept records and receipts of your purchases and expenses, you should be able to estimate the cost of replacing things like electronics, furniture, and equipment. If you have stock, take inventory and estimate the value of it on any given week. Get any antiques, artwork, or hard-to-replace items appraised and add them into your valuation.

Your Valuation Options

computer screen with charts — *You can use the market value of your property to help you decide which valuation options are best for you.*

Next, you need to consider not just what is being insured, but how. You might think, you paid a certain amount for your building or equipment, and that’s how much it’s insured for, right? But that isn’t always the case. There are actually four different ways of valuing property:

Market value – This is what most people think of when they think of the value of their property. Simply put, market value refers to how much your property would sell for if you sold it today. Confusingly, insurance companies usually do not use this as an option for valuing your business, but you can use it to help you decide which of the following valuation options are best for you.

Actual cash value (ACV) – When using this method to value your property, insurance companies will basically look at how much you paid for the property, then take into account depreciation for wear and tear. For example, if you bought your business’ computers 4 years ago for $1,000, you would not get that full amount back with this method; your claim would take into account their age and the amount they have been used. These types of policies generally have lower premiums but you will also recoup less of your money if you make a claim.
Replacement cost – This is the most popular type of property insurance valuation method. It covers the cost of rebuilding your building or replacing your property with materials or items of the same value. Depreciation is not taken into account, so you’ll get more coverage, but will also pay more up-front in premiums. In some cases, the extra money might be worth it; the relatively small amount you save on premiums might not compare with the cost of a disaster.
Functional replacement cost – Although not used as often, this method makes sense for businesses that are housed in old buildings. It allows you to rebuild with materials that are “functionally” equivalent to the antique or outdated materials in your old building. You might not be able to recoup your antique fixtures, but you would be able to get more affordable premiums and a payout that does not take into account depreciation.

Business Property Valuation in Action

Finally, let’s look at how a claim might work in the real world, using a real property example. Let’s say there is a fire in your building, which is an old structure built of stone, with marble in the interior. It would cost $1 million dollars to completely rebuild it using the same materials.

If your building is totally destroyed, and you had a replacement cost policy, you would receive $1 million to rebuild. But if you had an ACV policy, you might have insured it for $700,000, so that is how much you would get to rebuild. You would also have been paying less in premiums up to this point.
If your building is partially destroyed, and only the roof needs to be replaced, you would make a claim for only the roof. If it will cost $50,000 to repair and you have a replacement cost policy, you would get $50,000. If you have an ACV policy, which takes into account depreciation, the amount you would get would depend on how old the roof was. If it was brand new, you might get the full $50,000; if it was 50 years old and ready to collapse, you’d probably get very little.

Valuing your property and figuring out the best way to insure it may seem like a daunting task, but it’s necessary for protecting everything you’ve been working for. Not every part of owning a business is fun and games, right? Keep a close eye on your commercial policies and they’ll be there for you in case of bad times. And if you need a partner in preparing for rainy days, EZ is here to answer your insurance questions and provide you with instant, accurate quotes when you need them. We’ll set you up with your own personal agent who can guide you through all the ins and outs of commercial insurance. Your business is worth it! To get started with us, simply enter your zip code in the bar above, or you can speak to an agent by calling 888-615-4893.

Claims-made vs. Occurrence Policies: What’s the Difference?

Claims-made. Occurrence policy. Coverage trigger. It can feel like commercial insurance has its own foreign language sometimes. But don’t worry, all of these terms can be broken down into plain English: claims-made and occurrence policies are simply the names for the two basic types of commercial liability policies. The difference between them is how their coverage is activated, or triggered – in each of these policies, the timing of the “triggering” event is key. Let’s take a closer look at what is meant by coverage trigger, how these policies work, and which type you can expect to be offered when choosing a policy.

Coverage Triggers

As you already know, purchasing commercial liability insurance alone or as part of business owner’s policy is an important part of protecting your business. This type of policy covers you for any damages that you are legally required to pay following an occurrence that causes bodily injury or property damage. The word “occurrence” here actually has a definition: according to the International Organization for Standardization (ISO), an occurrence is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” In plain English, what all of this means is that you pay your premium, and, in exchange, your insurance company takes on the risk. They pay any claims made against you, whether they be for a customer slipping on a wet floor, a pipe bursting due to your faulty plumbing work, or any other accident that leads to damages.

The occurrence described above is what leads to the claim being made against you – or “triggers” your coverage – which is why it’s called a coverage trigger or trigger of coverage. This is not to be confused with another term you may have heard: conditions of coverage. Conditions of coverage are the actual steps you have to take after the coverage trigger occurs, including notifying your insurance company of the claim and providing any evidence or documentation required.

Occurrence Policies

Now that we’ve gone over what a coverage trigger actually is, we can look at how the timing of the trigger makes all the difference in the two different types of liability policies. What matters in a commercial liability policy is when the occurrence happened versus when the claim was made. An occurrence policy is triggered by an injury or accident that takes place during a specific coverage period. It does not matter when the claim is made, just when the occurrence happened.

*Damage that triggers a claim that took place within the policy period would be covered under occurrence claim policy, even if the claim is after the policy has ended.*

For example, let’s say a plumber buys a liability policy on an occurrence basis, with an effective policy date from January 1, 2019 – December 31, 2019 and a claim is reported against them in February 2020, for faulty work that they did in March 2019. This claim would be covered under their policy, because the damage that triggered the claim took place within the policy period. It would not matter if the claim was reported after December 31, 2019.

These types of policies are particularly useful for covering things like product liability, environmental liability, occupational diseases, or other things that can have a longer reporting or settlement time.

Claims-made Policies

*Claims-made policy will only cover incidents reported during the active policy period and after the policy’s start date.*

While most liability policies purchased by small business owners are occurrence policies, there are some types of policies, like errors and omissions, which are usually written as claims-made. Some small business owners, however, choose to buy claims-made policies simply because they are usually the cheaper of the two. This is because they tend to provide less coverage; occurrence policies are more expensive because there isn’t a time limit on when a claim can be reported and still be covered. This is not the case with claims-made policies.

When a policy is written as claims-made, it means that the policy will only cover incidents reported during the active policy period and after the policy’s start date, or retroactive start date, if that applies. A retroactive start date is the specific date the policy’s coverage begins. This is usually the policy’s effective date, or a date in the past that you and your insurer agree upon. If you’re shopping for a claims-made policy, it’s best to look for one without a retroactive date, so that you have a longer range of coverage. In addition, if you’re looking for more coverage with a claims-made policy, you can add a provision known as an extended reporting period, or “tail coverage,” to your policy to extend the amount of time you can report a claim after the policy’s cancellation.

An example of how claims-made policies work is as follows: the plumber from above purchases a claims-made liability policy with the same effective date of January 1, 2019 – December 31, 2019, but because it is claims-made it has a retroactive start date of October 1, 2018. If the plumber causes the damage on November 10, 2018 and the claim is made on March 2, 2019, it will be covered because it occurred after the retroactive date and was reported during the policy period. If the work had been done prior to October 1, 2018 or if the claim had been reported after December 31, 2019, it would not have been covered.

We get it, there’s a lot to learn when you’re shopping for commercial insurance. But the time spent researching is worth it: finding the right kind of insurance for your business can mean the difference between protecting it and losing everything you’ve worked so hard for. But remember, you don’t have to go it alone – EZ.Insure is here to help. We’re ready to set you up with your own personal agent who will answer all your questions, walk you through the process, and sign you up when you’re ready – all for free. Get started with us today by entering your zip code in the bar above, or you can speak to an agent by calling 888-615-4893.

Tag: commercial insurance help