That Will NEVER Happen to My Company!

I can't count how many times I've sat down with C.E.O.'s, V.P.'s and C.F.O.'s for them to tell me that a specific claim instance would never happen to them.  Well, news flash...it has happened to some of my clients!  And no matter how many controls, safety measures and positive company cultures you may boast, it can happen to your company.   Recently we stressed the importance to a company for crime coverage.  The owner was adamant that this would never happen to his company.  He denied the coverage and he is now dealing with over a $350,000 financial loss due to an employee stealing from the company.


As an insurance advisor, it is my job to tell you about all the things that can happen and prepare the business for financial hardship or simple inconvenience in wake of a claim.  Are some instances scary and turn into disasters?  Yes.  Is that every claim?  No.  You definitely don't have to over-insure in every instance.  I am not a fan of spending money carelessly.  But don't go the ignorant route and assume that claims you hear about on television or in the news could never happen to your company.


When I am developing an insurance program for my insured's, one of my client's primary concerns is the deductible or self insured retention amount.  As this should be a concern, some of the less experienced clients tend to associate the deductible, whether high or low, with the premium amount.  The higher the deductible the lower the premium dips.  The lower the deductible, the higher the premium rises.

As a rule of thumb, is this correct?  For the most part yes.  However, what does it mean to take on a bigger deductible vs. a smaller one?  Some business owners only care about the bottom line and never think that anything will ever happen to their business.  These are the businesses that are O.K. with taking a bigger deductible or S.I.R. risk, even if it isn't the smartest thing to do on the books.

My advice is to seriously evaluate financially what your company can afford in case of a claim where a deductible or S.I.R. needs to be paid.  Whether that be a $2,500 deductible or a $50,000 S.I.R., pay attention to these key insurance factors and not just the bottom line.  Is this deductible per claim or per occurrence?  A per claim deductible could mean you are paying out multiple deductibles for one particular event or loss which could add up quickly.

Have more questions or just want a second opinion?  Feel free to email me for aninsurance evaluation for your own business at joileneh@dbinsurance.com.

What is the Difference Between a Deductible and a SIR?

Many people that have liability insurance for their business may not even know the difference between a deductible or self insured retention.   For the most part, they serve the same purpose.  They can offer a cost savings to an insured who anticipates small and infrequent losses, and they can reduce an insurer�s reluctance to write an account with a loss frequency problem.


The fundamental difference between a deductible and a SIR is how the claims are adjusted. With a deductible approach, the insurer adjusts all claims, and then bills the insured for his deductible amount. With an SIR approach, the insured is responsible himself for adjusting claims up to his SIR, which means that the insured will probably require the services of a third-party administrator (TPA). After the SIR is consumed, then the insurance carrier is brought in to handle the remaining amounts of the claim.  Not only do deductibles and SIRs differ in claims adjustment approach, but they also affect risk management styles.

The problem I have seen businesses of all sizes get into is when they decide they want to go with a high deductible or a high SIR to save money.  When inexperienced managers or owners decide this prior to calculating if they can actually sustain paying out those amounts to the insurance companies, it can be detrimental to the business itself.  Regardless of whether you have a deductible or SIR, you are still obligated to pay the insurance company.

Think wisely before choosing a high deductible or high SIR plan.  Speak to your insurance broker about the positive and negative affects it could have on your business and your insurance program.  And remember, just because your premium is lower, doesn't mean you'll end up paying less in the long run.