Sharing the Risk with Your Insurance Company

BY MYRON ROMANIUK

Insurance Broker with member office of Superior Group - Allied Member

There is a delicate balance of shared financial responsibility in any insurance policy. It's important that you work with your broker to determine the appropriate degree of "self-insurance" according to your ability to handle financial loss.

Selecting an appropriate property deductible is a simple first step. The deductible represents your "share" in the event of an insurance claim. Generally, the higher the share you can absorb, the lower your property rate - resulting in savings on your insurance premium. The financial stability of your operation and your cash reserves should be taken into consideration, your broker can help you make the decision

Every policy defines limits to the losses it will cover. Be sure to review these limits in detail with your broker to avoid surprises. At the same time you may identify optional coverages that you don't need either because you can afford to absorb the loss or you have limited or no exposure to the hazard insured.

Most resort policies will require a schedule, or list, of buildings and other insured property such as generators, contractor's equipment or computer equipment. A thorough annual review of these items and values insures the adequacy of your coverage, prevents over-insuring equipment and also provides an opportunity to delete items of little value to the operation, or that you can afford to absorb in the event of a loss. This can again lower your premium.

The financial implications of a catastrophic loss (for example, a fire at one of your key buildings) go well beyond the loss of buildings and contents. In fact, interruptions to your operations may be totally out of your control such as the closure of roads leading to your operation as a result of a forest fire miles away. Typically, closures of this nature must be by way of Provincial Authority. In summary, an interruption to your operations during the season can be crippling. Be sure to consult with your broker regarding the different forms of business interruption insurance available on your policy. You can determine the degree to which you would share in a loss by selecting appropriate limits, and thus control the premium.

Be sure to analyze your exposure to third-party liability claims. A small operation with few exposures may not require the hazardous exposures. Regardless of the size of your operation, maintenance of your propane fired appliances in accordance with Technical Standards & Safety Authority (TSSA), maintaining working smoke detectors in all of your heated buildings as well as simple stairway and railing upkeep are examples of areas where claims of this nature can be reduced. Few or no claims help in keeping insurance premiums at an acceptable level and proper maintenance can generally help achieve this goal. There also may be an opportunity to select a lower limit and still have adequate protection, lowering the premium. Although this is generally discouraged by Brokers due to the rise in liability claims across the industry, there are still insured's who are comfortable reducing their limits.

The insurance industry has adopted fairly standard insurance "forms". For instance, your coverage choices for buildings may include Replacement Cost, or Actual Cost Value. The less expensive option will limit the payout in the event of a loss, but will be more affordable. The impact of a loss on your operation should be the determining factor in selecting the coverage type.

You may also encounter coverage options for watercraft - for example a limited Named Perils coverage, or a Broad-form coverage, which insures for more perils. The premium savings can be substantial. Some insured's have guests sign waivers placing responsibility on these guests using their watercraft and others simply build possible losses to watercraft into the rates charged to their guests. Although there are mixed reviews on waivers, they do help guests take more ownership when renting watercraft and reduce losses. Your choice on which coverage to use will depend on the exposure and on your ability to absorb an uninsured loss.

Your insurance broker can help you make these decisions. Remember - your broker works for you!


This article was taken from page 8 of NOTO's "The Outfitter" publication, Summer/Fall 2005 Issue

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