Top 10 Insurance Terms

Directors and Officers Insurance: Debunking the Myths

Companies often don’t believe they need the much-misunderstood commercial liability insurance product known as directors and officers liability insurance (D&O).

Acts leading to claims: This liability insurance provides protection from financial damages and covers legal defense expenses from claims relating to things like

  • mistakes
  • omissions
  • breaches of duty
  • misleading statements or misstatements
  • neglect

D&O insurance protects individual directors and officers of a company from financial damages due to actual or alleged wrongful acts committed while in these jobs. It covers past and present directors and officers, and sometimes employees. One common misconception is that D&O provides corporate leaders with blanket coverage, but in fact D&O doesn’t protect against negligence or illegal acts.

Who needs it? Publically traded companies should buy D&O insurance when a board of directors or an advisory committee is struck and/or when the company is looking for investors. In the latter case, investors will usually require D&O insurance as a condition for putting up funds. Non-profits and private companies should also consider D&O, depending on their business type. And small businesses also shouldn’t automatically dismiss it; there are many reasons managers, directors, and officers of even small companies may be sued.

Confused? Discuss it with your advisor.

The Customer Isn’t Always Right: How to Draw the Line…

StickyHowever many times you’ve repeated over and over to yourself that the customer is always right, there will be times when you simply have to draw the line and tell the customer that he or she is wrong.

It may be due to a manipulative client who is trying to wring concessions from you, or it may just be that the customer is irrational or out of line in their demands.

But whether it arises from a misunderstanding about deliverables, timing, terms or pricing, it is always traumatic to the employee or manager. How you react and the degree of professionalism you bring to the situation are crucial to the eventual outcome.

Here are some tips for handling a conflict, disagreement, or dispute when a client is just plain wrong.

  • Listen actively; let the client state his/her position and ask probing questions
  • Focus on the issue, not the person
  • Do not argue, offer trite excuses, or assign blame
  • Don’t go behind the person’s back to someone else in their organization
  • Answer follow-up calls and emails promptly
  • Have a co-worker attend your meetings or sit in on your phone calls with this client
  • Be conscious of your body language, facial expressions, and tone of voice during every encounter with the customer.

When you know that this customer is wrong, you may feel powerless and unsure about how to deal with the situation. You may have concerns that your reputation will be tarnished.

Many companies are now providing support to employees who are dealing with such situations by offering conflict resolution training and maintaining a culture that empowers employees to know when and how to draw a line.

How Millennials Will Change the Ways We Do Business

SloppyAs baby boomers move on to greener fairways, a new cohort is taking their place: millennials.

And they’re going to be big. Ray Williams, president of Ray Williams Associates, notes in a Financial Post article: “By 2020, nearly 50 percent of the U.S. workforce will consist of Millennials.”

Born roughly between 1980 and the early 2000s, millennials are said to be self-centered technology addicts who are distrustful of authority and tradition.

So, given those traits, what’s ahead for the way we do business?

In “The Trophy Kids Grow Up: How the Millennial Generation is Shaking up the Workplace,” Ron Alsop suggests that with millennial employees, “employers are facing some of the biggest management challenges they’ve ever encountered.”

In expanding on this point, Kate Taylor writes in Forbes: “The 9-to-5 job may soon be a relic of the past if Millennials have their way…freelancing and self-employment are on the rise.

Meanwhile, 60 percent of Millennials are leaving their companies in less than three years…” at an enormous cost to employers.

Alsop notes some anomalies: For example, millennials applaud the flexibility provided by the virtual office, but demand defined rules and responsibilities; they’re self-absorbed, yet civic-minded and philanthropic. “Millennials…bring a set of values and priorities that differed significantly from the generations that came before them.”

Concludes Chris Komisarjevsky in HuffPost: “In our digital age, these millennials have power and influence well beyond their age.”

10 Insurance Terms You Must Understand

In a virtual world, your commercial insurance policy can seem like just so much more boring paperwork. However, if you’re a business owner, get over it; it’s essential you read and completely understand your policy, however boring. To get you to that place, here are some common – and important – business insurance terms you need to know:

Actual Cash Value (ACV): This refers to the cost of replacing destroyed or damaged property with like or similar property. However, depreciation is taken into account, so whatever the insurer pays to replace the property will have deductions for depreciation. For example, a surround-sound system installed in your restaurant 10 years ago is destroyed in an electrical fire. Your insurance would pay an amount to replace it with a similar or like item, less any depreciation value to account for value lost over a decade. If you have high-value items such as electronics, artwork, or antiques, consider replacement cost coverage, which allows a higher claim payout, because it doesn’t deduct for depreciation.

Act of God: These are naturally occurring perils over which policyholders have no control, such as earthquakes, devastating windstorms, typhoons, or similar events.

Aggregate limit: An aggregate limit is the maximum amount you can receive for a specified period of time. For example, you may have an aggregate limit of $200,000 for one year, which would mean that regardless of how many separate claims you make, once your policy pays out that amount for the year, it won’t pay more. Some policies have general aggregate limits, meaning the total amount your insurer will ever pay, regardless of how many claims.

Exclusion: These are “named provisions” that specifically identify items that aren’t covered, including losses occurring from specified actions or issues.

All-Risk policy: This policy will pay for losses regardless of the reason the loss occurred.

Named Perils policy: The exact opposite of an “all-risk” policy, “named perils” specifically defines what causes of loss will be covered. Usually, these include vandalism, fire, or acts of nature. This policy provides coverage ONLY for events listed in the policy, and although it’s usually very affordable, it offers very limited coverage.

Valued policy: Also referred to as an “agreed amount” policy, this states that an event resulting in a complete and total loss will be covered up to a specific, pre-determined amount as stated in the policy.

Endorsements: These are provisions added to a policy that provide extra coverage, alter a policy in some way to account for special coverage needs, or define exclusions or inclusions. Often referred to as “riders”, they can be thought of as amendments to policies.

Real Property: This refers to things such as the land or items permanently affixed or attached to it: sheds, detached garages, permanent fixtures like fences, and sometimes heavy machinery and equipment.

Personal Property: Personal property is different from real property in that personal property is easy to relocate. If you turned your building upside down, anything that falls out is considered personal property, such as furniture, computers, and office equipment.