What is Minimum Premium, or oftentimes abbreviated MP, in Business Insurance? It's an excellent question. Simply put, it's the least (or minimum) amount the insurance company charges in premium to write the policy. For some business classifications, it could be as low as $250 and for others it could be as high as $30,000. The bottom line, it's their minimum premium. It could apply to any type of insurance and is usually brought up when presenting a quote, increasing or decreasing property coverage, or decreasing or increasing gross sales.
Lets look at an example on how it can apply to Business Personal Property. Insured starts a new business and moves in. At the time, they don't have a lot of property coverage because it's just a professional office. They grow and add more people, furniture and inventory. Knowing they need to add coverage for property, they call their agent to add Business Personal Property. Agent adds it and premium doesn't go up. Customer is happy because premiums didn't increase and they got more coverage. Looking at it from the other way, though, might not be as favorable. Customer downsizes and wants to lower coverage. Agent lowers Business Personal Property, but insured is still at Minimum Premium (MP), so there's no decrease in premium.
Minimum Premium can also be a topic conversation when it comes to gross sales. As we've discussed before, gross sales is one of the key factors that can impact premium. Lets say Minimum Premium for a policy is $5,000, and gross sales are at $250,000, what if you only do $100,000 in gross sales? Will there be return premium? No, because MP is $5,000.
It's always important to ask about Minimum Premium, so you can manage expectations. If you have any questions about Business Insurance and Minimum Premium, please feel free to contact me.
Commercial Insurance Agent
Engineers need Business Insurance. Not just General Liability Insurance, but also Professional Liability Insurance, also known as Errors & Omissions (E&O). I work with a lot of Engineers and they are some of the most meticulous and ethical people I know when it comes to their projects, but no matter how meticulous a person is, mistakes can happen. Or maybe you don't even make a mistake, you're just brought into the lawsuit. Insurance for Engineers can provide coverage and defense for businesses in the engineering industry.
For example, a civil engineer might design a water retention pond to provide flood control and it fails. When it fails, it floods a handful of homes or businesses that it backs up to. Since the civil engineer signed off on the design drawing as PE (Professional Engineer), they could easily be held liable. Especially since the drawing is considered a legal binding contract. Was it the engineers fault? Or was it a construction defect? The general contractor and the civil engineer are probably going to be pointing fingers at each other, which is not uncommon. Now it's time for the insurance companies to get involved. Even if you are not at fault, you could potentially be brought into the lawsuit. This is the time when a Professional Liability Insurance policy, specifically one tailored to an engineering firm's needs, would be important to have in place.
As far as coverage goes, the following are a few insurance policies an engineer should consider when purchasing business insurance (notice I said, "a few", as there are more):
As far as limits of liability (also known as the coverage amount) for Professional Liability Insurance, the starting point is usually $1,000,000, however, if assets or risk exceed this, you should definitely consider more. Sometimes I get asked how much coverage is enough, which is an excellent question. Unfortunately, given today's litigious business landscape, there's really no way of knowing if it's enough coverage. You might start by asking yourself, what is the most I could be sued for, plus defense costs. Look at your policy or quote, to see if the defense costs are inside the limits or outside the limits (here's some additional information on it from a past article- Inside the Limits or Outside the Limits).
Some engineering firms have limits just to satisfy certain contracts, which could leave them underinsured, if the contract requirements are lower than what they might need. I would definitely recommend scheduling a policy review with an agent to discuss increasing limits or broadening coverage, especially as you grow and your assets grow. Make sure to ask about the retention amount (also known as deductible). Typically this will be between $2,500 and $10,000. Maybe more, maybe less, so make sure you ask, so you know before you have a claim. Also consider different deductible options. I would recommend asking about First Dollar vs Straight Deductible.
Insurance for engineers doesn't have to be complex. When it comes to finding a professional liability insurance company, I represent many companies that insure engineers. You really want to look for an insurance carrier that has a program specifically designed for engineers. Many of these special programs offer many value-added services that your typical insurance carrier might not offer. Here are few of the companies I go to for an engineering insurance quote:
Chubb Insurance Company
Travelers Insurance Company
Admiral Insurance Company
Hiscox Insurance Company
If you're looking for Insurance for your engineering firm, please feel free to contact me. Perhaps you just have questions and don't need a quote, feel free to reach out to me as well. Whether you are a civil engineer or a mechanical engineer, I would be happy to help.
Commercial Insurance Agent