Inside the limits or outside the limits might not sound all that important, but when a claim occurs, it can be extremely important when it comes to Business Insurance. When considering your liability policy (General Liability, Professional Liability, etc.), you should look at this option very carefully. Simply put, it refers to costs of legal defense and how they are calculated based on your liability limits. Lets look at this in more detail below.
Inside the Limits Lets say you have liability limits of $1,000,000 and you have been brought into a lawsuit that is going to require substantial legal defense costs. Inside the Limits means the legal defense costs are inside or included in the $1,000,000 per occurrence maximum that the insurance company is going to pay out. So if the carrier pays out $150,000 in defense costs, and you are found at fault, this leaves $850,000 to pay in damages. If damages exceed this amount, the business will have to handle since the insurance company has fulfilled their obligation. Outside the Limits Conversely, Outside the Limits means defense costs are outside the $1,000,000 limits. Meaning defense costs have their own limits like the General Liability Insurance. Obviously choosing Outside the Limits is going to be the better option for your business. However, it does come at a price, since typically this option is going to be additional premium. It's important to understand which options are available to you and also understand which option you have. Sometimes you'll see "Defense outside the limits" listed as a coverage option. If you have any questions about Inside the Limits or Outside the Limits or any other Business Insurance questions, please feel free to reach out to us. We are always happy to help. Jason Matison Commercial Insurance Agent Austin, Texas
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First Dollar Defense (FDD) is probably not a coverage option or term you've heard of before when it comes to Business Insurance, but it's one that you should definitely be aware of. Especially if you are a design professional, such as an Engineer or Architect (see Insurance for Engineers). First Dollar Defense is actually a coverage option that can be added to your Professional Liability (E&O) policy for an additional premium. You might also hear this coverage called Dollar One Defense.
Typically the insured must pay a deductible for the insurance company to start defending them (this is referred to as Straight Deductible). With First Dollar Defense, the insured does not have to pay a deductible unless the insurance company commits to damages/indemnity payout. So, here's an example of how this coverage option would work:
Conversely, if the court finds the insured at fault, and damages are paid, the insured would pay a deductible. If you have any questions about First Dollar Defense, or any other Business Insurance question, please let me know. We are always happy to help. Jason Matison Commercial Insurance Agent Austin, Texas 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. Jason Matison Commercial Insurance Agent Austin, Texas |
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