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Before outlining the structure of a policy it is necessary to stress the importance of ensuring that the correct limits of indemnity form the basis of your insurance cover. It is tempting for businesses seeking to reduce their costs to deliberately underinsure their businesses. This can potentially prove catastrophic in the event of a loss, as an insurer will almost certainly invoke the principle of "Average" when underinsurance is discovered.

The Principle of Average: In the event of underinsurance any claim settlement will be based on the ratio of the sum insured to actual value. For example, where a business has insured stock worth £100,000 for only £50,000, the business has underinsured by 50%. In the event of a loss of £25,000, the insurer will apply average and only pay a settlement of £12,500.

The example above underlines the importance for businesses to establish the correct basis of cover with their provider and then negotiate a competitive premium. An independent specialist broker with access to a number of alternative markets will help you obtain the right solution at the best available premium.

Structure of Marine Combined Insurance Policies

Marine Trades Combined Insurance policies generally follow the same model, with the odd exception as to where a particular item may appear. For example, some policies will include pontoons in the Material Damage Section whilst others may bracket them in the Marine Section. Outlined belo is a typical policy structure:

Material Damage: This Section will cover all property other than vessels at your business premises. It is split into various sub-sections that vary from provider to provider, but the splitting of property into these sub-sections enables you to benefit from lower premium rates on the lower risk items to be covered. Typically, a Material Damage Section will be divided as follows:

Buildings (with or without subsidence cover)

Marine Installations (pontoons, slipways, wet/dry docks etc)

Computers and Associated Equipment (at the business' premises)

Machinery and Equipment (at the business' premises)

General Stock (at the business' premises)

Valuable & Attractive Stock (at the business' premises)

All Other Contents (at the business' premises)

Glass: Some insurers will include Glass within the cover for Buildings. However, most Marine Trade insurers will not cover Glass unless specifically requested and will also levy an additional premium. Cover will be provided for external and internal glass with additional extensions available for items such as glass signage and sanitary ware.

All Risks Cover: Must be obtained for businesses wishing to insure items they remove from the business' premises such as:

Tools & Machinery

Laptop Computers, Mobile 'Phones etc

Trailers (thease can also be covered under the Marine Section)

Frozen Food: Covers loss or damage to fuel resulting from change in temperature in fridges or freezers resulting from breakdown or interruption to power supply.

Goods in Transit: Protects against loss of goods whilst in transit or whilst temporarily stored in the course of transit. Business owners need to beware of the variation in scope of cover from policy to policy and of the plethora of exclusions that each insurer applies to cover.

The premium for Goods in Transit insurance is based on a combination of the total sum insured per vehicle, the number of vehicles used and the estimated total annual carryings of the business.

This Section can also be extended to insure postal sendings and carriage by third parties.

Goods in Transit cover for vessels is excluded on many policies unless specifically mentioned. However, it is possible to include insurance for vessels whilst in transit by endorsing the Marine Section of the policy. Organising a policy in this way can save a business money if vessels are the only items to be insured whilst in transit.

Exhibitions: Covers exhibits, stands and other materials at exhibitions.

Whilst insurers include this Section within their policies, a business could reduce costs by having the Marine Section of their policy endorsed to cover vessels at exhibitions rather than pay their insurers an additional premium for the same benefit.

Business Interruption: Covers the loss of Gross Profit and/or the Additional Cost of Working in the event of the trading activities of a business being interrupted by an insured peril, such as fire or flood. Extensions can be purchased to cover losses arising from perils such as:

Breach of Canal

Damage in the vicinity of Premises or to Contract or Exhibition Sites

Denial of Access to the vicinity of Premises

Damage to Moulds, Patterns, Jigs, Dies, Tools, Plans, Designs, etc

Loss or Damage to Property stored in locations other than own premises

Loss or Damage to Property in Transit

Damage to Premises of Suppliers or Customers

Loss of Utilities

Disease & Illness

Just as it is essential to insure property on the correct basis to avoid insurers applying "Average" in the event of a claim, it is vital to ensure the correct level of Gross Profit is used to determine Business Interruption cover.

The definition of Gross Profit in insurance terminology differs from that of accountancy. A business should always check with its provider as to the exact terms of their Business Interruption policy but the procedure below provides a general system that should fit most insurers' methodology:

Obtain the income statement for the last full operating month and locate the net profit amount.

Employers Liability Tracing Office

Review each individual expense line item on the income statement to identify costs of operation that are not directly related to production, also referred to as "standing charges." For example, office rent is due whether the business is in operation or not, and the price does not fluctuate based on production, whereas some worker salaries (such as casual, seasonal labour) would cease when trading is interrupted.

Warranties: A policy warranty is an instruction by the insurer that must be carried out by the insured. For example, the business may be warranted to work on vessels worth no more than £500,000. In such a case, if the business worked on a more valuable vessel then it would be in breach of warranty.

The breach of a warranty by a business would enable an insurer to void the whole policy. In the above example, if the business owner suffered a theft of outboard engines, the insurer could void the policy on the grounds that the business had breached a warranty - even though that warranty was totally unrelated to the theft.

As you can see, warranties can potentially have a huge impact on your business. You should ensure your insurance provider goes through each warranty with you and explains what it means. Insurers can impose a warranty for just about anything - some common examples are below (the list is by no means comprehensive):

Compliance with Flammable Liquids & LPG Regulations.

No paint or GRP Spraying.

Automatic fire alarms to be tested weekly.

Fire extinguishers to be professionally inspected annually.

Fireproof doors to remain closed during working hours.

All stock to be kept at least 15cm off floor

Waste & dirty cloths to be kept in metal bins.

Waste bins to be kept outside premises out of working hours.

Intruder alarm to be set whenever premises is unoccupied.

Electrical circuits to be inspected within 30 days of policy inception.

Cash registers to be left empty & open when premises closed.

Vehicles to be fitted with immobilisers and alarms.

Premises to be inspected daily.

No artificial heating to be used on premises.

Machinery only to be running when premises is occupied.

No flammable liquids to be kept on premises.

Moorings to be lifted & inspected at least annually.

Terms of trade to incorporate BMF Terms of Business.

No work carried out on commercial vessels

Trailers to be secured with a wheelclamp whilst unattended.

Vessel not be let out for hire or reward.

Vessel will not tow or be towed

British Marine Federation (BMF) Terms of Business

Most Marine Trade policies warrant that you operate under BMF Terms of Business. You do not have to be a member of the BMF to use their terms. The essential point from an insurance aspect is that you ensure all your customers insure their own boats. This is a crucial factor that defines the mechanics of how your Public Liability insurance works and how it differs from non-Marine commercial insurance policies.

If you have a customer's boat, outboard etc in your custody or control and it is lost or damaged due to your negligence, your legal liabilities in respect of the property are covered under the Public Liability Section of your Marine Trade policy.

This cover would not be provided on a non-Marine policy as legal liability in respect of goods in custody or control is specifically excluded. To insure these items you would have to procure specific insurance which, as leisurecraft and associated equipment are very expensive, would be financially prohibitive for a business to purchase.

Other Insurances for your Marine Trades Insurance Programme

Directors & Officers Liability Insurance (Management Protection)

Modern legislation now means company directors can now be sued as individuals in respect of their decisions and actions as directors or managers of businesses. The duties of company directors are established in law and include the following areas of responsibility:

Duty of Care: Directors are required to act with 'the care an ordinary man would take in the same circumstances on his own behalf' and with the skill expected from someone with his 'particular knowledge and experience'. Where duties are delegated the Director is responsible for ensuring that the person to whom the duties are delegated is sufficiently experienced, reliable and honest.

Fiduciary Duty: Directors must act honestly, in good faith and in the best interest of the company and must ensure they do not have any conflict of interest.

Statutory Duty: Company directors are legally bound by legislation such as the Companies Act 1985, Insolvency Act 1986, Financial Services Act 1986, Environmental Protection Act 1990, Health and Safety at Work Act 1974.

How Can Claims Arise?

Whilst public bodies such as the Health & Safety Executive can prosecute directors if they are perceived to have failed to comply with their statutory duties, claims could also arise from numerous third parties such as employees, creditors, customers or suppliers.

With the number of employees injured at work increasing by over 100,000 in 2010 and lawyers able to act on a "No-Win, No-Fee" basis, directors appear to be more exposed than ever.

What Are The Financial Implications of a Claim? Directors will be personally liable for meeting the cost of legal expenses as well as any damages awards, fines or penalties. This means assets such as their cars, houses, stocks and money could be lost. Companies are prohibited from indemnifying their directors in the event of their insolvency.

How Can Directors & Officers Liability Insurance Help?

Whilst a D&O policy will not cover any fines against directors it will cover the cost of defending a prosecution until the point when guilt is established. This could potentially save tens, if not hundreds, of thousands of pounds of an individual's assets in legal expenses. A D&O policy can also cover awards for damages and legal expenses made against directors in civil cases.

Professional Indemnity Insurance

If you give advice, conduct surveys or inspections for a fee, your legal liabilities in respect of these activities are excluded on your Marine Trade policy. A stand-alone Professional Indemnity policy will fill the gap in your insurance cover.

Tractor & "Special Types" Insurance

Tractors and other special type vehicles which are road-registered are excluded from standard public liability policies, as are many unregistered vehicles, if travelling on, or crossing, public highways. This may also apply to areas where the public have access such as ports, harbours and boatyards. Types of vehicles that fit into this class are: Tractors, Cranes, Fork Lifts, Cherrypickers, Boat Lifts and other self-propelled mobile plant.

Third Party insurance is compulsory and a failure to have this basic cover is considered one of the most serious offences. A substantial fine and disqualification are amongst the recommended penalties.

Driving uninsured (or allowing your employees to do so) is an absolute offence which means there is no discretionary defence available, ie the vehicle is either insured or it is not. If, for any reason it is not insured, the offence is committed.

Without insurance your business and your personal assets are at risk from potentially huge compensation claims being made against you

Comprehensive Road Risks insurance in for tractors and "Special Types" is available at very competitive rates from your specialist broker.

Summary

Modern businesses need modern insurance programmes. Cutting cover to cut costs is not the solution. Your 9-point step to getting the right cover for your business at the best available premium is:

1. Choose an independent specialist broker.

2. Ask them what they can offer you in terms of support in the event of a claim.

3. Ask them to visit you to look over your business.

4. Ensure you fully disclose all relevant information about your business

5. Accurately assess the value of your premises & property and the levels of your turnover, payroll and gross profit.

6. Request 3 quotations.

7. Ensure you have all conditions, exclusions, warranties explained to you verbally - a written summary is not sufficient.

8. If you think some of the exclusions or warranties are unreasonable then ask your broker to negotiate their removal.

9. Finally, negotiate the best premium you can get from your appointed broker.

Article Source: http://EzineArticles.com/9012296

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