Caption Corner Part 2 – The 4 D’s of Insurance
As licensed practitioners, there is no doubt that you have a professional liability insurance policy, a cyber or data breach insurance policy to insure you from HIPAA violations for third party information breach, and a general liability insurance policy covering your office, fire perils, bodily injury, and third party property.
This month we will continue to discuss some of the most important liability insurance terms that you need to know.
Last month we discussed the following:
- Insurance Agent or Insurance Agency
- Hazards and Perils
- Limits and Sub-limits
- Insurance Claim
This month we shall discuss the four D’s of insurance:
- Direct Writer
- Dynamic Risk
Declarations is a supporting added component separate page of the insurance coverage to supplement what is written in the insurance policy contract. In Property and Casualty policies such as Professional Liability, General Liability, Cyber Liability, and Auto and Home Owners policies, the Declarations page is at the front of the policy package.
Declarations indicate the insured name and address, policy term including effective date, the amount of insurance coverage, policy endorsements and specifics including a mix of coverage, limits, premiums, deductibles, and policy form numbers and descriptions. The Declarations page is just as important as your insurance policy contract, so read it carefully and make sure that you understand what is covered and not covered because that is the insurance coverage with extras and exceptions that you are paying for.
You need to read each page of the insurance policy contract as well, so as to compare how the Declarations page works together with it. Often times the insurance policy contract excludes certain coverage or limits coverage, and the Endorsements listed in the Declaration page restore them partially, in full, or even augment the coverage. It varies by the insurance carrier and specific insurance product coverage.
If you buy insurance from the NASW RRG, you never need to worry about deductibles on any Declarations page or in the insurance policy, because none of the NASW RRG insurance policies have deductibles. Many competitors have deductibles, often as high as $1,000 per occurrence, so make sure that you know what you are buying.
A deductible is the amount of the insurance benefit that the policyholder must pay first when a claim is reported and approved by the insurance carrier. It is referred to as the initial amount or the “first dollar” cost paid by the policyholder. After the deductible is paid, then the insurance policy responds to the claim, but only up to the stated policy limit.
Many insurance carriers design their insurance products with deductibles focused around frequent incident categories because they do not want to pay a lot of claims that occur because these underlying incidents are a very common and frequent occurrence. So the policyholder sustains the first dollar risk for frequently occurring incidents.
Generally, the more deductibles in an insurance policy, the lower the premium should be. But that is not always the case these days. Many insurance carriers want to charge you the most premium possible and still inflict upon you a lot of deductibles, and sometimes very high deductibles.
Make sure that you understand how your insurance policies operate. The NASW RRG has no deductibles in any of its insurance policies.
A Direct Writer System is a distribution system established for the sale of insurance products. Direct Writers are insurance agents who are employees of the insurance company that they represent and only sell that single company’s insurance products.
The Direct Writers are thoroughly trained in all facets of the company’s insurance products and know how best to serve you. Insurance companies who use Direct Writers want control over the quality of product distribution and sales, and this helps to make sure that the customers understand what they are buying. Direct Writer insurance carriers typically only accept insurance policies that are written by its own Direct Writers and not from insurance brokers, third party administrators, and independent insurance producer agents.
If you are dealing with a commission-driven insurance sales agent such as a broker, a third party insurance administrator, an insurance producer agency, or a multi-line insurance intermediary, WATCH OUT. Make sure that you know how much commission this seller is receiving from you when you pay your premium.
Their commission is buried in your insurance premium payments, and they collect ongoing commissions from you each time you renew your insurance policy and when you pay your insurance premium. In addition, many of the larger independent agents and insurance brokers also receive a profit share commission from the insurance carrier whose insurance products they sell.
Your insurance premium payments are funding this perk, so you are paying too much money. Frequently insurance agents, agencies, and brokers they try to steer you into higher commission insurance policies.
The NASW RRG is a Direct Writer with respect to its NASW member base so there are no commissions at all. The focus is on customer service and high value for the NASW policyholder.
Dynamic Risk is a technically obscure term that is not frequently stated in public advertising and is more related to actuarial risk assessment.
Generally, the higher the risk, the higher the premium for any insurance policy. Dynamic Risk refers to that risk that arises when a change in the insured’s organizational operations and practices occurs.
For example, any change in your business or practice size or specialty may increase or decrease your risk. If you add employees or independent contractors or add a new person with a different occupation such as a psychologist to your social worker staff, then the risk increases.
Conversely, if you downsize your practice from many employees to just yourself, then your risk decreases as does your insurance coverage and insurance policy premium. Changes to your practice should be reported to your insurance carrier as soon as possible so adjustments in coverage and premium can be made to fit your new risk profile.
A unique feature of the NASW RRG General Liability insurance policy, for example, is that Dynamic Risk is not a factor because you can add as many offices in any number of states that you want without being required to pay an additional premium, because only the insured’s annual revenue determines the General Liability premium.
Published January 2017