May 18, 2011
Credit Union Management magazine’s Web-only “Insurance Matters” column runs the third Wednesday of each month.
I’m not sure why it’s a secret; it just is. Maybe it’s something people just don’t think about. They should think about it, though. Insurance coverage is being left off policies, and premium dollars are being left on the table. Maybe it’s something in American culture—we just don’t haggle like we used to.
The secret is that everything in your credit union's insurance program is negotiable. Everything. Terms, exclusions, definitions ... all of it, negotiable.
That is, until a claim occurs.
Negotiation is the essence of what I do for my clients. I find an exclusion I don't like, and I try to get it changed. I find a definition that hurts the protection my client gets, and I work to get the underwriter to amend it.
Sometimes I play one insurer off another. "Insurer ABC will do this. Why won't you?" It's all a part of getting the best insurance program for my clients.
You can negotiate your insurance, too.
In the past few years, several new insurers have come on the scene for credit unions. They are offering broad, innovative coverage. Competition brings out value. Even CUNA Mutual, the biggest insurer in the credit union insurance field, will offer alternative terms and conditions. Sometimes you just have to ask.
Credit unions with no past claims are in an especially good position to negotiate. Let insurers compete for your business.
The other secret of insurance negotiations: If you don't ask, the answer is always no.
You don't have to wait for your insurance to expire to negotiate policy terms, either. Sit down with your insurance agent. Have her review your coverage with you. When you learn that something isn't covered, ask why. Push. Ask for optional quotes on important coverage extensions like e-banking, privacy remediation and plastic card coverage. See that your general liability insurance offers coverage for mental anguish claims. Make sure your property insurance has high limits of coverage for extra expense insurance and valuable papers coverage.
Here’s one thing you have to make sure you ask about—negotiate for if you have to: coverage for damage to a location you rent. It’s the most ignored part of credit union liability coverage.
Let's say your credit union's coffee pot starts a fire. Your property is damaged, and so is your landlord's building.
Your landlord may be a great guy, and he may be insured. His insurance company may not be so understanding. You caused the damage, and the landlord's insurer is going to expect someone to pay.
Your general liability policy includes an amount for "damage to premises you rent." Sometimes it's called fire damage liability coverage. Limits are usually $300,000 to $500,000. This may seem small when you consider the cost of constructing buildings. However, this coverage only needs to pay for the damage to the part of the building you occupy. The rest of the building can be paid for using the other, broader coverage in your general liability insurance. Also, your umbrella liability coverage steps in.
This separate coverage is important, as the standard section of general liability excludes property in your care. Without this coverage section, you could be without protection. Talk with your insurance agent.
Scott Simmonds is the unbiased insurance guy, consulting on, but never selling, insurance, www.CUinsuranceConsultant.com. He welcomes questions from readers, and will attempt to answer as many as possible in future columns. E-mail him for a copy of his white paper, “Questions Credit Unions Should Ask About Their Insurance.”
|Questions and Answers
Q - We just learned that our insurance program does not cover us for pollution. Is this standard, or did our agent miss something?
A - Most standard insurance programs exclude pollution coverage. That means if your land is polluted, there is no coverage to clean it up. If a heating oil tank at one of your branches leaks and pollutes the next-door neighbor's property, there is no coverage. If you foreclose on a property that turns out to have hazardous waste, your insurance will not respond.
There is usually no coverage on your general liability or in your directors' and officers' insurance. Your auto insurance will include coverage if an owned vehicle is involved in an accident and the fuel tank leaks. However, if your courier is delivering cleaning supplies and an accident causes the supplies to leak into a stream, you will probably have no coverage.
Your insurance coverage probably does have a limited amount of coverage when there is damage to your building and pollution leaks onto your land. An example would be a fire at a branch that causes a ruptured fuel oil tank. Usually property insurance policies have $25,000 of coverage for this type of event.
Your biggest exposure is foreclosed properties. Make sure you know what you are taking over before you foreclose. More than one financial institution has found themselves to be the not-so-proud owners of a minor hazardous waste dump when they take over a remote piece of land or building.
There is insurance available for pollution liability and cleanup. It is sold by specialty insurers, and the premiums are at least $7,500. Your insurance agent should be able to help you find coverage. Or, call me for a reference.