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Businesses & Organizations Individuals & Families 24-Hour Claims Service Agency Information Community Involvement Library/Links    Information for Banking Professionals Online Glossary - An online dictionary with definitions of insurance terms Protecting the interests of your customer Asset Valuation – There are 2 common ways to value an asset.  Actual Cash Value and Replacement Cost. Replacement Cost = the cost to replace at today’s costs.  New for old.  This is certainly the preferred method of valuation.  (Generally a replacement cost policy will pay the less of 1).  the cost to repair to pre-loss condition 2). replacement with like kind and condition or 3). the cost to replace new.) Actual Cash Value = replacement cost less depreciation.  This is a common valuation method for old or distressed buildings and contractors equipment. Keep in mind that an insurance limit is not a market value.  Replacement cost of real property does not include land values and therefore, it is not unusual to have an asset insured for less than the loan amount if it is located on valuable property. Underinsurance – Insurance companies protect themselves from customers assuming they will not suffer a total loss and then undervaluing assets to keep insurance premiums low.  A Coinsurance Clause will assess a penalty, even on small claims if property is not insured within 80% or 90% of its replacement cost.  Coinsurance clauses can be waived with an Agreed Amount Endorsement which generally requires an appraisal or signed Statement of Values indicating values are accurate to the best of the customer’s knowledge and belief. Protecting the interests of the Bank Prior to the issuance of a loan, a bank should request that they receive Evidence of Property Insurance naming the bank as loss payee and mortgagee.  This documentation differs from a binder, which is meant to be a very basic policy summary given to a policy holder before a policy is actually issued or endorsed. A bank may also want to request a certificate of insurance  (scroll down on definition to liability) which outlines liability coverage afforded by the policy. As a general rule, customers should work with carriers that have an A rating or better from AM Best (go to far right of screen, click on financial ratings and enter the carrier name) (access to ratings is free if you provide your email address, etc.  We have not experienced any spam as a result.) Does the bank provide an insurance requirements outline document to its customers? Providing Valuable Advice to your Customers Workers Compensation is commonly the largest portion of an organizations property and casualty insurance costs.  Premiums are determined by multiplying the total payroll for a class of business times a rate set by the state.  The rate set by the state is expressed as a premium per $100 of payroll.  For example all clerical office workers fit into code 8810 which carriers a rate of $0.28 per $100 of payroll.  An employer with $100,000 of payroll would pay $280 per year for those employees.  The state gives a discount to employers with workers compensation premiums of more than $5,000 per year who have less claim costs than average and charges a premium to those who have excessive claim costs.  This is done through an Experience Modification Factor.  An employer with perfectly average claims has an experience modifier of 1.00.  Better than average is below 1.00 and worse than average is above 1.00.  The premium ($280 in the above example) would be multiplied by the modifier to come up with a final rate.  Modifiers for employers with Wisconsin payroll only are available on line, with a password. Dividends - Certain carriers will greatly assist customers in lowering their experience modification factors.   Other carriers will attract clients with attractive dividends which is a return of a premium at the close of the policy period. Some dividends are based on performance.  No dividend can be guaranteed in advance as all dividends are subject to the approval of the board of directors.  As with stock dividends, if paid, they will be paid to all of a class of customers and not to select customers. Employment Practices Liability exposures of sexual harassment, discrimination, wrongful termination, etc. are not covered under the typical policy and require special coverage.  Employment practice laws are extremely employee friendly &  a customer can find themselves "Guilty until proven innocent." Business Income - This is the coverage that will sustain a company during a time of little or no income and continued expenses.  A business income worksheet can be complicated.  Several business income worksheets are available online.

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