Evaluating Your Historical Society Insurance
By Eleanor Spinazzola
E&S Insurance Service, 21 Meadowbrook Lane, Gilford, NH 03249
1-800-594-9285; (eleanor@esinsurance.com)
Thousands of years ago, before you could purchase an insurance policy, merchants found a way to protect themselves against a catastrophic loss by dividing their cargo among several boats before going down the rapids. If the cargo in one boat was destroyed, they hadn’t lost everything.
Although it is much more convenient today to spread the risk of uncertainty through the purchasing of an insurance policy, everyone needs to do a risk analysis to determine what their loss exposure is (possibility of loss) and plan for losses before they occur. Risk management techniques include avoidance, loss prevention, retention, noninsurance transfers and insurance transfer.
Avoidance is reducing the probability of loss to zero. In the case of a Historical Society, it might mean not making your building available for private functions, thus eliminating that exposure to loss.
Loss Prevention helps reduce the probability of loss but does not eliminate it; therefore requires preventive measures before a loss occurs. Enforcement of “no smoking” regulations would be a loss prevention technique as would installing a central station fire alarm or updating the wiring in an older building.
Retention would rely on the organization making a decision not to insure a small exposure but to fund that loss, if there were one, from the operating budget of the historical society. A good example is to remove comprehensive and collision coverage from an older vehicle.
Noninsurance Transfers is usually part of a larger contract where an entity, other than an insurer, agrees to pay certain losses incurred by another. This could be a transfer under a lease agreement for property or a hold harmless agreement under liability.
Insurance Transfer is normally accomplished by purchasing insurance coverage and paying a known cost (insurance premium) to a professional insurer (insurance company) in exchange for a transfer of the risk of a sudden, unexpected and possibly catastrophic loss.
There are two very good guidelines for a smaller organization to keep in mind when it comes to purchasing insurance coverage.
1) Don’t risk more than you can afford to lose. A large corporation may be able to afford a $100,000 deductible but it is unlikely that a Historical Society could fund such a large sum. It is also not recommended to submit many small claims, so inquire about the cost savings to increase your deductibles. The savings can add up over the years.
2) Don’t spend a lot for a little protection. For example, a good rule of thumb is not to purchase collision coverage on a vehicle once the insurance is costing you 10% of the vehicle’s value. If you have a van worth $3500 and the collision premium is $500 (not to mention the other $500 that will be subtracted for the deductible) you’ll pay $1000 out of pocket before you can collect $2500. In this case, it is certainly time to think “retention” as a risk management tool!
What are your exposures?
Property Insurance:
Buildings
Personal Property You Own on the Insured Premises
Personal Property You Own off the Insured Premises
Newly Acquired Buildings or Personal Property
Personal Property Owned by Others in Your Care, Custody or Control
Equipment Breakdown (Boiler & Machinery)
Valuable Papers and Records
Accounts Receivables
Business Income Insurance
Property in Transit
Demolition Coverage
Debris Removal
Increased Cost of Construction / Ordinance or Law Coverage
Flood Insurance
Earthquake Insurance
Crime Insurance:
Employee Dishonesty
Money & Securities
Commercial Liability Insurance:
Premises and Operations Liability Insurance
Products and Completed Operations Liability Insurance
Personal & Advertising Liability
Medical Payments
Directors & Officers Liability Insurance (D&O)
Coverage is for errors and omissions (excludes bodily injury and property damage but
Directors & Officers have that coverage under the Commercial Liability Insurance)
Workers Compensation Insurance:
Statutory Coverage for Employees
(Volunteers or unpaid workers are not considered employees and not covered unless specifically endorsed onto the policy.)
Automobile Insurance:
Owned Automobiles – Liability and Physical Damage
Non-Owned Auto Liability (use of employee’s vehicle for Historical business)
Hired Automobile Liability (vehicle leased, rented or borrowed)
Umbrella Liability Insurance:
Provides Excess Insurance over Underlying, but not excess over D&O
Fortunately, for a risk such as a Historical Society, there are wonderful insurance “packages” that combine many of the property, liability, crime and automobile coverages under one policy for a minimum premium of $500. Obviously this minimum increases if you are insuring a building or you own a vehicle, but the programs are very competitively priced.
Workers Compensation minimum premiums vary by class code from $341 for clerical up to $850 for construction classes, but actual premiums are based on total annual payroll.
Directors & Officers Liability can be as low as $800, but the rating is based on financial information and normally you’ll find an average of $1000 for the annual premium.
Each and every risk is different in terms of exposures and so too are insurance contracts. It is important that you review your program annually making any changes necessary.