Does Sick Pay do What it’s Supposed to do? The Case For and Against

Posted on February 25th, 2019

Studies show sick pay can reduce the spread of disease in the workplace, but also increase absenteeism.

Sick leave allows employees to take a set amount of paid time off when they’re ill. It’s a coveted employee benefit, but some observers wonder if it encourages absenteeism, while others believe illnesses such as flu and colds would spread faster without it.

The amount of sick pay an employee can earn varies from company to company. According to the Bureau of Labor Statistics, a majority of employers offer one hour of sick pay for every 30 to 40 hours an employee works — an average of seven to eight days of sick pay per year.

Sick pay policies often are mandated and more generous in other countries. In 1883, Germany became the first country to mandate paid leave. According to a Statistisches Bundesamt report (the federal statistical office of Germany), German employers typically offer employees 10.8 sick days each year.

In comparison, Canada, Japan and the United States are the only industrialized countries that do not provide paid sick leave to all employees. A report by Philip Susser and Nicolas Ziebarth in 2016 showed that low-income, part-time, and service sector workers had coverage rates of less than 20 percent. Some cities, such as San Francisco, now are mandating sick pay.

While few employees would argue against being paid for days when they are ill and cannot work, the big question is whether sick pay does what it’s designed to do and is worth employers’ resources.

The Case for Sick Leave

Employees who know they will get paid, even though they take time off from work for a day or more to recuperate, are more likely to stay home. But employees who don’t have paid time off often work while ill in order to continue getting a paycheck, possibly spreading infection to other employees and customers. Therefore, sick leave plays a big part in stopping the spread of disease.

Besides the potential of sharing infectious diseases, sick employees often are less productive and take more time to recover.

Stefan Pichler and Nicolas Robert Ziebarth published a report in 2018 showing that during flu season sick pay mandates reduced the flu rate as much as 40 percent.

Many employers view paid sick leave as a necessary benefit to keep and attract a skilled workforce. That’s especially true this year for retail establishments. Federal labor statistics indicate that there are 100,000 more retail job openings this year than last. The Business Insider attributes the shortage to a low unemployment rate and many workers’ interest in full-time, not part-time, jobs. Employers like Target, JC Penny, Kohl’s and Macy’s were particularly worried about this holiday season and ramped up recruitment efforts. According to the outplacement firm Challenger, Gray and Christmas, Target was looking to hire 120,000 part-time workers for the holidays.

The Wall Street Journal reported that employers seeking seasonal help were adding paid time off as a perk for part-time employees — something they hadn’t done before — hoping to attract more employees.

Another benefit of sick leave pay is it makes it easier for low-wage, hourly employees to take care of sick family members without fear of losing wages. It also puts lower wage and higher wage employees on the same footing, reducing inequalities between the two groups.

The Case Against Sick Leave

There are concerns that some employees view paid sick leave as vacation days and will call out frequently without notice. A Statistisches Bundesamt report released in 2018 showed that back pain was one of the most common reasons that workers in Germany called in sick. In 1996, when Germany enacted a bill to reduce sick pay from 100 percent to 80 percent of wages, the number of sick days was reduced. In particular, absences due to back pain decreased by almost 30 percent. On the flip side, more employees came to work sick.

When an hourly employee takes paid sick leave, employers often pay another employee to cover the employee’s job duties — an expense that can add up since an employer is paying double for the same amount of work.

The Case for and Against an Alternative

Paid time off (PTO), also known as personal time off, is becoming a popular alternative to sick leave. Many companies have replaced sick leave, vacation days and personal days with a PTO plan. Employees earn days off after working a certain number of days and can use the time any way they like.

While many employees currently earn 10 paid holidays, two personal days, and eight sick leave days annually (not including vacation days) they typically would get 30 days paid time off under a PTO plan

This plan works great for employees who are healthy since they rarely use all of their sick days. Instead, they get extra vacation time.

PTO has some downsides for employers. The plan gives employees more sick days, which means they could be away from work more often without notice. Also, some employees who want to keep all of their “vacation days” could come into work sick in order to use their paid days off later.

PTO plans work best for companies with the flexibility to easily manage when employees call out. Employers must stress the importance of requesting approval for days that are actual personal days or vacation days.

For help deciding which PTO plan will work best for you please contact us.

How to Prepare for Retirement – Beyond Saving Money

Posted on February 25th, 2019

It’s never too soon — or too late — to plan for retirement and to take positive steps for saving money

More than three out of five 65-year-olds are expected to reach age 80, according to the Social Security Administration — an increase of almost 50 percent from 50 years ago. While that’s great news, think about what that means to your retirement saving. If you retire at age 65 and live to be 80, you will spend 15 years in retirement. If you live to age 100, you will be retired for 35 years.

The good news is that it’s never too soon — or too late — to plan for retirement and to take positive steps to saving the amount of money you will need for retirement. Here are several steps you can take now beyond the simple “just save more” game plan.

Determine Your Budget – You may be years from retirement, but you should determine now how much you’ll need. Track your spending and figure out which expenses you won’t have when you stop working and which expenses may increase. This will help you decide whether your present investments are enough to cover your future needs. If not, make adjustments immediately. Work with a financial planner if you think you need assistance.

Get rid of high-interest debt – Some of the highest interest rates you’ll pay are for credit card debt, and the Employee Benefit Research Institute reports that nearly 50 percent of seniors aged 75 and older have outstanding debt — mostly from credit cards. Many credit card companies charge their clients 20 to 25 percent interest. If you had $20,000 in debt, you’d pay $4,000 to $5,000 annually — just for interest — before even paying any of the balance. Don’t go into retirement with that debt. Pay off the debt now, and then use the funds you had to put toward your credit card debt into saving for retirement.

Shop for the Lowest Fees – You will be charged a fee for having someone manage and invest your money. That’s fair — you’re paying for their expertise. Just make sure that you’re not paying more than necessary to your banks, brokerages, and credit card and mutual fund companies.

For instance, one company might charge 1.18 percent for managing your mutual funds, while another company might charge 0.10 percent for the same service. When added up, you could save several thousand dollars over several years. However, make sure that you’re getting the services you need. Sometimes a higher fee is worth the attention and service you need.

Plan to Pay Off Your Mortgage – Even if you have a low interest rate on your mortgage, it’s still a good idea to pay off your house. You still will have home-related expenses, including property taxes, insurance, maintenance and repairs, but your mortgage will be one less expense to worry about.

Some retirees go with a reverse mortgage when they have a lot of equity in their homes. The reverse mortgage lender provides the home owner with a steady income. The loan doesn’t have to be paid back until the homeowner moves out or dies. If you have heirs, they may have to sell the home unless they can afford to pay off the loan.

Consider a Change of Scenery – Use your vacation time to check out great retirement cities. Not only can you look for places that match your interests, but you might find places that allow your retirement dollars and the equity from the sale of your home to go farther.

USA Today in 2018 ranked the top 30 cities for retirees, taking into account the prevalence of recreational facilities, access to medical facilities and the amount of income a retiree would need. Rochester, Minn., was ranked number one, with an average retirement income of $26,217.

Don’t Serve as a Bank for Your Adult Children – According to a survey by Merrill Lynch and Age Wave, four out of five parents offer financial support to their adult children. And a TD Ameritrade survey discovered that many millennial receive about $11,000 annually from their parents. That same money invested annually at 8 percent could be a boon to your retirement savings.

Please contact us for help planning for retirement.

Trending: New “Instant” Payroll App

Posted on February 25th, 2019

Even employees who save money can run into a bit of financial trouble. A new payroll option might make their lives easier.

ADP, Daily Pay, Kronos, Even and other online payroll administrators now give employers the option of offering their hourly employees access to their paychecks for work already completed before payday.

The payroll app is paired with an employer’s current scheduling and payroll system and an employee’s direct deposit account. The app keeps track of when an employee completes a scheduled shift and the amount of money earned. Employees can access some or all of their earnings from that shift. There is a fee for the service — ranging from $1 to $5 — which is paid by either the employee or employer.

Bankrate, a financial services company, reports that nearly 20 percent of Americans don’t save any of their annual income, meaning they live paycheck to paycheck. Having immediate access to their paycheck often means they won’t have to rely on high interest credit cards or expensive payday loans or pay bank overdraft charges.

A downside is that employees might choose to take early payments often and find themselves under the same financial problems they were hoping to avoid. Walmart has an app that helps employees avoid this by letting employees figure their monthly expenses before accessing their paycheck.

Employers who decide to offer this benefit should know there may be costs when enrolling your workforce into the app. There also may be legal ramifications if you’re not in accordance with state and federal law concerning pay. For example, pay rates must be based on an hourly wage, rather than a flat daily rate.

Despite these concerns, many employers report the app has improved recruiting, retention, absenteeism and morale. Some employers discovered their employees are willing to work longer hours and more shifts when they see an immediate return for their efforts.  

Why Generics are Good for Your Pocketbook (and Health Insurance Premiums)

Posted on February 22nd, 2019

When available, generic drug substitutes generally save about 30 percent.

Generic medications have been hailed as a great way to save money on prescriptions and control escalating health insurance premiums. Generics usually cost substantially less than name-brand drugs, but be aware that generics aren’t immune to excessive price hikes.

Fortunately, the more you know about brand name drugs and generics, the more control you have over health care benefit costs.

Generic drugs are similar to prescription drugs since they contain the same active ingredients at the same strength and purity as brand-name counterparts but at a reduced cost.

Generic drugs generally cost about 30 percent less than brand names. Recently, a dose of the antidepressant Prozac costs up to $185 a month. Its generic equivalent runs as little as $24.

However, doctors don’t always prescribe generics because not every medication has a generic equivalent. An Archive of Family Medicine survey showed that doctors underestimated the cost of brand-name drugs 90 percent of the time and overestimated the cost of generics 90 percent of the time.

And, some generics don’t work exactly the same as name brands because blood levels vary.

Why Prescription Drugs Cost More

Drug companies claim higher prices pay for the research, development, testing and marketing of drugs. There seems to be no apparent ceiling on how high prices can go. Humira, used to treat rheumatoid arthritis, cost one employer $31,993 per person.

Other reasons for high drug costs:

•    Competition in the specialty medication market can drive costs up as companies increase the price of older therapies to match the price of new ones.

•    To protect their investment, companies file for patents on new drugs to have exclusive manufacturing rights. Other manufacturers can then apply to the U.S. Food and Drug Administration (FDA) to make a generic version. Because these companies don’t have to pay for research, they can sell the generic at a price closer to the manufacturing cost. While patents keep competitors at bay until the patent expires, some companies have found ways to expand the patent. AbbVie, manufacturer of Humira, added about 70 new patents on the drug that could keep biosimilars away until 2022 – even though the first patent expired in 2016.

According to Berkeley Wellness of the University of California, generic drugs account for more than 85 percent of U.S. prescriptions, compared to 57 percent in 2004. The popularity of generics clearly stems from the higher prices of prescription drugs.

Why Generics Cost Less

After a patent expires, a single generic drug manufacturer gets exclusive marketing rights, usually for six months. But when that period ends, other generic makers can make the drug and the resulting competition drops the price 80 or 90 percent or more.

The FDA has been under pressure to approve more generic drugs, but many generic prices are already so low, generic drugmakers are concerned increased competition could be a threat to their business.

Why Generic Prices Increase

According to the Government Accountability Office, more than 300 drugs recently had at least one price increase of 100 percent or more. The New England Journal of Medicine reports that one manufacturer raised a generic price 2,800 percent.

Some drugs are harder to manufacture than others. Humira, for instance, falls in the class of drugs called biologics. These specialty drugs are manufactured from a living organism and are difficult to replicate. The Federal Drug Administration refers to the generic versions of the drugs as “biosimilars.” Pharmaceutical companies creating biosimilars must prove their products create the same effects as the drug they replicate, requiring the companies to fund case studies and tests with patients, increasing the cost.

Another reason for high costs is that some generic manufactures that lack competition can price their drugs at the same level of the branded drug.

Not all pharmacies charge the same price for generics. A reporter for Detroit’s WXYZ-TV compared the retail prices of several generic drugs at more than 20 local pharmacies and found that prices for one medication varied from $10.99 to $97.99.

Drug discount cards also can reduce costs, but the savings depend on the card.

Ways for Employers and Employees to Save Money

Many experts agree that the key to lowering pharmaceutical costs is to educate your employees. They should seek second opinions and ensure they are diagnosed properly for chronic conditions and that their doctor prescribes the appropriate medication and dose. Of course, employees should request generic drugs when appropriate and should compare prices at different pharmacies.

Employees can not only save money by purchasing generics, but their insurance premiums are generally lower when overall health plan costs for the group were kept down the preceding year.

Please contact us if you have other questions about generics.

Benefit Planning Strategies for 2019-2020

Posted on February 21st, 2019

Although employer-sponsored group health benefit open enrollment is behind us, it’s not too early to start looking at what strategies will be in favor in 2019 to curb costs.

The Society for Human Resource Management (SHRM) reports that group health benefits are expected to approach $15,000 to $20,000 per employee this year. And while some employers are paying as much as 70-100 percent of employees’ premiums, health benefit costs still are rising at twice the rate of wage increases and three times general inflation, according to National Business Growth on Health, a human resources consultant.

Employers are taking matters into their own hands and are looking at new products and benefit changes for the 2019-2020 season.

Popular Health Insurance Trends

Consumer-Directed Health Plans combine a high-deductible health insurance plan with a tax-advantaged account that employees use to pay for eligible medical expenses — a health savings account (HSA) or health reimbursement arrangements (HRA). Any unused funds in an HSA can be rolled over to the next year. Also, employees can continue to use the funds for medical expenses after they reach age 65 and are enrolled in Medicare. The National Business Group on Health says many employers are helping employees by contributing to their employees’ HSAs, on average $500 for an individual and $2,000 for a family. In contrast, an HRA is a company-funded, tax-advantaged health benefit used to reimburse employees for personal health care expenses, and may be aligned with any type of health plan, not just a qualified high deductible health plan. However, HRAs can only be funded with employer contributions. HRAs may rollover funds at the employer’s discretion in plan design.

Employee purchase programs help employees pay for things they really need — such as appliances, tires or computers — but don’t have the emergency funds to pay for unexpected expenses. Bankrate, a consumer financial services company, estimates that nearly one-fourth of all Americans do not have adequate emergency savings. An employee purchase program means that employees facing a financial crisis are less likely to withdraw funds from their 401(k) plan or put the expenses on a high-interest credit card if they have access to emergency funds through the program. Employees pay back the loan over several pay periods through payroll deduction.

Group legal insurance plans give employees low-cost access to attorneys for will preparation, adoptions, estate planning, tax audits, traffic violations, real estate purchases, child custody issues and document review and preparation. One reason many people don’t seek legal assistance is fear of high fees. Having a ready bank of attorneys also saves employees’ time from having to search for appropriate legal assistance. The benefit is not a new one. It was first offered in the United States in the 1970s and become more mainstream in the 1990s.

Student loan repayment programs. According to a report by CNBC, more than one million people default on their student loans every year. And CollegeinColorado.org says that many of those loans average $25,000. Student loan repayment programs allow employers to assist employees with repaying their student loans. The Internal Revenue Service in 2018 issued a private letter ruling allowing a company to amend its 401(k) plan to allow employer contributions of up to 5 percent toward student loans to individuals who contribute at least two percent to their student loan. It’s assumed that this ruling may lead to more student loan debt solutions. Employers who can’t afford to assist with student loan costs can opt to provide educational tools about navigating debt.

Virtual care, also called telehealth or telemedicine, is becoming more and more popular as a way to provide easy and inexpensive access to board-certified physicians. Employees who have access to virtual care can have a phone or video conference with a professional physician or behavioral professional at low or no cost. Many of the telehealth physicians can prescribe medications.

Voluntary benefits are insurance products employers can offer employees at rates lower than they would pay for individual coverage. These products cover a large range of needs, such as life, disability, critical illness and accident insurance, plus pet coverage, ID theft protection, legal services and financial counseling. Employees’ premiums usually are automatically deducted through paychecks.

For planning guidance on your group health benefits, please contact us. 

Alera Group Acquires Broad Reach Benefits, LLC

Posted on February 12th, 2019

DEERFIELD, IL  — Alera Group, a leading national insurance firm, today announced that it has acquired Broad Reach Benefits, LLC, effective February 1, 2019. Terms of the transaction were not announced.

Broad Reach Benefits, headquartered in Madison, New Jersey, offers a wide range of employee benefits services and assists its clients by overseeing the entire employee benefits process. The firm focuses on bringing actuarial analysis, reporting metrics throughout the year and state-of-the-art technology previously only available to large corporations to middle market and small employers.

“Broad Reach Benefits is a fantastic addition to Alera Group, and we look forward to integrating their benefits expertise within our growing business in the northeast,” said Alan Levitz, CEO of Alera Group. “The existing collaborative culture within Broad Reach is a strong fit with our national culture. We are excited to welcome Broad Reach into the Alera Group family.”

“We are thrilled to become part of Alera Group and its exciting goal of working together to bring expanded national resources into our existing relationships,” said Phil Cohen, Managing Partner of Broad Reach Benefits. “The Broad Reach Benefits team looks forward to collaborating with other Alera Group firms across the country, many of whom I have known for years, as we enhance our service offerings with additional resources and expertise.”

All Broad Reach Benefits employees will continue operating out of the firm’s existing locations in New Jersey and Tennessee under the name Broad Reach Benefits, an Alera Group Agency, LLC.

Alera Group was formed in early 2017 and is one of the nation’s foremost independent insurance agencies. For more information on partnering with Alera Group, visit Partner With Us at www.jmjwebconsulting.com.

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About Alera Group
Based in Deerfield, IL, Alera Group’s over 1,500 employees serve thousands of clients nationally in employee benefits, property and casualty, risk management and wealth management. Alera Group is the 15th largest privately held firm in the country. For more information, visit www.jmjwebconsulting.com or follow Alera Group on Twitter: @AleraGroupUS.

M&A Contact
Rob Lieblein, Chief Development Officer
Email: rob.lieblein@aleragroup.com
Phone: 717-329-2451

Media Contact
Jessica Tiller, Weiss PR
Email: jtiller@weisspr.com
Phone: 443-621-7690

“Need to Have” Liability Coverages for Every Business

Posted on February 8th, 2019

There are insurance coverages that all businesses need, some that all business should consider, and some that you need only if you have special risk exposures.

Need to Have

Commercial general liability (CGL) is essential for every business. It will pay your legal costs, along with any judgments or settlements, when you are legally obligated to pay another party due to accident, injuries and claims of negligence. Most policies also provide medical expenses coverage that will pay up to $5,000 or $10,000 toward medical expenses of a third party injured on your premises, regardless of fault.

The CGL covers you for liability arising from:

  • Bodily injury, or physical harm to a person that occurs on your business premises or by your employee while driving for business.
  • Property damage you (or an employee) cause to property owned by someone else.
  • Personal injury, or damage to another’s rights or reputation. This includes slander, libel, invasion of privacy, false arrest and wrongful eviction.
  • Advertising injury, or copyright infringement and misappropriation of another’s idea in your advertising.

The CGL has some significant exclusions, including:

  • It will not cover your employees’ claims for bodily injury or employment practices. Two specific types of insurance policies are intended for these types of claims: Workers’ compensation covers employees’ bodily injury and lost-time claims; employment practices liability insurance (EPLI) covers claims involving employment practices, such as wrongful termination, discrimination, etc.
  • Contractual liability, or liability you accept by an agreement that would not exist otherwise.
  • Liquor liability — for businesses that sell, serve, make or distribute liquor.
  • Slander, libel, copyright infringement or misappropriation of another’s idea — for businesses in the media industry.
  • Pollution
  • Damage to your work due to faulty workmanship
  • Product recall
  • Electronic data

As with most insurance policies, the general liability policy also excludes coverage for claims resulting from war, criminal or intentional acts.

Umbrella or excess liability insurance provides coverage once a claim exhausts the limits of your other, or “underlying,” liability policies. For example, if an employee causes a multiple-injury auto accident, your umbrella or excess policy would begin to pay after claims exceed your commercial auto policy’s liability limits. Umbrella coverage differs from excess coverage in that it can also “step down” to cover some losses not covered by the underlying policies. However, most umbrella policies exclude coverage for employment practices, professional liability and product recall— all of which can be covered by specialized policies.

Commercial auto insurance covers your business for auto-related liability. Personal auto policies exclude commercial use of the vehicle, leaving a serious coverage gap if you or an employee are involved in an injury or property damage accident while driving for work. Commercial auto insurance can cover vehicles on an individual or fleet basis. We strongly recommend adding to your policy uninsured and underinsured motorists coverage, coverage for borrowed or rented autos, and coverage for employees using their own cars for work.

Business owners’ policies (BOPs) combine business liability and property coverages into a standard package, typically including property, general liability, vehicles and business interruption. BOPs can simplify insurance buying and can save you money versus buying separate policies from different carriers. However, if your business has unique risks, this one-size-fits-all coverage might not be your best choice.

Workers’ compensation insurance. All states except South Dakota and Texas require businesses with employees to carry workers’ compensation insurance or self-insure. The insurance covers all lost time and medical benefits the employer is obligated to pay by state law.

In most states, employers who lack workers compensation insurance face civil fines, and some states impose criminal penalties as well. In states that don’t require insurance, employers will probably want it anyway, since without insurance, employees can sue in court for injuries. With insurance, the “workers’ compensation bargain” means employees give up their right to sue their employer in exchange for the promise of receiving state-mandated benefits.

If you have questions about Need to Have coverages or feel that you lack any of these coverages, please contact us.

Alera Group Acquires Whipple & Company

Posted on February 7th, 2019

DEERFIELD, IL  — Alera Group, a leading national insurance firm, today announced that it has acquired Whipple & Company, effective February 1, 2019. Terms of the transaction were not announced.

Whipple & Company, based in Boca Raton, FL, was founded in late 2016 by Melissa Whipple, who remains as Managing Partner of the firm. Under her leadership, Whipple & Company experienced remarkable growth over the past two years, meeting client’s unique employee benefits objectives with particular expertise in carrier negotiations, compliance, and wellness.

“We welcome Melissa Whipple and her team to Alera Group.  Whipple & Company is an excellent addition, expanding our presence and expertise in Florida and the surrounding states,” said Alan Levitz, CEO of Alera Group. “Melissa and her team bring considerable industry experience and terrific energy to Alera Group.  We look forward to their contributions to our continued national growth.”

“As an Alera Group firm, we look forward to offering our clients a wider breadth of resources and expertise than ever before, while continuing to deliver exceptional localized service,” said Melissa Whipple. “The collaborative culture of Alera Group aligns with the existing core beliefs of Whipple & Company, and we are excited for the synergistic work ahead.”

Whipple & Company employees will continue operating out of the firm’s existing location under the name Whipple & Company, an Alera Group Agency, LLC.

Alera Group was formed in early 2017 and is one of the nation’s foremost independent insurance agencies. For more information on partnering with Alera Group, visit Partner With Us at www.jmjwebconsulting.com.

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About Alera Group
Based in Deerfield, IL, Alera Group’s over 1,500 employees serve thousands of clients nationally in employee benefits, property and casualty, risk management and wealth management. Alera Group is the 15th largest privately held firm in the country. For more information, visit www.jmjwebconsulting.com or follow Alera Group on Twitter: @AleraGroupUS.

M&A Contact
Rob Lieblein, Chief Development Officer
Email: rob.lieblein@aleragroup.com
Phone: 717-329-2451

Media Contact
Jessica Tiller, Weiss PR
Email: jtiller@weisspr.com
Phone: 443-621-7690

 

How to Protect Your Interests When Working with Contractors

Posted on February 4th, 2019

One of the most effective and simplest ways of protecting your organization from liability due to contractors’ and subcontractors’ operations is with Additional Insured coverage.

Liability insurance covers you from losses due to claims your company, its employees or products or services caused harm or wrong to a third party. Sometimes, however, your organization can be considered “vicariously liable” when another business, such as a subcontractor, causes harm when doing work on your behalf. In these cases, you would want the contractor or other business’ policy to apply rather than yours.

There are two ways to obtain coverage under another entity’s policy. In the first, “contractual indemnity,” your contract with the other party requires it to “indemnify,” or cover you for any liability costs resulting from your joint operations. Alternatively, you can also require the other party to name your firm as an additional insured under its insurance policy.

However, obtaining additional insured status often provides greater protection than contractual indemnity. Some states and courts look unfavorably on contractual indemnity, because subcontractors who want business sometimes have little bargaining power. Additional insured coverage, on the other hand, causes no such problems.

For your contractor to provide you with “additional insured” coverage, it must obtain an additional insured endorsement, which modifies its general liability policy. Unlike the policy owner (or “named insured”), the additional insured has no responsibility for keeping any records needed for determining premiums, paying premiums or reporting claims.

When you require additional insured coverage under another organization’s policy, you’ll probably ask for a certificate of insurance to provide proof of coverage. Be aware that the certificate provides proof that the coverage existed on the date the certificate was issued. The named insured can cancel coverage without providing notice to you. You can request the insurer to provide you thirty days’ notice of cancellation or nonrenewal of the endorsement. However, the certificate is not part of the policy and not binding on the insurer. In the case of large or high-risk projects, you can request that the contractor modifies its policy with an endorsement that obliges the insurer to provide this notice.

Considerations for Subcontractors

If the shoe is on the other foot and you are a subcontractor, obtaining additional insured endorsements for contractors and providing the required certificates can be an administrative hassle. To solve this problem, you can buy a blanket additional insured endorsement. This provides additional insured coverage to any party with which you enter a contractual agreement (typically a construction contract or equipment rental contract).

Blanket additional insured endorsements are not as desirable for the additional insured. Blanket endorsements do not name specific additional insureds, so the insurer cannot provide notice of cancellation or nonrenewal. They usually provide narrower coverage as well — for example, many of these endorsements state that coverage ends when operations are completed. This could be construed to eliminate coverage for claims that occur during operations but aren’t filed until later.

For more information on covering additional insureds, please contact us.

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