Transcript Chartered Retirement Planning CounselorSM Professional

CERTIFIED FINANCIAL PLANNER CERTIFICATION
PROFESSIONAL EDUCATION PROGRAM
Financial Planning Process & Insurance
Session 16
Professional Liability
Commercial Insurance
©2015, College for Financial Planning, all rights reserved.
Session Details
Module
9
Chapter(s) 3 & 5
LOs
9-5
9-10
Explain the different types and characteristics
of professional liability insurance.
Explain a characteristic related to commercial
property or commercial liability coverage.
16-2
The Planner’s Role
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Identify potential areas of loss
Quantify risk
Helping client understand potential risk
Assess coverage
Refer to appropriate professionals
Review annually
One of the couples you work with just started an accounting practice
where he works as the CFO for small businesses that acquire federal and
state contracts. His spouse has a successful catering business, employing
three full-time employees and 15 contract labor employees; they cater
in-home events for wealthy clients, providing the food, bar, and valet
services. She has a kitchen in her home, two vans, and a large truck.
What risks could destroy their financial security?
16-3
Professional Liability Insurance
Covers failure to use due care
in professional practice
• Malpractice: physicians,
surgeons, dentists
o
Can cause physical harm
• Errors and Omissions:
insurance agents, attorneys,
accountants, etc.
o
Can cause fiscal harm
16-4
Business Owner Exposures
• Commercial liability
• Commercial automobile
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o Liability
o Medical payments
o Physical damage
o Truckers
o Garage
Dishonesty
o Employee
o Customer
Property-related
16-5
Commercial General Liability
CGL is designed to protect businesses
against non-auto liability, not involving
employees.
•
Conditions of premises – customer slips
on a wet floor.
•
Business operations – working in a
customer’s home, damage is done to
the home.
•
Product liability – defective product
injures a consumer.
•
Completed operations – installed
electrical fixture shorts out and causes a
fire.
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Contingent liability – retailer’s role in
selling a manufacturer’s defective
product.
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Contractual liability – if a product is not
fit for intended use it is a breach of
implied warranty.
16-6
CGL Claims
Commercial General Liability availability:
1. Occurrence basis: need only to be in effect on
date that an accident causing damage occurs to
trigger coverage
2. Claims made basis: trigger for coverage is date
claim is made against insured
16-7
Business Auto Insurance
Insured can pick from a wide range of coverage to meet specific
business needs:
• Any auto
• Owned autos only
• Specifically described autos
• Hired (leased) autos only
• Non-owned autos only
Other features are available
to business owners to
build a policy for
their needs.
16-8
Commercial Insurance
• Mostly monoline
•
coverage
Two primary packages
o Commercial Package
Policy (CPP)
• larger firms
• basic package of
property and liability
coverages
• business customizes
coverages based on
needs
o Business owners
policy (BOP)
• smaller firms
16-9
Other Commercial Liability Coverages
Form
Coverage
Workers’
Compensation and
Employer’s Liability
• Part 1 covers legal liability for payment
under state law
• Part 2 protects employer for common
lawsuits by employees
Commercial Umbrella • Can be added to a CGL policy
Liability Insurance
16-10
Coinsurance for Commercial Property Coverage
Replacemen
t cost 
Amount of insurance
Coinsuranc e

percentage
required
Coinsurance requirement* usually
80% of replacement cost.
This is primarily a concern in the
event of a partial loss.
 Insurance carried

 Loss   Deductible

 Insurance required *


Maximum amount
of recovery
*Insurance required is generally 80% of current replacement cost, but can vary on a companyspecific basis from 70% to 90%.
16-11
Commercial Property Coverages
Form
Coverage
Building and
Personal Property
• Building or contents, or both
• Contents—furniture and fixtures,
machinery, equipment, stock, etc.
• Additional coverage via endorsements
• Various “causes of loss” forms to specify
Blanket Insurance
• To cover more than one type of
Report Form
Coverage
• To cover fluctuating needs as stocks of
merchandise vary
o Insured makes periodic reports of
values on hand
property at more than one location
16-12
Additional Commercial Property Coverages
Form
Consequential Loss
Boiler & Machinery
Transportation
Crime/Dishonesty
Coverage
• Business interruption
• Contingent business interruption, extra
expense
• Leasehold interest
• Accident to insured object
• Ocean marine
• Inland marine
• Employee fidelity bonds
• Nonemployee crime
• Theft, disappearance, destruction
16-13
Question 1
All of the following professionals would be likely
to purchase errors and omissions insurance
except
a. financial planners.
b. accountants.
c. physicians.
d. attorneys.
16-14
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16-15
CERTIFIED FINANCIAL PLANNER CERTIFICATION
PROFESSIONAL EDUCATION PROGRAM
Financial Planning Process & Insurance
Session 16
End of Slides
©2015, College for Financial Planning, all rights reserved.