The 'last resort'

Insurance is a last resort payment method when the cost is so large that the budget, reserves, and the lines of credit are insufficient to meet the risk. Which risks should one insure? For a small adjusting firm with one leased office, most property-related claims may be paid out of petty cash, but the computer systems, employee health and injuries, vehicles and records may require more than the petty cash drawer can supply. Here are several types of insurance needed:

Employee benefits: Health insurance, disability benefits, life insurance, pensions and other benefits offered to employees usually require an insurer's involvement.
Workers' compensation: Unless the firm is large enough to qualify as a self-insurer, this risk requires workers' compensation/employers liability insurance by law.
Vehicle insurance: Lacking the "large number of homogeneous exposure units" needed for self-insurance, auto liability and physical damage insurance is needed.
Property insurance, including computer equipment: There is generally enough risk to warrant the purchase of property and equipment coverage.
Crime and dishonesty: Occasionally a dishonest adjuster may cause a major loss, or a cyber hacker will create fraud. This requires crime insurance.
Professional liability: Also called E&O or malpractice, but for the major screw-up or alleged bad faith claim, one or more excess layers of insurance will provide protection.
There are many types of insurance to consider, such as directors & officers liability, employment practices liability, computer fraud or cyber risks, etc., including excess layers of liability.

Insurance provides "peace of mind." Nobody wants a loss so large that insurance is needed, but it is important to understand what coverage is available and how it works, because someday it may be needed.

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Adjuster risk financing methods - Part 7

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