BCN 4708 Fall 2008 Chapter 8 Insurance

Insurance What is Risk? Specific types of Risk Inflation Inflation Market Market Principal Principal Liquidity Liquidity Credit Credit Two categories of risk Speculative Risk Speculative Risk Pure Risk Pure Risk What is Risk Management?

Risk Management Risk Management Process Identify and analyze loss exposure Identify and analyze loss exposure Evaluate alternatives Evaluate alternatives Select the best techniques Select the best techniques Implement Implement Monitor and adjust Monitor and adjust

Risk Management Return Risk Risk / Return Tradeoff

Risk Management Dealing with risk Identify Identify Plan Plan Monitor Monitor Anticipate Anticipate Improve company Improve company

Insurance Transfer risk exposure Insurance InsuranceRequired Covers specific risk Selection is important Disclosure Best’s Rating Guide

Insurance Types of losses Property Property Financial Financial Liabilities Liabilities Losses involving personnel Losses involving personnel

Insurance Premium Rates Property Property Full value Fire rate Flood rate Wind rate Etc Maximum values at risk Maximum values at risk Credits for certain amenities Credits for certain amenities Payroll or gross sales Payroll or gross sales Location Location Reputation Reputation

Insurance Builders Risk Property deductions Property deductions Unoccupied Unoccupied All losses not excluded All losses not excluded

Insurance Property insurance Covers losses due to destruction of personal or company property Covers losses due to destruction of personal or company property Replacement cost Replacement cost Value Value Coinsurance Coinsurance Specific perils Specific perils Exclusions Exclusions

Insurance Financial Loss Exposure Loss of net income Loss of net income Decrease in revenues and increase in expenses Decrease in revenues and increase in expenses Business interruption insurance Business interruption insurance Covers rental equipment costs Work stoppage costs Temporary relocation costs

Insurance Business General Liability Exposures Legal liability losses Legal liability losses Bodily injury Bodily injury Property damage Property damage Other injury Other injury Caused by employees or subcontractors Caused by employees or subcontractors Occurrences Occurrences

Insurance Contract Liability Exposure Owner, Contractor, Surety Exculpatory Clauses Exculpatory ClausesHold-harmlessIndemnification Contract Liability exclusion Contract Liability exclusion

Insurance Other types of coverage Business Automobile Policy Business Automobile Policy Workers Compensation Insurance Workers Compensation Insurance Employee Benefits Liability Coverage Employee Benefits Liability Coverage Employment Practices Liability Employment Practices Liability Umbrella Liability Policy Umbrella Liability Policy Personnel Loss Exposures Personnel Loss Exposures

Insurance Public Liability Insurance Need proof for initial license or to renew Need proof for initial license or to renew Signed affidavit Signed affidavit Min requirements Min requirements Different for different areas of construction No exemption

Insurance Workers’ Compensation insurance Certificate of registration Certificate of registration Can obtain exemption Can obtain exemption

Employee Deductions FIT FIT SIT SIT Social Security Tax (OASDI) Social Security Tax (OASDI) Medicare Tax (HI) Medicare Tax (HI) SUTA SUTA SDI / Workers’ Comp SDI / Workers’ Comp Local Local Union Union Medical Medical Dental Dental