Insurance News & Updates

Industry news, regulatory updates, and developments affecting the New England insurance market. Cleary’s team tracks what’s changing so our clients don’t have to — this section is where we share what’s worth paying attention to.

Inland Marine Policies

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Inland Marine policies, as compared to Ocean Marine policies, are meant to cover non ocean related property that is under construction, moves from place to place or is of special or high value. These features usually do not make them good candidates to be insured by standard business property policies.

The term “Inland Marine” covers policies that have many different names to describe what they cover. When you see a building under construction, it would be insured under a Builders Risk policy. Cargo in transit would be insured by a Cargo policy. Contractors Equipment would be insured under an Equipment policy. Jewelry stores inventory is covered by a Jewelers Block policy.

What are some of the benefits of insuring property under an Inland Marine Policy form?

  • Most of them have broader coverage than standard property policies
  • Most use a rate structure that is more advantageous to the insured
  • Many insure the property in question under a “stated” value, meaning the stated value of the property insured is what you would receive if it were destroyed or lost as compared with Actual Cash Value which is a depreciated value

These coverages can be written as a stand-alone policy or added to a commercial property policy by endorsement. The industries where you typically see Inland Marine coverage are construction, warehousing and transit and where there is a “bailee” exposure, such as a dry cleaner. Loss to the property of others in their possession is covered under an Inland Marine form.

If you think that you may have an Inland Marine exposure or if you have coverage but are not sure if it is sufficient, please call Mike Regan at Regan Cleary Insurance.

At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. We are members of the National Association of Surety Bond Producers (NASBP), the professional organization for agents that also specialize in surety bonding. Give us a call today at 617-723-0700.

Summer Activities

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Liability risk is everywhere: at home, on the road, on vacation. It’s an unfortunate fact that accidents can stem from everyday activities and lead to costly lawsuits. Do you:

  • Own a pool or trampoline?
  • Entertain?
  • Have excited pets?
  • Spend time behind the wheel?
  • Have a teen driver in the household?
  • Own a recreational vehicle or boat?
  • Have staff in your home (gardeners, nannies, housekeepers)?

These are all factors that increase your risk for a lawsuit. Therefore it is important to make sure you understand the risks you face and the options you have to manage those risks.

In today’s litigious society, every family with significant assets faces the risk of lawsuits that could significantly impact their net worth. That’s why we recommend you consider the need for an Excess Liability policy. Financial planners suggest that clients should have excess liability coverage at least equal to their net worth.

Personal Excess Liability policies, more commonly known as Umbrella policies, are very important to your financial well-being and the cost is minimal: usually about $300 annually for the first $1,000,000 in coverage.

Umbrella policies pick up where your homeowner and auto policies leave off. For example, if you are in a car accident and your auto policy provides $500,000 in coverage, and someone is seriously injured, you could be sued for much more than $500,000. The umbrella policy would then take over. The policy would pay for medical bills and in the event of a lawsuit, pay legal fees and the settlement – up to the limits of your policy.

Contact us today so we can customize a policy that balances your assets and risks to provide you with peace of mind.

Concerned about your personal insurance coverage? At Cleary, our experienced Personal Lines department will work with you to evaluate your insurance needs, identify exposures and create a customized insurance portfolio. Give us a call today at 617-723-0700.

Federal Service Contracts

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The U.S. Department of Labor issued a Final Rule implementing Executive Order # 13495, Nondisplacement of Qualified Workers under Service Contracts, signed by President Obama on January 30, 2009. The Order and the final rule require contractors and subcontractors who are awarded a federal service contract to provide the same or similar services at the same location to, in most circumstances, offer employment to the predecessor contractor’s employees in positions for which they are qualified.

Where the successor contract is a contract subject to the Order and the final rule, the contracting officer (or designee) will ensure that the contractor provides written notice to the eligible employees of the predecessor contractor of their possible right to an offer of employment. Such notice may either be posted in a conspicuous place at the worksite or may be delivered to the employees individually. An offer of employment may be for any position for which the employee is qualified; the offer need not be for the same position that the employee previously held.

The effect on Contractors is outlined below:

  • With limited exceptions, the contractor will be compelled to initially offer employment to the predecessor contractor’s employees. The contractor’s workforce will be comprised of the predecessor company’s employees rather than employees selected or employed by the contractor.
  • If the predecessor workforce is unionized, the successor contractor will be required to recognize the union under the National Labor Relations Act successorship rules.
  • Additionally, if the predecessor’s workforce was in the process of unionizing, then those organizational efforts will continue with the new Employer.
  • The Final Rule’s effective date will probably be before year end when the Federal Acquisition Council issues companion regulations implementing the Executive Order.

Health and Welfare Changes

Effective June 17, 2012 the new SCA health and welfare benefit increased to $3.71 per hour. We encourage all contractors to not pay the new fringe benefit until it has been authorized by your Contracting Agency with a modification date.

At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 and we will work with you to create a plan that meets your fringe benefit obligations and provides your employees with valuable benefits.

Personal Finance 101

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With their college degrees in hand, it’s time for the recent graduates in your life to take on the responsibilities that come with the rewards of financial independence. And given today’s economic challenges, it’s critical for them to establish good money management habits from the outset. Here are some key personal financial tips you can give them along with your graduation gift — the tips may even turn out to be the most valuable gift they receive.

Watch your spending

As a new graduate, this may be your first experience with significant, steady cash flow. It can be tempting to spend all of your newfound money, but tread carefully until you’ve evaluated exactly how much you earn and how much you spend.

To start out on the right financial foot, make a budget and stick to it. Determine your monthly expenses and monthly income (after taxes), and then calculate how much you have left over. As you create your budget, be realistic about your spending — you may be surprised, for example, how much you spend on ATM fees, cab fare or take-out food.

Make retirement savings a priority

Find a prominent place in your budget for retirement savings, and treat your contribution as one of your monthly bills. If you have access to a 401(k), 403(b) or other tax-deferred retirement plan at work, make contributions to the plan a priority in your budget. These plans let you put aside money, pretax, which then can grow tax-deferred. So you’re reducing your tax bill while saving for your future. Alternatively, your employer may have a 401(k)-type plan with a Roth option that may be even better for a young person.

If your employer doesn’t offer a retirement plan, consider opening up an IRA. If you choose a traditional IRA, you can deduct your contributions when you file your tax return next year. If you choose a Roth IRA, you can’t deduct your contributions, but the withdrawals you make at retirement will be tax free.

Whatever retirement plan you have, the most important factor isn’t how much you contribute, but that you start contributing as soon as you can. If at age 22 you begin contributing $150 per month to a Roth IRA account that earns 8% annually, you’ll accumulate $676,000 by age 65. But if you wait until age 30 to start contributing, you’ll need to save twice as much for the rest of your working life to catch up.

If your retirement plan offers an employer match, though, try to at least contribute the amount necessary to get the maximum match. If you don’t, you’re throwing away free money!

Bear in mind that if you withdraw funds from your retirement plan before age 591/2, you’ll be subject to current income taxes and an additional 10% tax penalty.

Manage debt wisely

Many college grads leave school with some form of debt, usually from student loans or credit cards. It’s important to develop a favorable credit history, especially in times of tight credit, because lenders want to see that you’re a good risk. Damage to your credit rating can impair your ability to qualify for a car loan or mortgage at an attractive rate.

So pay off your credit card bills in full every month. If you do have credit card debt, transfer the balance to a low interest-rate card and pay more than the minimum each month. If you pay only the minimum, it could take you years to pay off the card. Even with a low interest-rate card, that could add up to hundreds, if not thousands, of dollars of nondeductible interest.

If you’re having trouble making student loan payments, consider consolidating multiple loans to extend your repayment timeline and reduce monthly payments, or look into getting a deferment. Make sure the rest of your finances are in order before you start attacking your student loan bills too aggressively. Give priority to credit card and other debts with higher interest rates.

Plan for future expenses

In addition to contributing to a retirement plan and paying off your debts, get in the habit of saving for short-term to middle-term expenses. First, save for emergencies — build up enough to cover at least a few months’ worth of living expenses. Even if you have a good job, you never know what the future will hold, especially in a stressed economy.

Once you’ve built up your emergency fund, save for other goals. You’ll be rewarded with a growing nest egg that may enable you to fund a car, home, wedding or other big items down the road.

Finally, you aren’t too young to benefit from the guidance of a professional financial advisor, who can provide specialized advice for your individual situation.

Insure yourself

If your health insurance expired at graduation, make sure that you get covered — either through your new employer or through an individual policy. A health emergency can significantly deplete your funds. Fortunately, you’ll find that you’re likely relatively cheap to insure because most recent grads are young and generally healthy.

In addition, don’t overlook other insurance needs, such as renter’s and auto insurance, to make sure that large, unforeseen expenses don’t disrupt your finances too greatly. Be sure to shop around for competitive rates.

Presented by John Steiger, ChFC, AEP Certified Financial Planner

At Cleary, we are committed to a holistic approach of protecting and preserving our clients’ financial assets. Give us a call today at 617-723-0700 and let us know how we can help you.

Client Spotlight

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A national early education organization, Jumpstart helps at-risk children develop the language and literacy skills they need to be successful in school, setting them on a path to close the achievement gap before it is too late.  Every year, thousands of preschool children benefit from this program, the only supplemental pre-K program of its kind, and enter kindergarten with the language, literacy, and social skills needed to succeed not only in school, but also in life.

Learn More

Cyber Liability

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Safeguarding data is an increasingly complex challenge for large and small businesses alike. Technology reaches throughout business operations, and the volume of electronically stored data grows exponentially. While these trends allow businesses to work more productively, they also result in a greater vulnerability to cyber security threats.

More than 40 states now have some level of data privacy and security breach notification laws on the books. Typically these laws require a business that has suffered a breach to notify all customers who have possibly been affected and may require credit monitoring services. The monetary and reputational costs for notification and credit monitoring are significant.

The inadvertent release of private data can take on many forms, including:

  • Lost or stolen laptop containing customer names and social security numbers
  • Cyber criminals who hack into your server to steal information
  • Disgruntled former employees looking to vandalize stored data
  • Private information mistakenly emailed to an incorrect address
  • The Ponemon Institute and Symantec have jointly developed a Data Breach Risk Calculator that is an effective tool for evaluating your business exposure to a Cyber Risk loss. Cyber Risk Insurance is available through numerous carriers, with the typical product offering:
  • First Party coverage: responds to notification expenses, credit monitoring, remediation expenses, extortion and theft
  • Third Party coverage: responds to regulatory defense and litigation from affected individuals

Insurance is not a substitute for sound policies and procedures regarding the handling of private data, but a Cyber Risk policy can help deal with the regulatory, monetary and reputational costs of a data breach. Let us know if you have additional questions regarding these exposures. Additional information can be found at the following websites:

http://www.ponemon.org/
http://www.us-cert.gov/control_systems/
www.isalliance.org
http://publicaa.ansi.org/sites/apdl/khdoc/Financial+Management+of+Cyber+Risk.pdf

At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. Give us a call today at 617-723-0700.

Certificates of Insurance

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Commerce would ground to a halt if it weren’t for Certificates of Insurance (COI). It’s a bold statement but true. Without this document providing that an entity has insurance coverage, banks wouldn’t fund construction projects, homeowners wouldn’t remodel, goods wouldn’t be shipped and cars wouldn’t be financed. These are just a few of the nightmare scenarios that would occur if one weren’t able to provide proof of insurance.

COIs provide proof to a third party (not the named insured) of the existence of and amount of insurance issued to the named insured by their insurance carrier(s). These are most commonly requested when required by a contract between two parties; such as an owner/contractor or bank/borrower.

COIs address those types of coverage that a third party would be most interested in knowing about concerning the named insured:

  • Commercial General Liability
  • Automobile Liability
  • Workers Compensation
  • Umbrella/Excess Liability

Third parties are often interested in proof of coverage specific to a transaction and that protect the third party’s interest in that transaction, such as proof of Homeowners Insurance for a mortgagor, proof of Builders Risk insurance to a project lender, or proof of cargo insurance to a bank financing an international transaction. Additional information provided by COIs include:

  • A “Remarks” section for more specific data (e.g. Description of Operations/Locations/Vehicles)
  • Insurance contract dates of coverage
  • Names of insurance carriers providing coverage
  • Limits of liability of each policy
  • Provision for notification of policy cancellation to the third party in the event the policy is to be cancelled before the expiration date shown

For more information concerning Certificates of Insurance, please call Mike Regan at Regan Cleary Insurance.

At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business . We are members of the National Association of Surety Bond Producers (NASBP), the professional organization for agents that also specialize in surety bonding. Give us a call today at 617-723-0700.

Disability Insurance

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According to a recent survey, 4 in 10 American workers live paycheck to paycheck. This means that an unexpected illness or injury that takes an employee off the job for more than a few days can have devastating consequences for those who depend on their wages to survive. Disability insurance – sometimes called disability income insurance – helps protect workers’ incomes against the possibility of loss of work from illness or injury.

What it Covers

In a nutshell, disability insurance helps replace a portion of a worker’s income if that worker loses his or her income due to an injury or illness. Typically, disability insurance policies will replace between 50% and 65% of a worker’s income – a percentage low enough that most people would prefer to return to the workforce as soon as possible, but high enough that most workers could keep a roof over their heads, the lights on in their homes, and some food on the table for themselves and their families until they recover. Broadly speaking, there are two kinds of disability insurance policies:

Short-term disability – for events that disrupt income for less than 90 days
Long-term disability – covering benefits for a longer period of time

  • Advantages of Group Coverage
  • Group disability coverage has advantages for both the employer and the workforce. Advantages to the employer include:
  • Reduced costs compared to offering individually underwritten policies to everyone
  • Increased employee loyalty – especially after someone in the workforce has a claim and word gets out that these valuable benefits kicked in
  • Tax deductible premiums
  • Easy, streamlined administration
  • List billing

Advantages of group disability insurance to the worker include:

  • Affordability – the employer subsidy makes it possible for workers to get coverage they would be unable to get on their own
  • Pre-existing conditions that would make it impossible for employees to get coverage as individuals may be waived in a group plan
  • Streamlined application process with no medical exam required
  • No prior year tax returns or income verification are required; employer reports income information to the disability insurance carrier

In addition, some policies are portable. If the employee leaves the company, he can sometimes keep the policy, though he loses the employer subsidy. Portability is an important feature, because disability insurance can be difficult to qualify for on the individual market.

Disadvantages of Group Disability Insurance

All coverages have both advantages and disadvantages. Some of the disadvantages include:

  • Less flexibility – managers and supervisors may have different needs and risk profiles compared to rank and file employees
  • Less coverage – some workers may be able to get more robust plans on the individual market than carriers offer via group plans
  • Benefits are taxable to the recipient
  • More restrictive definitions – with disability insurance policies, the definition of the word “disability” in the contract itself is of paramount importance. For example some policies, known as “Own Occupation” policies, pay benefits if you cannot work in your own profession. Other policies will not pay benefits if the worker can work in any occupation.
  • All things being equal, “Own Occupation” policies are preferable – but they tend to have higher premiums, and are less prevalent in the group disability insurance market.

Taxation of Disability Insurance

Group term premiums are generally deductible to the business as a business expense, just like any other wage expense. The value of the premiums, however, is not usually taxable as income to the worker. Disability insurance benefits may or may not be taxable, depending on the circumstances. Generally, if the recipient didn’t pay taxes on the premiums, then the benefits are taxable as ordinary income. This is true for most employer-paid group health insurance plans. If the employee paid part of the premiums, then a similar percentage of benefits will be tax-free.

At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 and we will work with you to create a plan that meets your business objectives, takes into account state and federal laws, and capitalizes on incentives and innovative solutions now being offered.

DOL Compliance Audits

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In the last several months, many of our clients with Service Contract Act (SCA) contracts have been audited by DOL Investigators from the Wage and Hour Division. These auditors are part of the expanded enforcement that occurred as a result of the American Recovery & Reinvestment Act.

They usually begin with auditing employee and contractor records, before moving on to personal interviews with employees. They are looking for Contract Work Hours and Safety Standards Act irregularities as well as FLSA and Service Contract Act violations. It is critical that companies pay the minimum wage rates and fringe benefits as listed in their respective wage determinations. In addition, record keeping should be up to date and verify the aforementioned, including your health and welfare reconciliations.

It is important to remember that employee wages and fringe benefits should not be combined. This is especially true when fringe benefits are paid in cash. Your records should verify the wages and fringe benefits are distinct, in the event an investigator asks for them.

Surprising as it may seem, some contractors are not aware they have a SCA contract until an audit takes place. At that point, fines are assessed and payments of back wages become due. In some instances, the Contracting Officer can ask to withhold funds that were destined for payments to the contractor, if there is a potential risk of default.

The best remedy to handle these audits is to have your appropriate personnel properly trained in the fundamentals of the SCA and how to handle DOL audits. In many cases we can assist a contractor with these audits, but it is imperative that we have good facts to build a prima facie case.

At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 and we will work with you to create a plan that meets your fringe benefit obligations and provides your employees with valuable benefits.

An Invaluable App

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A recent article in the Boston Globe, entitled “Boston’s Brightest Pick their Top Apps”, peaked our curiosity. While we all have read countless articles and downloaded oodles of apps, there might be one more you should consider. It’s called MyHome Scr.APP.book.

After reading that Joseph Murphy, the state’s Commissioner of Insurance recommended the app, we not only downloaded it but began using it. We found it to be one of the best and easiest ways to take inventory of household possessions. It even includes a preparedness section with various insurance tips.

MyHome Scr.APP.book is great for determining how much insurance you really need and cataloging your possessions in the event you need to file a claim. If you’re like us, you don’t think about taking a picture of your washing machine or jotting down the serial number until something happens and your homeowner’s insurance company is looking for the information. With MyHome Scr.APP.book, you simply walk through your home and enter names, purchase dates, prices, and serial numbers of your most valuable possessions.

Developed for the National Association of Insurance Commissioners (NAIC), the software links to your smartphone camera so you can easily attach a snapshot of each item. Once your list is complete, you can email or export the list to a safe location on the internet.

Cataloguing the contents of your home can be tedious and time consuming. It always seems to be on the list of things to do next week, though next week never seems to come. While no one wants to think about filing a claim, especially those that aren’t prepared, you can get prepared and organized with the help of MyHome Scr.APP.book. Best of all, it’s free and easy to use.

Concerned about your personal insurance coverage? At Cleary, our experienced Personal Lines departement will work with you to evaluate your insurance needs, identify exposures and create a customized insurance portfolio. Give us a call today at 617-723-0700.