Insurance - what's it all about?
By David Waters, Managing Director CHIS and PrimeCare Insurance
December 1, 2011
Insurance - we're all aware of it and most of us will admit it's essential, both for your care home and for your personal peace of mind. But with the array of important issues to consider and the sheer complexity of all the supporting information behind them, how many REALLY understand the principal aspects of their insurance?
You, as a care business owner, should know what your premium pays for so you can ensure you've secured the very best value for money.
To help demystify the landscape for you, we've outlined here principal components of any commercial insurance policy for either a domiciliary care business or care home. These can broadly be divided into three sections:
- Material damage - including business interruption
- Combined liability - employers', public, products and malpractice (treatment)
- Legal - advice and expenses
Each insurer will have a slightly different understanding of these covers so it pays to know what to look for.
Material damage
- Buildings - the actual building structure, including any permanently fitted features, such as hoist tracks, boilers and lifts;
- Contents - all building contents; carpets, curtains, beds, furniture, computers, phone systems etc not permanently fixed to the building. This may include your residents' effects and potentially your 'all risks' items (things regularly taken away from your business, such as laptops and potentially some caring equipment).
- Money - cash, cheques and stamps, although this usually provides only limited cover as businesses are no longer expected to carry much cash. Note: CHIS recommends all its clients pay wages by bank transfer to minimise cash held on site, so minimising the risk of physical harm caused by hold-ups.
- Goods-in-transit - items purchased off site (e.g. your local supermarket) which are damaged in a car accident on the way back to base.
- Business interruption - essential cover often overlooked, covers your lost gross profit following insured damage. (one care business was surprised following a major flood incident when they discovered they were still responsible for maintaining employees' employment and associated costs), and can also cover some additional costs necessary to minimise other business losses. We go into more detail on this cover at the end of this article.
Combined liability
- Employers' liability - provides protection from compensation and associated legal costs for employee injuries sustained at work if you found not to have provided a safe system of work (in most cases when an employee is injured at work the Courts believe the employer is at fault).
- Public liability - covers compensation and associated legal costs for residents, visitors (including intruders) or any non-employees on your premises injured or who suffer loss or damage - these are far less frequent than employers' liability claims, but are usually expensive for injury and less so for loss of possessions, such as hearing aid, teeth and glasses (all of which seem to regularly disappear!).
- Product liability - similar to public liability but specifically caused by products; essential for all care businesses providing food - usually included as standard along with public liability;
- Malpractice (treatment) - covers any injury caused through treatment (or failure to treat) any of your customers or residents; vital cover with the ever-increasing number of quasi-experimental nursing services now being undertaken by healthcare assistants. CHIS prefers to treat this as a separate indemnity to your public and products liability, should a treatment result in a claim - we also caution against this reducing the indemnity available under your public/products section of your policy, as there is usually a cost associated with this.
Legal advice and expenses
This essential cover enables care businesses to remain alert to any changes to employment law. Your legal expenses insurance will come with an advice line and, in our experience, over 50 percent of calls to the legal advice line relates to employment matters.
Employment law is impossible for anyone other than a practising employment lawyer to keep completely up-to-date with, as employees have different rights for different actions - TUPE, whistle blowing, redundancy - the list goes on.
By following the legal advice line recommendation, you should be indemnified if a claim is brought against you. This is usually an industrial tribunal claim, and the legal costs and compensation are often in excess of £25,000, so it's worth being insured to avoid this cost.
Most insurers include the 'chances of success clause' in their policy. This means if you have less than a 50 percent chance of success, they will not indemnify you for the legal costs and compensation. CHIS have an option which provides you with cover, regardless of the chances of success.
Loss of Gross Profit (aka business interruption)
Should your business or surrounding area be damaged by an insured peril - fire, flood or similar - it may well be that the damage will take time to repair and in the period while repairs are going on, you may lose some of your business. This loss of income may also leave you incurring costs, especially staff, mortgage and rates costs and may give rise to even greater costs. One business suffered a flood which resulted in dehumidifiers being left on for 24 hours a day and an electricity bill for almost double the usual for the same period, thankfully insured.
Most badly damaged businesses go through a period of uncertainty while they review the damage and the likely impact. In the event of major damage it may be necessary to submit planning permission or the approval of the local Council - this can often take several months and, if it's rejected, even longer.
For a care home, residents invariably have to move to other care homes and may never return if the damage is not rectified within a few months. In view of this potential risk, we advocate for all care homes a minimum indemnity period of 24 months. The indemnity period starts from the date the damage occurs and runs for the entire time it takes to re-establish your business, up to the maximum indemnity period.
For domiciliary care providers, if your office is badly damaged we anticipate additional increased costs of working and you will likely need cover for office relocation costs. The only offices available to you could easily be substantially more expensive, and you will need to advise your customers and their relatives of the situation and any change of address, phone numbers and more. All of which increases the costs of running your business, so should be insured as 'increased costs of working' insurance.
Summing up
There is nothing more true than the old adage "Act in haste, repent at leisure".
Having the correct insurance in place is vital. I would urge care businesses not to look solely at the premium, which is part of the decision making process, but far more at the covers and services you are getting.
Always ask yourself: does it represent value to money to you?
We're prepared to talk you through your covers, explain what you have got and what we believe you need so you can then make your own informed decision and ensure you are securing the appropriate value for money.
Give CHIS a call on 01273 645920 today.