Insurance For A Business

PI-085 (R 10/2007)

Consumer's Guide To Insurance

State of WisconsinOffice of the Commissioner of Insurance

P.O. Box 7873Madison, WI 53707-7873

oci.wi.gov

For Small Business Owners

Guide Provides Information On:

♦♦♦♦♦ Business Owner's Package Policy♦♦♦♦♦ Auto Insurance♦♦♦♦♦ Worker’s Compensation Insurance♦♦♦♦♦ Health Insurance

State of Wisconsin, Office of the Commissioner of InsuranceConsumer's Guide to Insurance for Small Business Owners

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If you have a specific complaint about your insurance, refer it first to the insurance company or agent involved. Ifyou do not receive satisfactory answers, contact the Office of the Commissioner of Insurance (OCI).

For information on how to file insurance complaints call:

(608) 266-0103 (In Madison)or

1-800-236-8517 (Statewide)

Mailing AddressOffice of the Commissioner of Insurance

P.O. Box 7873Madison, WI 53707-7873

Electronic [email protected]

(please indicate your name, phone number, and e-mail address)

OCI's World Wide Web Home Pageoci.wi.gov

For your convenience, a copy of OCI's complaint form is available at the back of this booklet. A copy of OCI'scomplaint form is also available on OCI's Web site. You can print it, complete it, and return it to the above mailingaddress.

A list of OCI's publications is included at the back of this booklet. Copies of OCI publications are also available on-line on OCI's Web site.

Deaf, hearing, or speech impaired callers mayreach OCI through WI TRS

The mission of the Office of the Commissioner of Insurance . . .

Leading the way in informing and protecting the public

and responding to their insurance needs.

Disclaimer

This guide is not a legal analysis of your rights under any insurance policy or government program. Your insurancepolicy, program rules, Wisconsin law, federal law and court decisions establish your rights. You may want toconsult an attorney for legal guidance about your specific rights.

The OCI does not represent that the information is complete, accurate or timely in all instances. All information issubject to change on a regular basis, without notice.

Printed copies of publications are updated annually unless otherwise stated. In an effort to provide more currentinformation, publications available on OCI’s Web site are updated more frequently to reflect any necessarychanges. Visit OCI’s Web site at oci.wi.gov.

The Office of the Commissioner of Insurance does not discriminate on the basis of race, color, nationalorigin, sex, religion, age, or disability in employment or the provision of services.

mailto:[email protected]

http://oci.wi.gov/oci_home.htm

http://oci.wi.gov/com_form.htm

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V. Risk Management/Loss ControlMeasures pp. 20-21

You may be able to reduce your premium bymanaging risk. This section gives some ideas onhow to minimize risk.

VI. Filing a Claim pp. 21-22

If your business suffers a loss or if your company caror truck is involved in an accident or is damaged orstolen, this brochure has some tips to make it easierfor you to go through the claims process.A. Property Damage 21B. Liability Insurance 21C. Motor Vehicle Damage 22

VII. Flood Insurance p. 22

If your business is located in a flood plain, you willneed to purchase flood insurance.

VIII. Health Insurance pp. 22-23

No Wisconsin state or federal insurance law requiresemployers to offer or provide health insurance toemployees. However, if an employer decides to offergroup health insurance to employees, the insuranceoptions available will often depend on the size of thegroup to be insured.A. Types of Coverage 22B. Finding the Right Coverage 23C. Cost Containment Features 23

IX. Choosing a Plan pp. 23-33

This section discusses the different types of healthbenefit plans available in the marketplace.A. Fee-for-Service Plan 24

Features of a Fee-for-Service Plan 24B. Defined Network Plan 25

Features of a Defined Network Plan 26C. Other Insurance Programs 27D. Other Types of Policies 27E. Requirements Applicable to All Health Plans 27F. How to File a Health Insurance Claim 30G. Disability Income Insurance 31H. Medical Underwriting 32

X. Buying Insurance pp. 33

Your agent can be as important as your doctor orlawyer. This section gives tips on how to choose aninsurance agent.

I. Business Owner's Polic pp. 5-10

Small to mid-size businesses frequently purchasethe Business Owners Policy or BOP. The BOPincludes:A. Property Insurance Coverage 6B. Liability Insurance Coverage 6C. Other Coverages 8D. Optional Coverages 8E. Buying Property and Liability Insurance 9

II. Required Coverages pp. 10-19

Wisconsin has a financial responsibility law that isdesigned to make sure that any motorist licensed todrive in the state has insurance or enough money topay for damages to others that may be caused by amotor vehicle.

A. Auto Insurance

♦ Financial Responsibility Auto InsuranceRequirements 10

Bodily Injury LiabilityProperty Damage LiabilityUninsured Motorist CoverageUnderinsured Motorist CoverageMedical Payments

♦ Types of Auto Insurance Policies 12-13

Wisconsin law requires almost all employers to carrysome form of worker’s compensation coverage ontheir employees.

B. Worker’s Compensation Insurance

♦ Benefits Payable to Employees 14♦ Wisconsin Worker’s Compensation Act 15♦ Where to Purchase Insurance 16♦ Penalties for not Purchasing Insurance 17♦ Cost of Insurance

Premium Rate Determination 18Classification System 18Experience Rating Plan 18

III. Insuring Your Home Business pp. 19

Three ways you can buy home business insurancecoverage.

IV. Umbrella Liability Insurance p. 20

An umbrella policy offers you extra liability insurance.Umbrella policies are sold with a variety of limits.


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XI. Before Disaster Strikes p. 34

This section contains a checklist of things to do now.

XII. Legal Protections pp. 34

Wisconsin has several laws to protect you beforeand after you purchase insurance.

XIII. Unfair Discrimination p. 34

Wisconsin law provides protection against unfairdiscrimination.

XIV. Worker's Compensation Questions?Here's Who to Call p. 36

Glossary of Insurance Terms pp. 37-39

Publication List

Complaint Form

Small Employer Web Site

The Office of the Commissioner of Insurance (OCI)developed a Web site to help small employersbecome more knowledgeable insurance consumers.The Insurance Coverage for Small Employers Webpage oci.wi.gov/smempins.htm assists Wisconsinsmall employers by providing information on thedifferent types of insurance policies on the market,how much coverage to buy, and how to buy it wisely.

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Few things in life are riskier than launching andrunning your own business. As a small businessowner you need to deal with complex issues such asbusiness plans, accounting sytems, payrollprocesses, employee recruitment, cash flowproblems, marketing and risk management.

As a business owner you have to deal with a largearray of insurance needs such as property, liability,auto, worker’s compensation, health, or disabilityinsurance. This brochure is designed to tell youabout the different types of insurance available, howto buy the coverage you need and to let you knowhow to file a complaint with the Office of theCommissioner of Insurance (OCI).

Property and liability insurance are critical coveragesa small business owner needs. Property insuranceprotects small business owners from losses due todamage to physical space or equipment and as aresult of theft. Liability insurance protects a smallbusiness owner if someone falls while visiting yourbusiness premises or a customer is hurt by aproduct your business sells.

Property Insurance

Property insurance may be one of the most importanttypes of insurance in terms of financially protectingthe property and physical assets of your business.Types of property a business needs to insureinclude:

♦ Buildings and other structures, leased or owned♦ Furniture, equipment, and supplies♦ Leased equipment♦ Inventory♦ Money and securities♦ Records of accounts receivable♦ Improvements and betterments you made to the

premises♦ Machinery♦ Boilers♦ Data processing equipment and media, including

computers♦ Valuable papers, books, and documents♦ Mobile property, such as automobiles, trucks,

and construction equipment♦ Satellite dishes♦ Signs, fences, and other outdoor property not

attached to a building♦ Intangible property (goodwill, trademarks, etc.)

There are three types of property insurance plans.The basic property insurance form generally coverslosses caused by fire or lightning and the cost ofremoving property to protect it from further damage(i.e., removing inventory or equipment from adamaged building so it won’t be stolen).

The broad form includes basic coverage pluscoverage for “extended perils,” including windstorm,hail, explosion, riot and civil commotion, aircraft andvehicles that damage the property of the insured.

The special form includes basic and broad coverageand covers all direct physical losses exceptconditions specifically excluded as listed in thepolicy.

Liability Insurance

Liability insurance, also called Commercial GeneralLiability (CGL), covers four categories of events forwhich you could be held responsible: bodily injury;damage to others’ property; personal injury,including slander and libel; and false or misleadingadvertising. CGL coverage pays for the injuredparty’s medical expenses. It excludes youremployees, who are covered by worker'scompensation.

There are three types of legal damages people maysue you for that are typically covered by a CGLpolicy:

Compensatory damages: financial lossessuffered by the injured party and future lossesthey may suffer resulting from an injury theyclaim in the lawsuit.

General damages: nonmonetary lossessuffered by the injured party, such as “pain andsuffering” or “mental anguish.”

Punitive damages: additional penalties andcharges the defendant must pay.

I. BUSINESS OWNER'S POLICY

One package policy frequentlypurchased by small to mid-sizebusinesses is the BusinessOwner's Policy or BOP. The BOP isa package policy designed to meetthe insurance needs of smalloffices, stores, apartment houses,and certain types of small servicesand processing businesses.


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The key to whether a business owner is eligible forthe BOP is the size of the premises, the limits ofliability required, the type of commercial operation itis, and the extent of its off-premises servicing andprocessing activities.

The BOP includes property insurance for buildingsand their contents. The package policy may alsocover loss of business income and extra expenseresulting from a fire or similar insured peril. Theliability section of the BOP includes coverage forbodily injury or property damage that a business maybe liable for.

NOTE: The BOP does not cover professionalliability (liability claims arising from wrongfulpractice by professionals), auto insurance,worker’s compensation, health or disabilityinsurance. These all need to be purchasedseparately.

A. Property Insurance Coverage

The BOP provides two basic property coverageforms: the standard form and the special form. Bothforms cover buildings and most business property ona replacement cost basis. Replacement costcoverage is what it actually costs to replace orrestore the item without deducting for depreciation.Do not confuse replacement cost with actual cashvalue. Actual cash value is usually figured out bytaking the replacement cost of the item andsubtracting depreciation. For example if your 7-year-old desk that cost $500 was damaged in a fire, itmight have depreciated 50 percent. Therefore, youwould be paid $250 for it.

Owners of older buildings for whom replacementcost coverage may be difficult or too expensive toobtain might consider the actual cash value option.Actual cash value is offered as an option forbuildings.

The property coverage under BOP automaticallyincludes other people’s personal property to theextent that the business owner is legally liable for thedamage.

B. Liability Insurance Coverage

Defending against a legal complaint, even a minorone, is costly. The liability coverage in the BOPprotects the assets of your business when it is suedfor something your business did (or failed to do) thatcaused injury or property damage to someone else.

Types of Claims Covered by Liability

The BOP liability covers claims in four basiccategories of business liability:

♦ Bodily injury is damage to a person’s body orphysical well being.

♦ Property damage is damage to any type of realestate or personal property such as furniture.

♦ Personal injury (including Slander or Libel) isdamage to a person’s or business entity’sreputation or basic rights, such as the right to befree from interference and to have privacy.

♦ Advertising injury refers only to liability for theharm caused as the result of the insured’sadvertising its goods or services, such as anadvertisement that slanders anotherorganizations products or services.

The liability coverage in the BOP also pays formedical expenses of persons, other than employees,who sustain injuries at the insured business or as adirect result of the operations of the insuredbusiness.

The liability coverage in the BOP covers liabilityclaims that stem from ownership or control ofpremises, products and completed operations, andcertain types of contracts. The term “premises”includes land, building and other property. This partof the policy, known also as owners’, landlords’ andtenants’, covers claims due to the failure to avoidharming customers, salespeople or other people(even trespassers) who are on their premises.

“Products” coverage includes claims that stem notonly from the manufacture of products but also fromtheir distribution and sale. “Completed operations” iswork that has been performed, such as the repairingof appliances, the cleaning of chimneys or theinstallation of plumbing.

However, liability insurance will not protect youagainst claims arising from nonperformance of acontract, wrongful termination of employees, sexualharassment, or race and gender lawsuits. This isanother good reason to carefully read your policy.

Single Limit Liability Coverage

The BOP has a single limit for liability and medicalexpenses with a separate medical expenses limit perperson injured. The BOP also has separate limits for


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products/completed operations, that is, the workcarried out and completed by the business, such asrepairing electrical appliances, and for advertisingand personal injury, as well as a general aggregatelimit and limits per person injured and peroccurrence, and limits on damage per fire.

The single limit in the BOP makes decisions on howmuch liability protection to purchase lesscomplicated, but it also reduces flexibility. If yourproduct has a higher than average product liabilityrisk, such as toys, the BOP might not provide enoughliability coverage.

For example, your business has chosen a $500,000limit on liability and medical expenses and a $5,000limit per person injured. If your store neededadditional liability coverage, you could purchasehigher limits or an umbrella or excess insurancepolicy.

Defense and Legal Costs

The BOP obligates the insurer to provide a defenseand pay for various legal costs when there is acovered liability claim or lawsuit against the insuredbusiness owner and the claim is covered by thepolicy. This provision not only protects a businessfrom legal expenses, but it also generally makesavailable a more expert defense than the businesswould be able to afford on its own.

Exclusions

The most important exclusion to note is the exclusionfor injury and property damage that is intended orexpected by the policyholder. For example, if youdistributed a letter containing false negativeinformation about a competitor in order to put him orher out of business, the policy would not cover thecompetitor’s claim for damages.

The BOP policy excludes liability for exposures thatwould be covered under other insurance coveragessuch as worker’s compensation and professionaland auto liability insurance policies.

Also excluded are claims resulting from damage tothe property of others in the business owner’s care,custody and control. This is because coverage forsuch damage is covered under property policies.

Losses relating to contracts or agreements, injuriescaused by exposure to nuclear radiation and liabilityfor injury or property damage caused by substancesthat pollute the environment are excluded.

The BOP also excludes all coverage for pollutionclaims. However, to protect your interest in theproperty you own, and to prevent the pollutants frominjuring others, the BOP property form provides$10,000 toward the cost of extracting the potentiallypolluting substances from the policyholder’s ownpremises. If you need liability coverage forenvironmental pollution you must purchase a specialpolicy.

Manufacturers of products subject to product recall,such as food items or toys, should considerpurchasing a special policy to cover this exposure.Products are excluded from the BOP policy becauseof the costs incurred in a recall.

Coverage for administering certain kinds ofprofessional services or failure to render suchservices may also be excluded from the BOP policy,depending on the extent of services provided.

Legal actions that do not involve a claim for bodilyinjury, property damage, personal injury, oradvertising injury, are not covered. The BOP policydoes not cover most contract disputes, actions bygovernmental agencies charging that a business hasfailed to abide by regulations or statutes, andcharges of pollution.

A claim for back taxes or a penalty for failure toprovide a safe workplace is not covered by the BOPpolicy.

It is important to ask your agent to explain anythingabout the policy you do not understand and toanswer any other questions you might have. Amongother matters, you should know what the policy doesand does not cover, including any deductibles orcoinsurance requirements, exclusions, exceptions, orlimitations, how and when to make a claim and howclaims are processed.

Specific Industry Coverage

Certain categories of small businesses, such asrestaurants, wholesalers, florists, garages, etc.,would not be eligible for a BOP, regardless of size,because they have specialized insurance needs.Many insurance companies offer specificallydesigned policies that usually include specialtycoverage that is advantageous to those businesses.For more information contact your agent or membersof your trade association.


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C. Other Coverages

Business interruption insurance provides coverage ifthe business premises, vital business equipment, orother business property becomes unusable becauseof a fire, explosion, or similar covered property peril.As a result most businesses will suffer:

♦ loss of net profit that would have been earned,and

♦ payments for expenses that continue eventhough the business is not operating normally(e.g., debt payments, taxes, salaries, andemployees).

These losses may be covered by businessinterruption insurance. The purpose of businessinterruption insurance is to provide the businessowner with what the business itself would have doneif there had been no loss. Business interruptioninsurance is included in the BOP but may also bepurchased as an endorsement to the fire policy.

Extra expense insurance provides coverage for abusiness to continue operating regardless of theextent of damage to their property. Many businessescan resume operations fairly rapidly but may incurextra expenses by relocating to temporary facilities,buying or leasing replacement equipment, supplies,furniture, and machines, quickly getting in newmerchandise, and notifying clients and customers ofthe move. Extra expense insurance providescoverage for these increased costs of resumingbusiness.

D. Optional Coverages

Insurance companies have designed packagepolicies for businesses so that all the major propertyand liability exposures are covered in a single policy.You can add a variety of coverages to the basicpackage for an additional premium through anendorsement which adds clauses to the insurancecontract.

♦ Outdoor signs. The BOP covers only signsattached to the building itself. The optionalcoverage applies to signs located on other partsof the building.

♦ Exterior grade floor glass. The coverage forexterior grade floor glass refers to glass atground or basement level with an exterior oroutside exposure.

♦ Money and securities. The money and securitiesoption provides all-risk coverage for valuableswherever they are, at the bank, at the businessowner’s or another person’s home, on thebusiness premises, or in transit between theseplaces. You choose the coverage limits that youneed.

♦ Crime insurance. Crime insurance protectsbusinesses from theft and malicious damage,such as employee embezzlement.

♦ E-insurance or Internet business insurance.E-insurance covers Web-based businesses fordamages caused by computer hackers andviruses.

♦ Employee dishonesty. The employee dishonestyoption provides coverage for loss of businessproperty, including money and securities, due toemployee theft, embezzlement, fraud or anyother criminal act on the part of an employee.You choose the coverage limits that you need.

♦ Mechanical breakdown. The mechanicalbreakdown option provides the same kind ofprotection available under a separate boiler andmachinery policy. A boiler and machinery policyprovides specialized coverage for machinery andpower-producing equipment. Coverage isprovided for losses resulting from the breakdownof mechanical, electrical and pressureequipment ranging from boilers to refrigerationsystems, engines, compressors, pumps, motors,transformers and other machinery.

♦ Boiler and machinery policies cover bothproperty and liability losses as well as thereasonable cost of making temporary repairs andexpediting repair work. Property coverage isprovided not only for the equipment, but also forother property of the policyholder that is directlydamaged as a result of an accident.

A boiler and machinery policy also may beendorsed to cover losses resulting from aninterruption of business following an insuredaccident and losses due to spoilage of specifiedproperty, such as food and other perishables,from lack of power, heat, steam, light, orrefrigeration resulting from an insured accident.

♦ Contingent Liability, Demolition Costs, andIncreased Cost of Construction. Coverage fordemolition costs and increased costs of


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construction to comply with building codesprotects the business owner from expenses toreconstruct property to comply with buildingordinances.

An important consideration when selecting thesecoverages is how much of any damage you canafford to pay yourself without crippling yourbusiness’s operations. The value of an outdoor sign,for example, may be so low and the likelihood ofdamage so minimal that it is not worth taking outinsurance to cover it. In the same way, you can savemoney by taking higher deductibles on the coveragesyou do decide to purchase.

E. Buying Property and Liability Insurance—Things to Consider

Underwriting Process

Insurance companies decide the types of risks theywill accept. This is referred to as “underwriting” andis the process by which an insurer selects andclassifies risks according to their degree ofinsurability.

Premiums

The premiums charged for business insurance varywidely from company to company. It pays to shoparound to obtain the best value for your insurancedollar. Insurance premiums are dependent on anumber of factors, including location, age and type ofbuilding, use of building, local fire protection, choiceof deductibles, application of discounts, and amountof insurance you purchase.

Deductibles

The cost of your insurance is directly linked to yourpolicy’s deductible amount. The deductible is theamount of money that you agree to pay as part of aclaim, before your insurer pays the remainingamount toward that claim. Deductibles reduce costsbecause you pay the first $250 or $500 of every loss.

Since you are actually “self-insuring” for thedeductible amount, you should ask if the savings isworth it. It is a good idea to get quotations for variousdeductibles, before making your selection.Deductibles may apply separately to each buildingcovered or to personal property in each building, withan aggregate deductible for any one occurrence.

Building Insurance

What will it really cost to replace your building in theevent of loss from a fire or tornado? Are therebuilding upgrades that are required by law when yourebuild (i.e., fire sprinklers may need to be installed)and what will they cost? Does the policy you areconsidering cover the extra cost to meet currentbuilding code requirements?

Business Personal Property

Every business owns some personal property thatcould suffer a loss. What would it cost to replace allof your furniture, fixtures, inventory (minimum andmaximum values during the year) and buildingupgrade (if you lease)?

Business Interruption Coverage

You need to consider how long it would take torestore your business operations in the event of afire. Where would you temporarily resumeoperations? What expenses could you discontinuewhile repairs are being made?

Liability Coverage

You should check your lease and other legalcontracts you have signed to see what and howmuch liability coverage the contracts require you tocarry. You may want to get price quotes for limits ofinsurance beyond what you are required to purchaseaccording to your contractual obligations, so you cansee what higher amounts of coverage will cost. Youmay decide to either buy all the liability coverage youcan afford or you may only want what is required.Many people buy what makes them comfortable for aprice they can afford.

Report Your Loss History Accurately

Failure to accurately report past losses could allowan insurance company to legally deny your claim andnot pay you for the loss. It is important to discloseany lawsuits in which you’ve been named as a partyand for which insurance coverage was provided.Also, be sure to include any property claims you’vehad such as those for fires, thefts, or vandalism.

Discounts

Discounts may be available if you have sprinklers,burglar alarms, and security cameras. Make surethat you tell your agent about any upgrades orrenovations done to the building, particularly to theroof, heating, electrical and plumbing systems.


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Your Insurance Agent

Your insurance agent should fully review the types ofbusiness property you own and use to discover whatkinds of property insurance you need. There is nosure answer about how much liability insurance tobuy for a particular business. You should considerthe degree of risk in the business itself. Yourinsurance agent can help you determine asatisfactory limit of coverage for your specificbusiness.

Ask your agent to explain anything about the policyyou do not understand and to answer any otherquestions you might have. You should know what thepolicy does and does not cover, including anydeductibles or coinsurance requirements, exclusions,exceptions, or limitations, how and when to make aclaim and how claims are processed.

II. REQUIRED COVERAGES

Wisconsin law requires that all business ownerspurchase certain types of liability coverage or showproof of financial responsibility. What follows is adescription of these required coverages.

A. Auto Insurance

Most businesses todayoperate with a motorvehicle. If the vehiclesare damaged in anaccident or stolen, the

business has to repair or replace them. If there is anaccident and the business is at fault, the businessmay be subject to large claims from people injured inthe accident. A business auto insurance policy helpsto cover both property and liability risks thatbusinesses face because of the ownership or use ofautos and trucks.

An auto is defined as any motor vehicle designed forprimary use on the road. This includes all types oftrucks and trailers pulled by trucks.

The insured is the person or entity who holds title tothe vehicle. Owners of small businesses often usethe same vehicles for both personal and businesspurposes. Problems may occur if the insurance is notwritten in the name of the person or entity with title tothe vehicle. For example, John Smith owns the XYZCompany that owns the vehicle that Smith drives forboth business and pleasure. Smith told his insurance

agent that he owned the car so the agent put Smith’sname on the auto insurance policy and not thecompany’s name. Smith is involved in an accident.There may be problems when he attempts to collecton an insurance claim to repair the damage to thecar because the insurance policy requires that theowner of the vehicle be the principal insured.

Financial Responsibility Auto InsuranceRequirements

Wisconsin has a financial responsibility law. It isdesigned to make sure that any motorist licensed todrive in Wisconsin has insurance or enough moneyto pay for damages to others that may be caused bya motor vehicle. These requirements may be metthrough insurance, a surety bond, or self-insurance.Details are available at the Department ofTransportation (www.dot.state.wi.us), Motor VehicleDivision, Hill Farms State Office Building, Madison,Wisconsin 53705.

If you buy insurance, your policy must provide thefollowing minimum liability coverage:

♦ $25,000 for injury or death of one person♦ $50,000 for injury or death of two or more

people; and♦ $10,000 for property damage.

The law also requires uninsured motorist coverageof $25,000/$50,000 for bodily injury only.

If you decide to satisfy the requirements of theWisconsin Financial Responsibility Law by buyingauto insurance, your policy must contain three majorparts—liability insurance for bodily injury, liabilityinsurance for property damage, and uninsuredmotorist coverage.

Bodily Injury Liability Insurance. Bodily injury liabilityinsurance does not protect you or your car directly. Ifyou cause an accident injuring other people, itprotects you against their claims up to the statedamounts for medical expenses, lost wages, pain andsuffering, and other losses. It will also usually pay ifthe accident was caused by a member of your familyliving with you or a person using your auto with yourconsent.

Property Damage Liability Insurance. Propertydamage liability insurance pays for any damage up tothe stated amount you cause to the property ofothers such as a crushed fender, broken glass, or adamaged wall or fence. Your insurance will pay for

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this damage if you were driving your auto or if it wasbeing driven by another person with your consent.

Uninsured Motorist Coverage. Uninsured motoristcoverage applies to bodily injury you, your family, andother occupants of your vehicle incur when hit by anuninsured motorist or hit-and-run driver. It alsocovers you and your family if injured as a pedestrianwhen struck by an uninsured motorist or hit-and-rundriver. It protects you by making sure that money isavailable to pay for your losses that were caused bysomeone else.

Uninsured motorist coverage does not cover yourproperty damage and does not protect the otherdriver. Your insurance company may sue the otherdriver for any money the company pays you becauseof the other driver’s negligence.

Underinsured Motorist Coverage. This is an optionalcoverage that increases the personal injuryprotection to you and the people in your car up to theamount of coverage you purchase. It becomeseffective when the party causing an accident haslower limits than you purchase and the accidentcosts more. The maximum dollars paid is then thedifference between the two limits.

For example, assume the underinsured motorist(UIM) limits selected were $100,000 per person andthe person causing the accident had limits of$50,000 per person. Under this scenario, you couldcollect up to $50,000 from the at-fault driver and upto an additional $50,000 (the difference in limits)under your own UIM coverage. UIM coveragetypically does not “add” the amount you purchased tothe amount available from the person causing theaccident.

Insurers are required to notify policyholders who donot have UIM coverage of its availability. The limitsof UIM coverage, if accepted after notification is$50,000 per person and $100,000 per accident.

Medical Payments. This provides medical or funeralexpense for people injured or killed in your car. Italso covers you and members of your family if hit bya car or injured while riding in another car. Medicalexpense coverage is usually sold as a single amountsuch as $1,000. Companies must offer this coveragebut you do not have to buy it.

Physical Damage Coverage

There are three basic types of physical damagecoverage for motor vehicles: collision,comprehensive, and specified perils.

Collision Coverage. This protects your car if your carcollides with an object, including another car, or if itoverturns. Your own insurer will pay for such damageeven if the collision is your fault. Limits are based onthe actual cash value of your car and it is usuallywritten with a deductible of $100 or more.

Comprehensive Coverage. This protects your caragainst almost all damage except loss caused bycollision. This includes fire, theft, missiles, glassbreakage, falling objects, explosion, earthquake, civilcommotion, or colliding with a wild bird or animal. Itis based upon the actual cash value of the car andcan be written with a deductible. Flood damage toyour auto is covered if your auto insurance policyincludes comprehensive coverage.

Specified Perils. Because comprehensive covers somany perils, it can be very expensive. Forbusinesses that want this broad coverage, a lessexpensive alternative is specified perils coverage.This is sometimes called “fire, theft, and combinedadditional coverage" or “CAC.” It covers many of theperils comprehensive covers, except windshielddamage, but it does so on a named peril basis.

Coverage for your vehicle in an auto insurance policyis not based on replacement cost. The amount aninsurance company will pay on an auto physicaldamage or theft claim depends on the “actual cashvalue” of the vehicle. The actual cash value of thevehicle is the replacement cost less depreciation,which most often is the current market value at thetime of loss. Therefore, the company’s obligation isto repair the car based upon its actual cash value notits replacement cost.

The insurance company may pay the business ownerthe value of the loss in money or, at its option, it may(1) repair or replace the damaged or stolen vehicle or(2) return a stolen vehicle to the business owner withpayment for any damage caused by the theft.

If you borrow money from a bank or some otherfinancial institution to buy your vehicle, the lender willprobably require you to purchase physical damagecoverage to protect both of your interests in the car.


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Safety Responsibility Law

Wisconsin has a Safety Responsibility Law. The lawrequires that anytime a person is hurt or killed orsomeone’s property is damaged over $1,000, it mustbe reported as soon as possible. You must also file aDriver’s Report of Accident within 10 days with theDivision of Motor Vehicles. If a police agencyinvestigates the accident, you do not have to fill outthe accident report, the police will.

If you are in an accident in Wisconsin, you shouldexchange insurance information with the other driver.Under the Safety Responsibility Law, uninsuredmotorists who are in reportable accidents must showthey can pay for the damages and injuries they mayhave caused. The law takes away the driver’s licenseand license plates of the uninsured motorist whocannot pay for damages or injuries they cause.

For more information, contact the Wisconsin Divisionof Motor Vehicles, Traffic Accident Section, Room804, P.O. Box 7919, Madison, Wisconsin 53707-7919, or at (608) 266-1249.

Types of Auto Insurance Policies

Auto Insurance for a Home-Based Business

In most cases, home-based business owners can becovered by their personal auto insurance policy.However, depending on your particular use of yourcar, you may need to purchase higher coveragelimits to protect yourself and your business.

In other cases, particularly if you are transportingpeople for any reason in the conduct of yourbusiness, you should consider a home-basedbusiness auto policy.

A home-based business auto policy is priced nodifferently than your regular auto policy. Insurancecompanies look at the number of miles you drive,who will be driving the vehicle, your driving record,and your claims history in order to set your premium.

The liability limits you choose and yourcomprehensive and collision deductibles are alsomajor factors in how much you are going to pay. Thehigher your limits, the higher your premium. Lowerdeductibles are going to cost you more, too.

As a home-based business owner you need to payattention to liability limits in order to protect bothpersonal and business assets. If you cause an

accident, the injured parties can go after you as anindividual and as a business owner. In order tominimize financial risk, you might consider higherliability limits.

Many home-based businesses move equipmentfrom job to job, like power washers and ladders forhouse painters, lawn mowers and other gardeningequipment for landscapers. If you have ahomeowner’s or renter’s insurance policy theequipment you haul from job site to job site isminimally covered. Your insurer will typically coverdamages from $250 to $1,000, minus yourdeductible.

If you permanently affix a piece of equipment, like agenerator, to your vehicle, the generator will not becovered unless you increase your insurance on yourvehicle in order to cover items that are permanentlyattached.

Most importantly, if you are relying on either apersonal auto insurance or personal umbrella liabilitypolicy to provide you with protection for yourcompany’s use of vehicles, look closely at theprovisions, as business-related liability may beexcluded.

Business Auto Insurance Policy

A business auto insurance policy covers bothproperty and liability risks that a business ownerfaces because of ownership or use of autos andtrucks. A policy covering a vehicle used in businessalso may cover your employees when they areoperating their personal cars for your business.

The liability portion of the policy obligates theinsurance company to pay because of bodily injury orproperty damage caused by an accident andresulting from the ownership, maintenance, or use ofa covered auto up to the policy limits.

When there is an auto liability lawsuit against theinsured business, where the loss is covered by thepolicy, the insurance company is obligated to defendthe business owner or settle the lawsuit. The policyleaves the decision entirely up to the insurancecompany about whether to defend or settle a givenclaim. The insurance company’s duty to defend orsettle ends when the insurance policy limits havebeen exhausted by the payment of judgments orsettlements.


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There are three options for liability coverage underthe business auto insurance policy: (1) autos ownedby the business; (2) all autos owned, hired or leased;or (3) all autos, including those that are not owned,hired, or leased. Most business owners should buythe third type of coverage to protect themselves fromliability when an employer or principal is driving apersonal auto on company business.

When is the business liable?

An employer is generally liable for the acts of theemployees when they are acting within the scope oftheir employment. So, when employees are drivingvehicles on company business, regardless of whoholds title to the vehicle, the employer probably willbe liable.

For example if an employee takes a company-ownedvehicle home at night, generally on the way to andfrom home, the employer is liable. However, if theemployee takes that vehicle out later that night onpersonal errands, the employer will usually not beliable, because the employee is not acting within thescope of employment.

Controlling Auto Loss Exposures

The cause of most accidents is the driver. Employersshould always check driving records of anyemployees who will drive on company business andnever allow persons with a poor driving record todrive.

It should also be company policy that drivers alwaysuse seat belts. Driving safety should be frequentlyemphasized, and all vehicles should be wellmaintained.

Premiums

Premiums for the property coverage portion of theauto insurance policy are based on business use,radius or areas of use, and where there is acombination truck and trailer on gross vehicle weight(GVW) or gross combination weight (GCW).

The three types of business use are service, retailand commercial:

♦ Service use refers to vehicles used to transportpeople, tools, equipment, or supplies to and froma job location.

♦ Retail use refers to vehicles that pick up propertyfrom or deliver it to individual households.

♦ Commercial use is when it does not fit under theservice and retail descriptions.

There are three radius classifications:

♦ Local—fewer than 50 miles from principal pointof garaging.

♦ Intermediate—more than 50 and fewer than 200miles.

♦ Long distance—more than 200 miles.

Fleet of Vehicles

Businesses that have a fleet of vehicles will of coursehave different needs than a business with one ortwo. Businesses need to be aware of how insurancepolicies are written for a fleet of vehicles. Someprovide fleet coverage, which means the businessdoes not have to notify the insurance company whena new vehicle is added; it is covered as part of thefleet. Other policies do require notice to theinsurance company of a new vehicle. If the notice isnot given, the new vehicle is not insured.

Underwriting Guidelines for Auto Insurance

Underwriting is the process insurance companiesuse to select and classify an applicant’s risk. Insurersuse their own underwriting standards to determine ifyour business is eligible for insurance and, if so,what price you should pay for the coverage.

When you apply for auto insurance, your drivingrecord will not only affect your rates, it may alsocause you to be denied insurance. Wisconsin lawdoes not permit insurers to exclude drivers byendorsement. They are permitted to rate based on allmembers in the household regardless of whetherthey are related by blood or marriage.

Wisconsin law does not require insurancecompanies to extend a grace period for autoinsurance premium payments. If payment is notreceived by the due date, the insurance company ispermitted to cancel your auto insurance policy fornonpayment of premium.

When replacing your automobile policy with anothercompany, be aware that the new company has60 days to underwrite (examine, accept or reject)your application. This may include securing motorvehicle, credit and claim history reports, as well asverification of other information provided on the


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application. Your policy can be canceled during thefirst 60 days for any adverse information, such asaccidents, violations, suspensions or prior claims.

If You Are in an Accident

Call the police. A police report can help if you havean accident or if your car is stolen or damaged byvandals. What looks like a minor dent could beseveral hundred dollars’ worth of damage.

Obtain information. Write down the names,addresses, telephone numbers, and license numberof persons involved and of witnesses. Note the time,date, location, road conditions, make and year ofvehicles involved, insurance information, apparentdamage and injuries, and your version of whathappened. Make a diagram of the accident. Yourinsurance company will need complete informationabout the account.

Call your agent. Phone your agent promptly, even ifyou are far from home. Have your policy numberready, plus all license numbers, phone numbers, andother information.

Ask your agent. Find out what documents, forms,and data you’ll need. If you have any questions, youragent will be able to assist you in filling out the forms.

Cooperate and answer all questions fully. Yourinsurer may call you for more information or ask toexamine your damaged vehicle. In order todetermine the extent of damage, they must haveaccess to the vehicle.

Take notes. Whenever you talk with insurancecompany employees, your agent, lawyers, police, orothers, write down the date, times, names, andsubjects you talked about. Include all decisions orpromises made.

Save receipts. Your auto policy may pay forincidentals such as a car rental or a hotel room ifyour accident happens out of town. Save copies ofall documents you send or receive.

Settling your claim. The claim should be paidpromptly after the insurer has received adequateproof of loss. If the insurer rejects your claim or paysonly part of it, you should be given an explanation forthe decision.

B. Worker's Compensation Insurance

Worker’s compensation is protectionmandated by state law for a workerand his or her dependents againstinjury and death occurring in thecourse of employment. It is nothealth insurance and is not intended

to compensate for disability other than disabilitycaused by injury arising out of employment.

The purpose of the worker’s compensation system isto provide financial and medical benefits to thevictims of “work-related” injuries and their familiesregardless of fault. The laws place the financialburden on the employer and ultimately the consumer.This compensation is generally the exclusive remedyfor the injured employee.

Benefits Payable Under Worker’sCompensation Insurance

Worker’s compensation benefits can provide theurgently needed medical care. And, it can providethe needed financial support for farmers and theirfamilies. Basic benefits include:

1) Coverage of all reasonable and necessarymedical costs.

2) Benefits for temporary wage loss [TemporaryPartial Disability (TPD) or Temporary Totaldisability (TTD)] sustained by an employee whilerecovering from an injury. Eligibility fortemporary disability benefits are determined andmust be documented by a doctor. Benefits fortemporary wage loss due to disability are basedon two-thirds of the employee’s wage rate up toa specified maximum amount.

3) Benefits for permanent disability [PermanentPartial Disability (PPD) or Permanent TotalDisability (PTD)] if the employee does not fullyrecover from the injury. Permanent disability isawarded for the potential, or actual, loss ofearning capacity. The amount of benefitpayment for permanent disability depends on theseriousness of the permanent disability.

4) Vocational rehabilitation and retraining. Forinformation on job retraining or placement, call orwrite the Worker’s Compensation Division.

5) If death occurs to an injured employee, deathbenefits and burial expense will be paid up tospecific limits.


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For more information on worker’s compensationinsurance, contact:

Wisconsin Worker’s Compensation DivisionDepartment of Workforce Development

www.dwd.state.wi.usMadison Area Office:

Worker’s Compensation Division201 East Washington Avenue, Room C100

P.O. Box 7901Madison, WI 53707

(608) 266-1340 Phone(608) 267-0394 Fax

Milwaukee Area Office:Worker’s Compensation Division

State Office Building, Rm. 330819 North Sixth StreetMilwaukee, WI 53203(414) 227-4381 Phone

(414) 227-4012 Fax

Appleton Area Office:Worker’s Compensation Division

Fidelity Bank Bldg., Rm. 3101500 North Casaloma DriveAppleton, WI 54913-8200

(920) 832-5450 Phone(920) 832-5355 Fax

Wisconsin law requires that a subject employer withemployees working in Wisconsin must have aworker’s compensation insurance policy with aninsurance company licensed to write worker’scompensation insurance in Wisconsin.

Each individual employer must provide a worker’scompensation insurance policy for its employees.One employer cannot provide worker’scompensation insurance coverage for anotheremployer’s employees even where or whether or notthey voluntarily sign a contract to provide thecoverage. Every employer, as described in s. 102.04(1), Wis. Stat., is required under s. 102.28 (2), Wis.Stat., to have a worker’s compensation insurancepolicy in the name of the employer/owner or in thename of the business entity.

An employer subject to the Act may not withhold orcollect any money from employees or any otherperson, including independent contractors andsubcontractors, to pay for worker’s compensationinsurance. To do so is illegal. Also, no agreement byan employee waiving rights to compensation is valid.[s. 102.16 (3) and 102.16 (5), Wis. Stat.]

Wisconsin Worker’s Compensation Act

Most Wisconsin employers are required to haveinsurance or be licensed self-insurers under theWisconsin Worker’s Compensation Act (the Act).The law mandates compensation insurance for:

1) Any employer who usually employs three ormore persons full- or part-time. This employerneeds insurance immediately.

2) Any employer who has one or more full-time orpart-time employees and has paid grosscombined wages of $500 or more in anycalendar quarter for work done in Wisconsin.This employer must have insurance by the 10thday or the first month of the next calendarquarter.

3) Anyone engaged in farming who employs 6 ormore employees (at one or more locations) onthe same day for 20 days (consecutive ornonconsecutive) during a calendar year. Acalendar year is January through December.The farmer must have insurance within 10 daysafter the 20th day of employment. Somerelatives of the farmer are not counted asemployees.

(Sections 102.04 and 102.07, Wis. Stat.)

Wisconsin law requires that a subject employer withemployees working in Wisconsin must have aworker’s compensation insurance policy with aninsurance company licensed to write worker’scompensation insurance in Wisconsin.

Each individual employer must provide a worker’scompensation insurance policy for its employees.One employer cannot provide worker’scompensation insurance coverage for anotheremployer’s employees even where or whether or notthey voluntarily sign a contract to provide thecoverage. Every employer, as described in s. 102.04(1), Wis. Stat., is required under s. 102.28 (2), Wis.Stat., to have a worker’s compensation insurancepolicy in the name of the employer/owner or in thename of the business entity.

An employer subject to the Act may not withhold orcollect any money from employees or any otherperson, including independent contractors andsubcontractors, to pay for worker’s compensationinsurance. To do so is illegal. Also, no agreement byan employer waiving rights to compensation is valid.[s. 102.16 (3) and 102.16 (5), Wis. Stat.]

http://www.dwd.state.wi.us


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Who is covered by the Act? Are thereexceptions?

Nearly all employers in Wisconsin are covered. Thisincludes both public and private employers. In fact,when talking about worker’s compensation, it iseasier to discuss the exceptions. There are a fewclasses of workers who are covered by federal lawsand are not covered by the Act. Employees of thefederal government (such as postal workers,employees at a veterans administration hospital, ormembers of the armed forces) are covered byfederal laws. People who work on interstaterailroads are covered by the Federal EmployersLiability Act. Seamen on navigable waters arecovered by Merchant Marine Act of 1920, and peopleloading and unloading vessels are covered by theLongshoremen’s and Harbor Worker’sCompensation Act.

The only employee exceptions to the Act insurancerequirement are domestic servants, some farmemployees, volunteers, including volunteers ofnonprofit organizations that receive money or otherthings of value totaling not more than $10 per week,and religious sect members that qualify and arecertified for an exemption. Please contact theWorker’s Compensation Division, Bureau ofInsurance Programs at (608) 266-1340 for a detailedexplanation of these exceptions. Virtually all otherworkers and employers are subject to the Act.

Are out-of-state employers who have employeesworking in Wisconsin required to have aworker’s compensation insurance policy inWisconsin?

Yes, out-of-state employers with employees workingin Wisconsin must have a worker’s compensationpolicy with an insurance company licensed to writeworker’s compensation insurance in Wisconsin.

Section 102.28 (2), Wis. Stat., requires that anemployer subject to the Act with employees workingin Wisconsin must have a worker’s compensationinsurance policy with an insurance company licensedto write worker’s compensation insurance inWisconsin. The policy must be endorsed to nameWisconsin as a covered state in section 3-A of thepolicy.

If an out-of-state employer has a worker’scompensation insurance policy with an insurancecompany not licensed to write in Wisconsin, theymust obtain a policy from a Wisconsin licensed

insurance company to cover their Wisconsinexposure. The insurance company must file theproperly endorsed policy with the WisconsinCompensation Rating Bureau.

To obtain more information contact:

The Wisconsin Compensation Rating BureauStreet Address

20700 Swenson Drive – Suite 100Waukesha, WI 53186

(262) 796-4540 (Phone)(262) 796-4400 (Fax)

Mailing AddressP. O. Box 3080

Milwaukee, WI 53201-3080

Internet Addresswww.wcrb.org

Must employers purchase worker’scompensation insurance?

The law requires that every employer subject to theAct must provide some way of assuring that it canpay benefits to its workers should they becomeinjured. Most employers in Wisconsin provide thissecurity by purchasing an insurance policy from aprivate insurance company. The insurance companythen reports to the State of Wisconsin Department ofWorkforce Development (DWD) that it is providingcoverage for the employer. Some employers,however, are “self-insured.”

What is self-insurance?

Some employers who are financially sound (andusually quite large) are “self-insured.” An employercan only be self-insured if it obtains permission fromDWD.

DWD requires employers to demonstrate a verysound financial condition in order to be self-insured.

Where to Purchase Worker’s CompensationInsurance

Open Marketplace

There are about 300 insurance companies licensedto write worker’s compensation insurance inWisconsin. Contact a local agent to assist you inapplying for insurance to the company of yourchoice.

http://www.wcrb.org


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If an insurance company turns down your applicationfor insurance, you should ask your agent to searchthe marketplace for another company. A list ofLicensed Worker’s Compensation InsuranceCompanies (oci.wi.gov/workcomp/wcliccos.htm) anda directory of licensed insurers that includesaddresses and phone numbers is available on OCI’sWeb site at Company Lookup https://ociaccess.oci.wi.gov/CmpInfo/CmpInfo.oci. You can also findCompany Lookup in the Quick Links section onOCI’s home page at oci.wi.gov.

Wisconsin Worker’s Compensation Pool

If coverage is not available in the open market, youragent should submit an application to the WisconsinCompensation Rating Bureau (Bureau). The Bureauacts as administer and trustee of the WisconsinWorker’s Compensation Pool (Pool). The Pool is arisk-sharing plan created to provide worker’scompensation insurance to any employer who isunable to obtain coverage in the open market andwho is, in good faith, entitled to such insurance. Out-of-state employers with no Wisconsin operations andemployers who owe the Pool monies from priorpolicies are not eligible for coverage from the Pool.

All insurers licensed to write worker’s compensationinsurance in Wisconsin must participate in fundingthe Pool, and are represented by eight insurancecompanies that have been designated as servicingcarriers. The insurance company assigned to servicea policy issued through the Pool writes the policy inits own name and provides claims, loss control,auditing, and other services, just as they would fortheir voluntarily written policyholders.

The Bureau will assign an insurer to write the policyfor you. The premium cost is generally the same forassigned coverage. Your insurance agent canprovide you with further information and forms.

For more information on the Pool, contact your agentor the Bureau at:

Street AddressWisconsin Compensation Rating Bureau

20700 Swenson Drive, Suite 100Waukesha, WI 53186

Mailing AddressWisconsin Compensation Rating Bureau

P.O. Box 3080Milwaukee, WI 53201-3080

Phone Number(262) 796-4540

Internet Addresswww.wcrb.org

Penalties for not Purchasing Worker’sCompensation Insurance

There are severe penalties for the failure of anemployer to provide worker’s compensationcoverage. First, if a worker is injured, the employer ispersonally liable.

Second, the Worker’s Compensation Divisionactively enforces the Act. It has the authority to closedown an employer until such time as proper worker’scompensation insurance coverage is obtained.

By law, a penalty is imposed on an employer forfailing to have worker’s compensation insurancecoverage where required. The normal penalty istwice the amount of premium not paid during anuninsured time period or $750, whichever is greater.An employer who has an illegal lapse in worker’scompensation insurance of seven consecutive daysor less, can be subject to a penalty of $100 for eachday they are uninsured up to seven days, provided 1)the employer has not previously been penalized fornot having worker’s compensation insurancecoverage; and 2) no injury that the employer is liablefor under s. 102.03, Wis. Stat., occurred during theuninsured period. If the illegal lapse is greater thanseven days, the normal penalty assessment willapply.

In addition to the penalty, uninsured employers arepersonally liable for benefits and do not have thenormal exemptions of property from seizure and saleon execution of a judgment. Officers and directors ofuninsured corporations are personally liable forbenefits owed by the corporation. There are otherpenalties that may apply depending upon thesituation. [Sections 102.82 (2) (a), 102.82 (2) (ag),and 102.28 (5), Wis. Stat.]

Cost of Insurance

The cost of insurance will vary depending on yourpayroll and the type of business you operate.Employers are classified for worker’s compensationinsurance purposes by the predominate business ofthe employer and not the specific job.

http://oci.wi.gov/workcomp/wcliccos.htm

https://ociaccess.oci.wi.gov/CmpInfo/CmpInfo.oci



http://www.wcrb.org


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For example, in a manufacturing risk situation, theproduct manufactured determines the business ofthe insured employer. In other words, GeneralMotors would be classified as an automobilemanufacturer. There are many different kinds of jobsinvolved in the manufacturing of automobiles, someof which are more hazardous than others.Nonetheless, all of these jobs are being performedfor an employer engaged in the business ofmanufacturing automobiles, and therefore, all of theemployees’ payrolls would be classified in the sameclassification.

Premium Rate Determination

The Bureau sets the premium rate for each classwith the approval of the Commissioner of Insurance.If you feel that your business is not properlyclassified or the premium charged is not proper, youcan appeal to the Bureau for review of your situation.If you are still not satisfied with the Bureau’sdecision, you may request, in writing, that theCommissioner of Insurance hold a hearing to reviewthe Bureau’s decision. [Section 626.31, Wis. Stat.]

Classification System in Worker’ s CompensationInsurance

The object of the worker’s compensation system isto group similar employers so that each classificationreflects losses common to them. Since losses varywidely by business or industry of employers,charging the statewide average rates would result insome employers paying too high a premium, whileemployers in other businesses or industries wouldpay less than their fair share.

Accordingly, employers are classified by the businessor industry in which they operate to reflect thisvariation in loss costs. Generally, similar businesseshave similar exposures to occupational injury anddisease, even though no two businesses areidentical.

Each classification combines the payroll and lossesof similar employers to develop a price for theinsurance protection. Worker’s compensationinsurance uses approximately 600 separate businessclassifications for premium purposes.

Three occupations are common to so manybusinesses that special classifications have beenestablished for them. These “standard exception”classifications cover clerical office employees,outside sales people, and drivers. The standard

exception classes are the only classifications that arenot related to the business of the employer. Instead,they are related to the job as these jobs are fairlycommon to all employers.

The Experience Rating Plan

The Experience Rating Plan offers a method formodifying the cost of insurance for all but the smalleremployers to match the characteristics of anindividual employer. Experience rating groups allinsureds according to their business operations orclassification, adds together the losses of thegroups, and obtains an average cost for the groups.

In worker’s compensation experience rating theactual losses of the individual employer aredetermined over a period of time, usually threeyears. The losses are capped which makes thefrequency not severity of losses more important fordetermining experience rates. This experience isthen compared or contrasted with the average asreflected by the rate or rates that apply to theemployer’s business. If the employer has better thanaverage costs, then the employer is awarded acredit, while poorer than average experience carriesa debit rating. Experience rating takes average lossexperience (rates), and modifies it by the individualemployer’s own loss experience.

Legal Protections in the Event of Bankruptcy

There are two provisions in the law to protectworkers in the event of bankruptcies.

Self-Insurers’ Security Fund

The Self-Insurers’ Security Fund is funded byassessments, on other self-insured employers.Should a self-insured employer go bankrupt, theSelf-Insurers’ Security Fund has the responsibility formaking payments to injured workers. Should thisoccur, it is very important that the injured worker givenotice of their claim to the Self-Insurers’ SecurityFund immediately. There is also a guaranty fundwhich assumes responsibility if an insurance carrierbecomes bankrupt.

Wisconsin Insurance Security Fund

Every state has a safety net to protect insuranceconsumers from financial loss in the rare instancethat a company becomes insolvent. This safety net iscalled a “guaranty fund.” The guaranty funds areestablished by state law and are composed of


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licensed companies in the state. They pay the claimsof policyholders and other claimants of an insolventinsurance company. The money to pay the claimsagainst the insurance company comes fromassessments made against all of the insurancecompanies that are members of the guaranty fund.

In Wisconsin, the fund is called the InsuranceSecurity Fund (Fund). The Fund is created by statelaw and is funded by assessments of insurerslicensed to do business in Wisconsin. In general, theFund protects residents for most claims of licensedinsurers in liquidation. The Fund should not be reliedupon to eliminate all risks of loss to insureds due toinsurer insolvency. Some types of policies may notbe fully covered and significant delays could occur insettling obligations in cases of liquidation.

Questions about the coverage and limitations of theFund can be addressed to:

Wisconsin Security Fund2445 Darwin Rd. #101

Madison, WI 53704(608) 242-9473

www.wilifega.org

Where can I get more Information AboutCoverage Under the Act?

Questions often arise concerning the interpretation ofthe coverage and exclusion requirements of the law.Information and assistance concerning these issuesis available from the Wisconsin Worker’sCompensation Division, Bureau of InsurancePrograms at (608) 266-1340.

Copies of the Worker’s Compensation Act ofWisconsin (www.dwd.state.wi.us/wc/legal/default.htm) are available for purchase. Please call(608) 266-1340 for details.

III. INSURING YOUR HOME BUSINESS

If you operate a home businessfull-or part-time you might beuninsured and not realize it.Many home business ownersbelieve that their homeowner’sinsurance policy covers all theirhome business needs. You

should not assume that your homeowner’s insurancepolicy will cover your home business. Your

homeowner’s policy may provide coverage butprobably only to a maximum of $2,500 for businessequipment in the home and $250 away from thepremises.

Your homeowner’s policy usually does not coverbusiness-related liability, for example, if a customeror supplier is injured on your property. Ahomeowner’s policy also does not insure yourinability to collect your accounts receivable if yourbusiness records are damaged, and your policy willnot replace lost income if you cannot operate yourbusiness due to damage to your home.

There are three ways you can buy home businesscoverage:

♦ Depending on your home business, you may beable to add an endorsement to your existinghomeowner’s insurance policy. For example,some insurers offer a home day careendorsement for people who operate a homeday care service for pay in their home.

♦ You may also be able to buy several individualbusiness insurance policies to provide thevarious coverages you need, such as businessproperty, general liability and business incomecoverage.

♦ Some insurance companies have begun to offerwhat amounts to a mini-business owner'spackage policy specifically for home businesses.Some of these policies cover the loss ordestruction of business property on or offpremises; the loss of valuable papers andimportant business information; personal injuryand advertising liability; accounts receivable upto $10,000; money lost on premises up to $5,000and off premises up to $2,000.

The companies that offer these policies often requirethat you purchase your homeowner's and autoinsurance policies from them. With these policies inplace, your home business policy extends theamount of personal property and liability coverageyou have on your home to your business. And if a fireor storm makes running your business impossible,your insurance will cover expenses and lost incomefor up to a year.

Discuss your home business insurance needs withyour agent to buy the policy that best fits your needs.

http://www.wilifega.org

http://www.dwd.state.wi.us/wc/legal/default.htm

http://www.dwd.state.wi.us/wc/legal/default.htm


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IV. UMBRELLA LIABILITY INSURANCE

Umbrella policies cover all underlying liability policies.Umbrella policies are designed to cover large,infrequent losses such as the total cost of claims thatmay result from a collision with a school bus. Todecide whether you need an umbrella policy, think ofthe most extreme situations like a roof caving inunder the weight of a once in a 100-year snowstorm,and the total cost of the claims that such an accidentwould produce if there were many people in thevicinity; then compare the amount with the limits ofyour current liability policies.

Umbrella liability insurance provides two kinds ofcoverage:

♦ Payments of liabilities in excess of the policylimits for an insured’s basic commercial generalliability, or employers’ liability coverage; and

♦ Liability for areas not covered in other liabilitypolicies.

An umbrella policy offers you extra liability insurancethat pays for a loss when the limits of your underlyingpolicy are reached. So, if you are responsible forsomeone’s injury that required $150,000 of medicaltreatment and the liability limit in your underlyingpolicy is $100,000, your umbrella policy will pay theadditional $50,000. Also, there are some situations,such as libel and slander, that a standard policy doesnot cover. An umbrella liability policy enables peopleto protect themselves against catastrophic lawsuits insuch situations.

Umbrella policies are sold with a variety of limits,commonly $1 million or $5 million. The underlyingpolicies provide the first dollars in a liability claim andthe umbrella is available to any remaining amountsuntil the amount paid by all policies reaches theumbrella limit.

Umbrella liability policy coverage usually protectspolicyholders wherever they travel. Many suchpolicies will cover legal defense costs even if thecharges are proved baseless. Umbrella liabilitycoverage has come to be in high demand amongindividuals who have substantial assets and whomay be especially vulnerable to lawsuits and costlyjudgments.

Keep in mind that most personal umbrella policiesthat are added to a homeowner’s or personal autoinsurance policy will cover liability stemming from

business activities and business property only ifcovered by the basic policies. Always check yourpolicy to see how it defines business and businessproperty, or ask your agent.

V. RISK MANAGEMENT/LOSSCONTROL MEASURES

You may be able to reduce yourpremium through riskmanagement. Risk managementinvolves identifying and analyzingways in which you may be foundliable (your “exposure to liability”)and selecting and implementing

techniques to be used to handle the exposure. Youcan take steps to reduce the possibility of unforeseenlosses and the impact of those that do occur,whether from fires, storms, thefts, lawsuits orinjuries.

You can:

♦ Conduct safety inspections and programs fortraining employees in first-aid methods.

♦ Install a sprinkler system and an alarm thatautomatically notifies firefighters of a fire. Thismay make losses less likely or injuries lesssevere.

♦ Make sure the wiring in your building is in goodshape.

♦ Train workers to lift heavy items properly and towear safety masks and gloves when workingwith hazardous substances.

♦ Keep only a small amount of cash in the cashregister and deposit the rest in a floor safe thatcannot be opened by employees.

♦ Store inventory in two locations so if there is aloss, all the inventory will not be destroyed.

♦ If you lease out part of your premises, you mightrequire your tenant to protect you from liabilityclaims of people they allow in the building.

♦ Make sure that all your drivers have good drivingrecords. The cause of most accidents is thedriver. You should always check the drivingrecords of any employees who will drive oncompany business and never allow a person witha poor driving history to drive.


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This list is far from complete. You should ask youragent or insurance company if they have brochuresor publications on loss control topics.

Impact of Implementing Loss Control Measures

Implementing loss control measures may make itless likely that you will be found liable, or if you arefound liable, that damage will be large. Becausepremiums are based on how much insurers pay outin claims, an increase in claim costs also means anincrease in your premiums.

Businesses with very good loss control measuresand claims histories will often pay lower insurancepremiums than those with less effective loss controlmeasures and practices. A business with a reallypoor loss control history may also have difficultyfinding property insurance.

This, in turn, may make it less likely that you will befound liable, or if you are found liable, that damageswill be large. You should talk to your agent aboutwhich risk management techniques you can use thatmay reduce your premiums.

VI. FILING A CLAIM

A. How to File a Property Damage Claim

If your business is hit by a fire,accident or theft, yourinsurance policy lists the stepsyou must take. The followingtips will make it easier for you

to go through the claims process.

1. When a fire, accident, or theft occurs, call youragent or insurance company at once. Report anyburglary or theft to the police.

2. Take steps to protect your property from furtherdamage.

3. If you need immediate repairs, save thedamaged parts. The claims adjuster may beinterested in examining them. If saving them isnot practical, call the claims manager at yourinsurance company.

4. Get at least two bids for repairs. This will speedthe processing of your claim. Get estimates onthe cost to repair or replace the damagedproperty. Bids should include:

♦ A list of parts that have to be replaced andthe reason for replacing them;

♦ Straight time labor costs;

♦ Overtime labor costs. Don’t forget to includeany costs you or your employees incur whilerepairs are being made.

5. If you are filing a business interruption claim, youwill have to show how much business youcarried on, both before and after the loss. Keepdetailed records of business activity and extraexpenses during the interruption period. Keepcurrent copies of these records off the businesspremises so they will not be destroyed by fire. Doeverything you can to minimize the amount ofloss.

6. If you need help, call your agent or yourinsurance company’s claims manager.

B. How to File a Liability Insurance Claim

Business owners have a contractual obligation toinform the insurance company or agent as soon asthey become aware that there is or could be a liabilityclaim. The insurance policy contains a “reportingclause” that specifies the time an insured has to file aclaim. With a standard general liability insurancepolicy, it is recommended that a claim be reported assoon as you know of a loss.

You should report all liability claims to the insurancecompany as soon as possible. Your report shouldinclude:

♦ The details of how, when and where the accidenttook place.

♦ The names and addresses of any injuredpersons and witnesses.

♦ All copies of any demands, notices, summonsesor legal papers received in connection with theclaim or suit to the insurance company as soonas possible.

♦ An authorization for the insurance company toobtain records and other information.

Your policy requires you to cooperate with theinsurance company in the investigation, settlement ordefense of the claim or suit.


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Unless all of the terms set out in the policy havebeen fully complied with, you might not be able tocollect from the insurance company.

C. How to File Your Motor Vehicle Claim

If your company car or truck is involved in anaccident, if it is damaged by fire, flood or vandalism,or if it is stolen, follow these steps in filing a claim.

♦ Phone your agent or insurer as soon as possible.Ask what forms or documents will be needed tosupport your claim. Your insurer may require a“proof of loss” form, as well as documentsrelating to your claim, such as medical and repairbills and a copy of the police report.

♦ Supply the information your insurer needs.Cooperate with the investigation, settlement ordefense of any claim, and provide copies of anylegal papers you receive in connection with yourloss. Your insurer will represent you if a claim isbrought against you and defend you if you aresued for a claim covered by the policy.

♦ Keep records of expenses you may incur as aresult of the accident. You may be reimbursed forthem because of your policy. If the accidentoccurs while employees are conducting insurer-related business activities, your worker’scompensation policy will cover the workers’medical expenses and loss of income.

♦ Keep copies of all paper work for your own files.You may need them later.

VII. FLOOD INSURANCE

If your business is located on aflood plain, you will need topurchase flood insurance. Floodinsurance is available through theNational Flood Insurance Program(NFIP). To qualify for the NFIPprogram, you must live in adesignated community and

comply with the government guidelines for floodprevention. Most areas in Wisconsin qualify. Youragent should be able to help you find out if you areeligible.

For general information on the flood insuranceprogram, you may call or write:

Federal Emergency Management Agency (FEMA)536 S. Clark St. - 6th Floor

Chicago, IL 60605(312) 408-5500 (Phone)

1-888-379-9531 Toll-Free1-800-424-5593 TTYwww.floodsmart.gov

VIII. HEALTH INSURANCE

No Wisconsin state or federalinsurance law requiresemployers to offer or providehealth insurance to employees.However, if an employer decidesto offer group health insuranceto employees, the insuranceoptions available will often

depend on the size of the group to be insured. Yourinsurance agent or broker should be able to adviseyou on the availability and cost of the coverage.

A. Types of Coverage

Group health insurance. Group health insuranceprovides coverage to individuals under a singlemaster policy issued to the group policy owner.Certificates of insurance are provided to theindividuals. The policy owner may be an employer,an association, a labor union, or other entity. Unlessthe group is small, no individual medical underwritingis performed. Instead, insurers require minimumemployee or member participation levels andminimum employer contribution levels in order toassure that there are sufficient individuals in thegroup in good health to balance those in the group inpoor health.

Group health insurance provides severaladvantages:

♦ The premium is often partly paid by an employeror union.

♦ The ratio of total benefits paid to total premiumsreceived is usually quite high.

♦ You are automatically eligible if you are a groupmember, and there may or may not be additionalscreening for medical problems.

♦ Group premiums are typically lower than thosefor comparable individual policy coverage.

http://www.floodsmart.gov


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Individual health insurance. Individual healthinsurance provides coverage to a specific individualor to an individual and their family under a policyissued to that individual. In order to be considered forindividual health insurance coverage, you will beasked to provide evidence of insurability that mayrequire you to undergo a medical examination. Thisis called medical underwriting. The samerequirements would apply to any dependents youmay insure under the policy. Medical underwriting isdiscussed further on page 32.

Finding adequate coverage at an affordable price willtake some effort. Start with a knowledgeable healthinsurance agent who will provide reliable service. Tryto get a recommendation from family or friends.Otherwise check the yellow pages of the telephonebook. If you are turned down by one company, tryanother. Insurers have different standards.

B. Finding the Right Coverage

The health insurance available to a group will dependupon several factors including:

♦ The size of the group;

♦ The age, sex, and marital status of employees;

♦ The number of the dependents;

♦ The health status of the employees anddependents; and

♦ The location and type of the business.

Factors that an employer needs to consider are:

♦ How much can the employer afford to contributetoward insurance for the employees? Should theemployees contribute toward their owninsurance? If so, what is a fair amount? Manyinsurers set minimum participation levels foreligible employees.

♦ What benefits should the policy cover? Becauseof the multitude of policies on the market, it isimportant for an employer to decide theminimum services he or she wants covered by apolicy.

♦ Are the policy benefits realistic given the group’sparticular community and today’s medical costs?For example, will the policy meet the group’s

needs if it only pays $250 for an appendectomywhen the average cost in the area is five timesthe amount?

♦ Most policies do not cover experimentalprocedures. Many organ transplants areconsidered experimental, they are expensive.What organ transplants are covered by thepolicy?

♦ Are cost-containing incentives built into thepolicy? This includes incentives for outpatientrather than in-hospital surgery, generic ratherthan name-brand prescriptions, and managedcare facilities.

Make sure that each covered employee understandsthe benefits covered and their responsibilities underthe policy for cost-sharing and cooperating withmanaged health care procedures.

C. Cost Containment Features

There are several ways insurers and employers canuse to hold down costs of medical benefit plans.There are two ways to shift costs to an employee.One is through the use of deductibles. The other isthrough copayments or coinsurance.

Deductibles, Copayments and Coinsurance. Adeductible is the initial amount that an insured mustpay before the policy benefits begin. It is usually a flatdollar amount. A copayment is a set dollar amountof the costs that the insured must pay andcoinsurance is a certain percentage of the coststhat the insured must pay after the deductible is met.

A policy containing a deductible, copayment andcoinsurance provisions may have a $500 or higherdeductible per family member per year, 80/20%coinsurance for expenses over the deductible, a $5copayment for prescription drugs, and out-of-pocketexpense cap of $1,000 per person or $2,500 perfamily.

Higher deductibles and copayments than those usedin the above illustration are becoming more common.

IX. CHOOSING A PLAN

Choosing a health insurance plan is like making anyother major purchase. You choose the plan thatmeets both your needs and your budget. For mostpeople, this means deciding which plan is worth the


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cost. Plans differ, both in how much you have to payand how easy it is to get the services you need.

Health insurance plans are usually described as afee-for-service health plan or a defined networkhealth plan. A defined network plan is the term usedin Wisconsin insurance law to refer to any healthbenefit plan that creates incentives for its enrollees touse network providers. A fee-for-service health planallows you to use any doctor, hospital, or otherprovider you choose. Although these plans offer thegreatest freedom to select any doctor, they areusually more expensive than plans that limit choices.Defined network health plans usually cost you less,but you give less freedom of choice.

Cost isn’t the only thing to consider when buyinghealth insurance. You also need to consider whatbenefits are covered. You need to compare planscarefully for both cost and coverage.

While fee-for-service and defined network plansdiffer in important ways, in some ways they aresimilar. Both cover an array of medical, surgical, andhospital expenses. Most offer some coverage forprescription drugs; and some include coverage fordentists and other providers. But there are manyimportant differences that will make one or the otherform of coverage the right one for you.

A. Fee-for Service Health Plan

Under a fee-for-service health plan, you are free toseek necessary medical care from any doctor andhospital you wish. The doctor often bills theinsurance company directly for the services provided,and the insurance company pays for the itemscovered by the policy. In some cases you will have tofill out claim forms and send them to the insurancecompany. This type of health plan offers the mostchoices of doctors and hospitals.

Features of a Fee-for-Service Health Plan

The following section discusses how a fee-for-service health plan works.

Deductible

The deductible is the dollar amount that you mustpay each year before the insurance company pays itsshare. The deductible may range from $500 or moreper year per individual or $2,500 or more per yearper family. For example, if you have a $500 annual

deductible, you will pay for the first $500 of coveredexpenses for each person insured.

If you are buying coverage for your family, ask howthe family plan works. Some plans may not requireeach family member to pay the deductible after twopeople in the family have paid it.

Read the policy carefully. Some policies require youto pay a deductible on a calendar year basis or on aper sickness or injury basis.

Coinsurance

Coinsurance is your share or the percentage ofcovered expenses you must pay in addition to thedeductible. The most common coinsurancearrangement is for the insurance company to pay80% and you pay 20% as coinsurance until amaximum out-of-pocket expense is reached.Coinsurance applies to each person and starts overagain each year. Sometimes the policy will cover allexpenses after a certain point. Look at the list ofcovered expenses for the policy to see howcomprehensive it is.

Out-of-Pocket Limit

Many plans have an out-of-pocket limit. The out-of-pocket limit is the maximum dollar amount that youpay for covered services and supplies during aspecified period, generally a calendar year. Themaximum may be defined to include or exclude thedeductible. Once the out-of-pocket maximum is paid,benefits are paid at 100% of the costs incurred afterthat time.

Lifetime Maximum

Your major medical policy puts a cap, such as$1 million, on the total amount the policy will paytoward your medical expenses. When the insurancecompany has paid that amount, the policy will be“used up” and no more benefits will be paid for yourmedical expenses. If you expect to have significantmedical expenses, make sure to check the plan’slifetime maximum.

Medically Necessary

Every major medical policy contains a provision thatallows insurance companies to evaluate whether aservice or treatment is “medically necessary” intreating a patient and whether it could adverselyaffect the patient’s condition if it were omitted.Insurance companies can deny payment for a


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treatment that is not medically necessary. Mosthealth benefit plans often require a review beforecertain medical procedures are done.

Usual, Customary, and Reasonable Charge

Most insurance companies do not use your actualbills to calculate their payments. Companies havetheir own fee schedule, often known as usual,customary, and reasonable (UCR) charges. TheUCR charges are typical amounts paid for everythingfrom a doctor’s visit to heart surgery.

For example if your doctor charges $1,000 for anoperation while most doctors in your area chargeonly $800, you will be billed for the $200 difference.This is in addition to the deductible and coinsuranceyou would be expected to pay. To avoid thisadditional cost, ask your doctor to accept yourinsurance company’s payment as full payment, orshop around to find a doctor who will. Otherwise, youwill have to pay the difference.

Exclusions and Limitations

There are some services that plans won’t cover—usually because they are not considered medicallynecessary. In addition, some services, such asmental health and substance abuse treatment, maybe limited. Review each plan’s exclusions andlimitations. Keep in mind that you have to pay the fullcost of care that isn’t covered.

B. Defined Network Health Plan

Some defined network plans will provide coverageonly if the enrollee uses network providers and otherplans will pay a larger portion of the charges if theenrollee uses network providers. HMOs, point-of-service plans and preferred provider plans areexamples of defined network plans. This type of planis sometimes referred to as a managed care plan.

Health Maintenance Organization (HMO)

An HMO is a health insurance plan that providescomprehensive, prepaid medical care. It differs froma traditional insurer in that it both pays for andprovides the medical care. Persons insured by anHMO plan are referred to as enrollees. An HMOusually operates on a closed panel basis. Thismeans the enrollees are required to seek care froma medical provider who is either employed by orunder contract to the HMO.

HMOs limit care to a specific geographic area.Except for serious emergencies or the need forurgent care outside the service area, the HMO willprobably not pay for care enrollees receive from aprovider who is not affiliated with the HMO unless theHMO physician refers you to that provider.

HMOs are regulated as insurance companies by theOCI. To do business in the state, an HMO must meetcertain financial requirements and abide by relevantinsurance laws. OCI must approve policies beforethey are sold to ensure they comply with state laws.

Point-of-Service Plan (POS)

A POS plan is essentially an HMO that allowsmembers to use services provided outside of thenetwork without prior approval from a network doctor.POS plans offer lower deductibles and nocoinsurance for visits to doctors inside the network.Visits outside the network normally require thepayment of deductibles and coinsurance the sameas a standard insurance policy.

Preferred Provider Plan (PPP)

A PPP is a form of managed care closest to anindemnity plan. A PPP has arrangements withdoctors, hospitals, and other providers of care whohave agreed to accept lower fees from the insurer fortheir services. A PPP pays a specific level of benefitsif certain providers are used, and a lesser amount ifnon-PPP providers are utilized. A PPP must providereasonable access to network providers in theservice area. However, a PPP is not required to offera choice of participating providers in each geographicarea.

PPPs may require that enrollees pay coinsurance ofup to 50% for services provided by nonparticipatingproviders. Enrollees should read their policiescarefully before seeking services fromnonparticipating providers.

A PPP operates in a certain geographic area, islimited to specific providers, and is regulated by OCI.A PPP that has a provider agreement with a hospitalmay not have an agreement with every provider whoprovides services at the hospital, such asanesthesiologists, pathologists, and radiologists.

Many insurers that offer standard health insurancepolicies also offer some type of preferred providerplan. You should ask your agent to provide you withinformation on preferred provider plans in your area.


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Features of a Defined Network Health Plan

The following section discusses how a definednetwork health plan works.

Provider Directories

All defined network plans will provide an enrollee witha provider directory listing hospitals, primary carephysicians, and specialty providers from whom theenrollee may obtain services. These directories areupdated annually. However, the enrollee shouldinquire at the time of making an appointment as towhether the provider is currently a member of thedefined network organization.

Continuity of Care

If a defined network plan represented a primary carephysician (defined as a physician specializing ininternal medicine, pediatrics, or family practice) asbeing available during an open enrollment period, itmust make the physician available at no additionalcost for the entire plan year. A specialist providermust be made available for the lesser of the courseof treatment or 90 days. If an enrollee is in hersecond trimester of pregnancy, the provider must beavailable through postpartum care. The exceptionsare for a provider who is no longer practicing in thedefined network plan’s service area or who wasterminated from the plan for misconduct.

Referral Procedure

Some HMOs require a referral from a primary carephysician before an enrollee can see another planprovider. All HMOs require the enrollee to have areferral that has been approved by the plan beforegoing to a non-plan provider. The certificate bookletincludes information on the procedure to follow andany notification requirements.

A defined network plan may not require a referralfrom a physician for services from a planchiropractor. It must also allow a woman to receiveobstetrical and gynecological services from a planphysician who specializes in obstetrics or gynecologywithout requiring a referral from her primary careprovider.

Defined network plans must have a procedureallowing for standing referrals. A standing referralauthorizes an enrollee to be seen by a specialistprovider for a specific duration of time or specific

number of visits without having to obtain a separatereferral from the primary provider for each visit to thespecialist.

If an enrollee goes to a non-HMO provider without anapproved referral, the claim for those services willnot be reimbursed by the HMO. Enrollees have theright to file a grievance when a referral is denied.

Second Opinions

Every defined network plan must cover a secondopinion from another provider within the definednetwork plan provider network.

Disenrollment

An HMO must disclose in the policy and certificateany circumstances under which an enrollee may bedisenrolled. Disenrollment proceedings may beinitiated only for the following reasons:

♦ The enrollee has failed to pay required premiumsby the end of the grace period.

♦ The enrollee has committed acts of physical orverbal abuse, which pose a threat to providers orother members of the organization.

♦ The enrollee has allowed a nonmember to usethe HMO’s certification card to obtain services orhas knowingly provided fraudulent information inapplying for coverage.

♦ The enrollee has moved outside of thegeographical service area of the organization.

♦ The enrollee is unable to establish or maintain asatisfactory physician-patient relationship withthe physician responsible for the enrollee’s care.

Enrollees have the right to file a grievance when adisenrollment proceeding is initiated.

Small employer health insurance is available inWisconsin from several insurers and defined networkplans. The OCI publishes a brochure that is meant tohelp small employers understand their options and toprovide a comparison of premium rates available inthe small health insurance marketplace. To obtain acopy, contact the OCI at 1-800-236-8517 and ask fora copy of Health Insurance for Small Employers andTheir Employees. A copy is also available on OCI’sWeb site at oci.wi.gov/pub_list/pi-206.htm. OCI alsopublishes a Spanish version of Health InsuranceInsurance for Small Employers and TheirEmployees. You can receive a copy of Seguro de

http://oci.wi.gov/pub_list/pi-206.htm


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Salud para Pequeños Empleadores y sus Empleadosby calling 1-800-236-8517. A copy is also available inpdf format on OCI’s Web site at oci.wi.gov/spanish/sp_pub_list/pi-306.pdf.

C. Other Insurance Programs

Health Insurance Risk-Sharing Plan (HIRSP)(hirsp.org)

HIRSP offers health insurance to Wisconsinresidents. The plan makes health insurance availableto people who either are unable to find adequatehealth insurance coverage in the private market dueto their medical conditions or who have lost theiremployer-sponsored group health insurance.Applicants are required to meet HIRSP eligibilitycriteria to qualify. For more information about HIRSP,including eligibility, covered services, and policyoptions write HIRSP Customer Service, 1751 W.Broadway, P.O. Box 8961, Madison, WI 53708-8961,or call (800) 828-4777 or (608) 221-4551.

BadgerCare Plus (New 05/2008)(www.dhs.wisconsin.gov/badgercareplus)

BadgerCare Plus is a new program for children under19 years of age and families in Wisconsin who needand want health insurance.

BadgerCare Plus is for all children, regardless ofincome.

BadgerCare Plus is about more than just children. Italso offers access to comprehensive, affordablehealth care to many families and pregnant women inWisconsin.

BadgerCare Plus is designed for people who do notcurrently have access to health insurance. It is notdesigned to replace private insurance. For thatreason, specific rules have been established that donot allow most people to drop their private insuranceto participate in BadgerCare Plus.

If you would like more information about BadgerCarePlus call member services at 1-800-362-3002.

D. Other Types of Policies

There are several other types ofpolicies on the market. These arenot substitutes for basic or majormedical coverage.

Vision and dental policies:These are policies that providebenefits only for vision or dentalcare. They should not be boughtas substitutes for morecomprehensive coverage.

Hospital confinement indemnity. This type ofpolicy pays a fixed amount for each day in thehospital for a specified number of days. Sometimesbenefits are not paid until you have been hospitalizedfor several days. These policies are often not a goodbuy unless the daily benefit is quite high.

Specified disease policies. These policies cover aspecific disease or group of diseases. The mostcommon type is cancer insurance. If you already havecomprehensive coverage, this coverage is notnecessary.

Any insurer selling cancer insurance must give theA Shopper's Guide to Cancer Insurance (oci.wi.gov/pub_list/pi-001.htm) to applicants. A copy of theguide is available by contacting the OCI at 1-800-236-8517.

Health discount cards. Be wary of health discountcards, which offer a reduced fee for doctor visits orother medical services. Health discount cards areNOT health insurance plans and are therefore notregulated by the OCI. Some discount cards have beenthe subject of numerous scams in recent years, so besure to check these out carefully.

E. Requirements Applicable to All Health BenefitPlans

Emergency Care

Every health plan offered in Wisconsin that coversemergency care, including defined network plans,must cover services required to stabilize a conditionthat most people would consider to be anemergency, without prior authorization. Definednetwork plans are permitted to charge a reasonablecopayment or coinsurance for this benefit.

http://oci.wi.gov/spanish/sp_pub_list/pi-306.pdf

http://hirsp.org

http://www.dhs.wisconsin.gov/badgercareplus





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Grievance Procedure

All health insurance plans, including all definednetwork plans are required to have an internalgrievance procedure for those who are not satisfiedwith the service they receive. The procedure must beset forth in the insurance contract and must also beprovided in written notice.

The defined network plan must provide each enrolleewith complete and understandable information abouthow to use the grievance procedure. An enrollee hasthe right to appear in person before the grievancecommittee and present additional information.

Enrollees may wish to first contact the definednetwork plan with a question or complaint. Manycomplaints can be resolved quickly and require nofurther action. However, filing a complaint with theplan first is not required. An enrollee can file acomplaint with the appropriate state agency insteadof, before, or at the same time as filing with thedefined network plan.

Defined network plans are required to have aseparate expedited grievance procedure forsituations where the medical condition requiresimmediate medical attention. The procedure requiresdefined network organizations to resolve anexpedited grievance within 72 hours after receivingthe grievance.

Defined network plans are required to file a reportwith the OCI listing the number of grievances theyhad in the previous year. A summary of thisinformation for HMOs is included in The Consumer’sGuide to Managed Care Plans in Wisconsin. Toreceive a copy of this brochure call the OCI at 1-800-236-8517. A copy is available on the OCI’s Web siteat oci.wi.gov/pub_list/pi-044.htm.

Independent Review

All insurance companies offering health benefit plansin Wisconsin are required to have an internalgrievance process to resolve any complaint you mayhave with the plan. If you are not satisfied with theoutcome of the grievance, you have an additionalway to resolve some disputes involving medicaldecisions. You or your authorized representative mayrequest that an Independent Review Organization(IRO) review your health plan’s decision.

The independent review process provides you withan opportunity to have medical professionals who

have no connection to your health plan review yourdispute. You choose the IRO from a list of revieworganizations certified by the OCI. The IRO assignsyour dispute to a clinical peer reviewer who is anexpert in the treatment of your medical condition.The IRO has the authority to determine whether thetreatment should be covered by your health plan.

The independent reviews are conducted by IROsthat are certified by the OCI. In order to be certifiedthe IRO must demonstrate that it is unbiased andthat it has procedures to ensure that its clinical peerreviewers are qualified and independent.

In most cases, you will need to complete your healthplan’s internal grievance procedure. After you receivethe insurer’s final decision on your grievance, choosean IRO from the list provided by the insurer. Thensend a written request for independent review to theinsurance company.

Your health plan should provide you with informationon your right to request an independent review in itswritten materials. You can also call the health plan atits toll-free number and request information onindependent review.

For more information on the independent reviewprocess, call the OCI at 1-800-236-8517 and requesta copy of Fact Sheet on the Independent ReviewProcess in Wisconsin. A copy is also available on theOCI’s Web site at oci.wi.gov/pub_list/pi-203.htm. OCIalso publishes a Spanish version of the Fact Sheeton the Independent Review Process in Wisconsin.You can receive a copy of Resumen informativosobre el proceso de revisión independiente enWisconsin by calling 1-800-236-8517. A copy is alsoavailable in pdf format on OCI’s Web site atoci.wi.gov/spanish/sp_pub_list/pi-303.pdf.

Mandated Benefits (Updated 05/2008)

Health insurance policies sold in Wisconsin ofteninclude “mandated benefits.” These are benefits thatan insurer must include in certain types of healthinsurance policies. Except for HMOs organized ascooperatives under ch. 185, Wis. Stat., HMOs arerequired to provide the same benefits as traditionalinsurers. Cooperative HMOs are subject to themandates regarding chiropractors, optometrists,genetic testing, nurse practitioners, newborns,adopted children, HIV drugs, dentists,temporomandibular (TMJ) disorders, breastreconstruction, and hospital and ambulatory surgerycenter charges and anesthetics for dental care.





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The mandated benefits required by Wisconsin statelaw include coverage for: professional health careservices; adopted children; handicapped children;nervous and mental disorders, alcoholism, and otherdrug abuse; home health care; skilled nursing homecare; kidney disease; mammography; new borninfants; coverage for grandchildren born todependent children under the age of 18 who arecovered by the policy; diabetes, lead screening, andmaternity coverage for all persons covered under thepolicy if it provides maternity coverage for anyone,genetic testing, drugs for treatment of HIV infection,TMJ disorders, hospital and ambulatory surgerycenter charges and anesthetics for dental care,breast reconstruction, coverage of certain health carecosts in cancer clinical trials, and coverage of studenton medical leave.

Insurer plans must provide at the least the minimummandated coverage but may provide benefits thatare greater than those mandated by law. Somemandated benefits apply only to group policies.Some apply both to policies sold to individuals and togroups. For more information on mandated benefits,call the OCI at 1-800-236-8517 and request a copyof Fact Sheet on Mandated Benefits in HealthInsurance Policies (oci.wi.gov/pub_list/pi-019.htm).

The Health Insurance Portability andAccountability Act of 1996

Federal and state laws provide important consumerprotections for those who have preexisting medicalconditions and move from one job to another.Legislation passed during the 1997 legislativesession brings Wisconsin insurance laws intocompliance with the federal Health InsurancePortability and Accountability Act of 1996 (HIPAA).HIPAA does not mandate that employers provideinsurance. It does not require insurance plans tocover specific services (except in some limitedsituations) or regulate the premiums that may becharged by insurers. In general, most of the newlaws cover group health plans only. Very fewchanges were made to individual health plans.

The OCI publishes a brochure designed to provide ageneral overview to the federal law as well as thechanges made to state health insurance law.

You may request a copy of the Consumer's Guide toHealth Insurance Portability and Accountability Act of1996 (HIPAA) and Wisconsin Insurance Laws(oci.wi.gov/pub_list/pi-096.htm) by calling the OCI at1-800-236-8517.

Continuation and Conversion

Both state and federal law give certain individuals whowould otherwise lose their group health care coverageunder an employer or association plan, the right tocontinue their coverage for a period of time. The twolaws are similar in some ways, but also haveprovisions that are very different. Most employersthat have 20 or more employees must comply withthe federal law, while most group health insurancepolicies that provide coverage to Wisconsin residentsmust comply with the state law. When both lawsapply to the group coverage, it is the opinion of theOffice of the Commissioner of Insurance that wherethe federal and state laws differ, the law mostfavorable to the insured should apply. The state lawalso gives conversion rights to certain individualswho are covered under individual health insurancepolicies.

Federal Law (COBRA)

The Consolidated Omnibus Budget ReconciliationAct (COBRA) is a federal law that allows mostemployees, spouses, and their dependents who losetheir health coverage under an employer’s grouphealth plan to continue coverage, at their ownexpense, for a period of time. This law applies toboth insured health plans and self-funded employer-sponsored plans in the private sector and thoseplans sponsored by state and local governments.However, COBRA does not apply to certain churchplans, plans covering less than 20 employees, andplans covering federal employees.

Under the federal law, employees who terminateemployment for any reason other than grossmisconduct, or who lose their eligibility for groupcoverage because of a reduction in work hours, andthe covered spouses and dependents of theemployees may continue the group coverage for upto 18 months. A spouse and dependents maycontinue coverage for up to 36 months if they losecoverage due to the death of the employee, divorcefrom the employee, loss of dependent status due toage, or due to the employee’s eligibility for Medicare.If within the first 60 days of COBRA coverage anindividual or dependent is determined to be disabledby Social Security, the disabled individual and othercovered family members may continue coverage forup to 29 months.




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Wisconsin Law (s. 632.897, Wis. Stat.)

Wisconsin’s continuation law applies to most grouphealth insurance policies that provide hospital ormedical coverage to Wisconsin residents. The lawapplies to group policies issued to employers of anysize. The law does not apply to employer self-fundedhealth plans, or policies that cover only specifieddiseases or accidental injuries.

Where to go for Help

For questions about the Wisconsin continuation law,contact:

Office of the Commissioner of Insurance

P.O. Box 7873Madison, WI 53707-7873(608) 266-0103 (In Madison)1-800-236-8517 (Outside Madison)oci.wi.gov

For questions about the federal COBRA law, contact:

U.S. Department of Labor - Regional OfficeEmployee Benefits Security Administration (EBSA)200 West Adams, Suite 1600Chicago, IL 60606(312) 353-0900www.dol.gov/dol/topic/health-plans/cobra.htm

For more information on continuation andconversion, call the OCI at 1-800-236-8517 andrequest a copy of Fact Sheet on Continuation andConversion Rights in Health Insurance Policies thatdescribes both state and federal law. A copy is alsoavailable on the OCI’s Web site at oci.wi.gov/pub_list/pi-023.htm. OCI also publishes a Spanishversion of the Fact Sheet on Continuation andConversion Rights in Health Insurance Policies. Youcan receive a copy of Resumen informativo sobrelos derechos de continuación y conversión de laspólizas de seguros de salud by calling 1-800-236-8517. A copy is also available in pdf format on OCI’sWeb site at oci.wi.gov/spanish/sp_pub_list/pi-123.pdf.

F. How to File a Health Insurance Claim

Read your benefit booklet carefully before you havea claim. Understand what is and is not covered.Follow all procedures and deadlines for seekingtreatment and filing complaints and appeals. The

majority of insurance companies maintain a toll-freetelephone information and complaint line, and somecompanies and HMOs provide special mediation orarbitration procedures for handling complaints.

Filing your claim

♦ It is important to find out if your provider submitsthe claim for you or if you need to do it. If you areinsured through an HMO, you will rarely, if ever,see the actual bill for your health care services.Insurance companies pay claims for fee-forservices differently.

♦ If you need to file the claim, review theinformation to be sure it is complete and correct.

♦ File it as soon as you get the bill from theprovider.

♦ Send it to the right address.

♦ Keep a copy for your reference.

Processing your health claim

Allow a reasonable time for the company to processyour claim. The company will inform you if it needsany additional information to complete the claim. Thecompany may also request more information fromthe provider or return the claim form to you to getmore information.

Once the insurance company receives the claimform, it reviews the claim and tells the provider whatit will pay for the services. The insurance companyalso sends you, the insured, a form known as an“EOB” (explanation of benefits) that tells you thesame thing about your claims.

It is very important for you to look at your EOBs andany doctors’ bills you get. You should make sure theservices listed on an EOB match the services youreceived. If a service is not covered, or is onlypartially covered (if, for example, you have to pay a20% coinsurance), the EOB will help you understandwhat you will be billed by the doctor or hospital afterthe insurance company pays its share.

How the claim is paid

If you assigned benefits to the provider, the benefitcheck will be sent directly to the provider.

You will pay any deductibles and coinsurance.


http://www.dol.gov/dol/topic/health-plans/cobra.htm






31

If you did not assign the benefits, the check will cometo you and you will need to pay your providers for theentire amount.

If your claim is denied

All health insurance plans, including all definednetwork plans are required to have an internalgrievance procedure for those who are not satisfiedwith the service they receive. The procedure must beset forth in the insurance contract and must also beprovided in written notice.

The defined network plan must provide each enrolleewith complete and understandable information abouthow to use the grievance procedure. An enrollee hasthe right to appear in person before the grievancecommittee and present additional information.

If you are not satisfied with the outcome of thegrievance, you have an additional way to resolvesome disputes involving medical decisions. You oryour authorized representative may request that anIndependent Review Organization (IRO) review yourhealth plan’s decision.

In most cases, you will need to complete your healthplan’s internal grievance procedure. After you receivethe insurer’s final decision on your grievance, choosean IRO from the list provided by the insurer. Thensend a written request for independent review to theinsurance company.

Your health plan should provide you with informationon your right to request an independent review in itswritten materials. You can also call the health plan atits toll-free number and request information onindependent review.

To obtain a copy of the listing of organizationscertified to perform independent review call the OCIand request a copy of Independent ReviewOrganizations Certified to Perform IndependentReviews in Wisconsin. A copy is also available onOCI’s Web site at oci.wi.gov/iroscert.pdf. OCI alsopublishes a Spanish version of the IndependentReview Organizations Certified to PerformIndependent Reviews in Wisconsin. You can receivea copy of Independent Review Organizationscertificadas para llevar a cabo revisionesindependientes en Wisconsin by calling 1-800-236-8517. A copy is also available in pdf format on OCI’sWeb site at oci.wi.gov/spanish/iroscertsp.htm.

For more information on the independent reviewprocess, call the OCI and request a copy of FactSheet on the Independent Review Process inWisconsin. A copy is also available on the OCI’s Website at oci.wi.gov/pub_list/pi-203.htm. OCI alsopublishes a Spanish version of the Fact Sheet on theIndependent Review Process in Wisconsin. You canreceive a copy of Resumen informativo sobre elproceso de revisión independiente en Wisconsin bycalling 1-800-236-8517. A copy is also available inpdf format on OCI’s Web site at oci.wi.gov/spanish/sp_pub_list/pi-303.pdf.

If you do not resolve the matter, file a formalcomplaint with the OCI. For your convenience, acomplaint form (oci.wi.gov/com_form.htm) isincluded in the back of this booklet. The OCIconsumer complaint form is available in Spanish.You can obtain a copy by calling 1-800-236-8517. Acopy is also available on OCI’s Web site atoci.wi.gov/spanish/com_form_sp.htm.

G. Disability Income Insurance

Anyone who works probably needs disability incomeinsurance to help replace income lost because of along-term injury or illness. People of working age aremore likely to become disabled than they are to die –making disability insurance at least as important aslife insurance.

There are numerous types of disability insurancepolicies available. You have to be a wise consumerand look at the different products. You have tochoose the product that best suits you.

Disability income policies have waiting periods beforebenefits become payable. The waiting period startsafter you have become disabled for a covereddisability. The longer the waiting period, the lower thepremium will be. The period of time for whichbenefits are payable can also vary considerably.Benefit periods may depend on whether the disabilitywas caused by an accident or illness. A long-termdisability income policy may provide for lifetimeaccident benefits and illness benefits to the age of65. The longer the benefit period, the higher thepremium will be.

What it Covers

The amount of monthly benefit provided by adisability income policy may be stated as a

http://oci.wi.gov/iroscert.pdf

http://oci.wi.gov/spanish/iroscertsp.htm





http://oci.wi.gov/spanish/com_form_sp.htm


32

percentage of income or as a set dollar amount. Theamount of benefit for which you can qualify is usuallybased on a percentage of your gross earnings,normally around 60%. A partial disability benefit maybe provided, or may be available, on an optionalbasis.

Some policies may reduce your benefit by theamount you receive from social security or worker'scompensation so your disability benefit and socialsecurity or worker’s compensation benefits togetherwill provide a specified income. Some companies willconsider possible social security benefits when theydecide the amount of benefits for which you qualify.

Occupational therapy and vocational rehabilitationbenefits may also be provided by a disability incomepolicy.

Things to be aware of regarding disabilityinsurance

A disability income policy generally requires that yoube totally disabled before benefits are paid. Thedefinition of total disability varies from policy to policy.There are two different definitions used in disabilitypolicies. One definition is that you are unable toperform your own occupation. The other definition ismuch more comprehensive requiring that you areunable to perform any occupation (for which you aresuited by education or experience). This distinctioncan be important for jobs that require veryspecialized physical skills such as surgeons orloggers.

Some points to check:

♦ What is the definition of disability? Does it coverboth injury and sickness? Is it for partial or totaldisability? Is it defined as inability to perform yourcurrent occupation or as inability to perform anyoccupation of which you are capable?

♦ When does coverage begin? Is it different forinjury and sickness?

♦ How long will benefits be paid? What is theweekly or monthly benefit?

♦ How much of your income will be replaced?

♦ What does it cost?

♦ Is it guaranteed renewable?

♦ Disability income policies may specify thatincome benefits will not be paid to a disabledperson if the disability results from certaincauses. Check the policy for any exclusions orlimitations that might apply. If you have anyquestions, ask your agent.

H. Medical Underwriting

Before you can buy an individual health insurancepolicy you must give the insurance companyinformation about your health. This process is calledmedical underwriting. The company uses medicalunderwriting information to predict what the likelihoodis that you will file claims against the policy. Eachcompany has its own underwriting standards, whichmeans one company could reject your applicationbut another may be willing to accept it.

The insurance company will get most of itsunderwriting information from these sources:

♦ Your application form

♦ Your past medical history

♦ The Medical Information Bureau

Underwriting Decisions

Insurance companies can accept your applicationand issue the policy as requested or they can do oneof the following:

♦ Issue the policy with full protection but charge ahigher premium. This might occur if you have achronic disease such as diabetes.

♦ Modify the benefits, such as increase thedeductible.

♦ Exclude a specific medical problem fromcoverage by adding an exclusion rider.

♦ Decide not to issue a policy—turn down yourapplication for insurance.

If you are turned down or denied coverage:

♦ Find out why you were denied coverage. Thecompany is required to provide you with thatinformation in writing. If it is due to your medical


33

history, make sure the information the companyreceived was correct.

♦ Try several other insurance companies orHMOs. Every company has its own underwritingguidelines. Some may view your situationdifferently.

♦ If you cannot find coverage from an insurancecompany, you may be eligible for benefits underthe Wisconsin Health Insurance Risk-SharingPlan (HIRSP). More information on HIRSP isprovided on page 27.

The Medical Information Bureau

When you sign the application form, you authorizethe insurance company to obtain information aboutyou from the Medical Information Bureau (MIB). TheMIB is a private company that insurance companiesuse to share information about insurance applicants.If you are denied coverage based on medical history,you may want to find out if you have an MIB file andif so, is it correct? If your file contains incorrectinformation, you have the right to ask the MIB tocorrect it. You may obtain a copy of your report bycalling or writing to:

Medical Information Bureau (MIB)P.O. Box 105Essex StationBoston, MA 02112(866) 692-6901(866) 346-3642 TTY (for hearing impaired)www.mib.com/

X. BUYING INSURANCE

For the most part insurance issold directly through an insurancecompany or indirectly through anagent or broker. An independentagent may represent more thanone, and sometimes severalinsurance companies. An

exclusive or captive agent sells solely for one insureror group of related insurers. Independent agents, aswell as exclusive agents, may place business withanother insurer if the insurer(s) he or she representsdoes not write the type of insurance needed. Abroker represents you in your dealings with aninsurance company.

When buying business insurance, you should:

♦ Contact several agents and insurancecompanies.

♦ Shop around.

♦ Understand what you are buying.

In buying insurance, price is certainly a bigconsideration. But your insurance agent alsoperforms an important role. An agent makes surethat the insurance is up-to-date, reflecting the actualvalues of the business, such as additional orreplacement equipment, new structure or expandedoperations. It is important to discuss with your agent,at least once a year, any changes that have occurredduring the year, any increases in values, andincreases in payroll and receipts.

An agent can offer advice on the amount and typesof business insurance you need. You may need towork with several agents to make sure that you aregetting the needed coverage at the best availableprice.

To assure that you are dealing with a reliable agent,you may wish to talk with other business owners inyour community to learn what agents they use andhow satisfied they are with these agents. You shouldalso discuss your needs with an agent who hasexperience with your particular type of business. Ifyou are a landscape gardener, for example, the risksyou face will be very different from those of the icecream parlor and you may need an agent whospecializes in your field to assist you.

All companies and agents doing business inWisconsin are licensed by the OCI. To find out if anagent or company is licensed call 1-800-236-8517.Licensing information about agents and companiescan also be found on OCI’s home page in the QuickLinks section under Agent/Agency Lookup (https://ociaccess.oci.wi.gov/ProducerInfo/PrdInfo.oci) andCompany Lookup (https://ociaccess.oci.wi.gov/CmpInfo/CmpInfo.oci).

http://www.mib.com/

https://ociaccess.oci.wi.gov/ProducerInfo/PrdInfo.oci

https://ociaccess.oci.wi.gov/ProducerInfo/PrdInfo.oci




34

XI. BEFORE DISASTER STRIKES

Before a fire, theft, or an accidentstrikes, you will save time, money andanxiety by doing these important thingsnow:

√ Study your insurance policies to see what is andis not covered. Make sure you understand yourpolicies before you have a loss. For example, doyou know the answers to these questions:

♦ How much liability insurance do you have?

♦ What are the financial responsibilityrequirements for your auto in your state?

♦ What deductibles do you have on your carsand trucks?

√ Ask your insurance agent to explain anything inthe policy you do not understand.

√ Make sure you and your employees know whatto do if you have a loss and need to submit aclaim.

√ Keep an updated inventory of your businessproperty with appropriate documentation.Remember to include leased property that is notspecifically insured by the leasing company.

XII. LEGAL PROTECTIONS

Wisconsin has several laws toprotect you before and after youpurchase insurance. Some of theseprotections include:

♦ Insurance companies and agents may notmisrepresent the terms of an insurance policy.

♦ Insurance companies may not unreasonablydelay their claims investigations, fail to pay alegitimate claim within a reasonable time afterproof of loss or engage in other unfair claimssettlement practices.

♦ Insurance companies may not cancel a policymid-term unless specific, limited reasons justifythe cancellation.

♦ Insurance companies must provide a 60-daynotice of nonrenewal. They also must give60 days’ notice of renewal on altered terms of anexpiring policy when the companies increaserates by over 25% unless something you docauses the increase.

♦ Although an insurance company may cancelyour policy for nonpayment of premium, you maybe entitled to a grace period. A grace period isthe period during which coverage continues evenif the premium has not been paid. For individuallife insurance policies it is 1 month. For healthinsurance it is 7 days for weekly premiumpolicies, 10 days for monthly premium policies,and 1 month for all other policies. No graceperiod is required for auto or property insurance.

♦ If you believe that an insurance company hasviolated your rights, you should first complain toyour agent or the insurance company. If thisdoes not resolve the problem, you may want tofile a complaint with the OCI. For yourconvenience a complaint form (oci.wi.gov/com_form.htm) is included in the back of thisbooklet. The OCI consumer complaint form isalso available in Spanish. You can obtain a copyby calling 1-800-236-8517. A copy is alsoavailable on OCI’s Web site at oci.wi.gov/spanish/com_form_sp.htm.

XIII. UNFAIR DISCRIMINATION

Insurers may not refuse, cancel, or restrict coverageon the basis of the sex of the applicant or insured.

Insurers may not refuse, cancel, or deny coveragefor auto or property insurance solely because of apast criminal record, physical or developmentaldisability, past mental disability, age, marital status,sexual preference, or “moral” character.

Insurers may not refuse, cancel, or limit the amountof coverage for property or casualty insurancebecause of the geographic location of the risk unlessrequired by law or for a legitimate business purpose.

No insurer may refuse or limit coverage or charge adifferent rate because of a mental or physicalcondition except when the refusal, limitation, or ratedifferential is based on either sound actuarialprinciples or actual or reasonably anticipatedexperience.






35

Small Employer Web Site

The OCI developed a Web site to help smallemployers become more knowledgeable insuranceconsumers. The Insurance Coverage for SmallEmployers Web page oci.wi.gov/smempins.htmassists Wisconsin small employers by providinginformation on the different types of insurancepolicies on the market, how much coverage to buy,and how to buy it wisely.

http://oci.wi.gov/smempins.htm

State of W

isconsin, Office of the C

omm

issioner of InsuranceC

onsumer's G

uide to Insurance for Sm

all Business O

wners

36

Worker’s Compensation Questions? Here’s Whom To Call

Worker’s CompensationDivision of the Departmentof Workforce Development(DWD) (www.dwd.state.wi.us)

201 East Washington AvenueP. O. Box 7901Madison, WI 53707(608) 266-1340 (Phone)(608) 267-0394 (Fax)

• All Questions Relating to the WI Worker’sCompensation Act

• All Injury/Claim Questions• Compliance Questions• Corporate Officer Options Questions• Enforcement Questions• Penalty and Penalty Payment Plan

Questions• Self Insurance Questions• Divided Insurance Questions• Wrap-up Policy Questions• Withdrawal Questions

Wisconsin CompensationRating Bureau (WCRB)(www.wcrb.org)

P. O. Box 3080Milwaukee, WI 53201-3080(262) 796-4540 (Phone)(262) 796-4400 (Fax)

• Wisconsin Worker’s CompensationInsurance Pool Questions

• Rate Questions• Inspection Questions• Audit Questions• Premium Charging Questions• Classification Questions• Experience Modification Questions• All Questions Regarding the Proper Filing of

Policies and Endorsements Pertaining toWisconsin Coverage

• Insurance Company Filing Questions• Endorsement Filing Questions• Questions Regarding Appeal Rights Of A

WCRB Decision• Questions about Statistical Reporting

Office of the Commissionerof Insurance (OCI) (oci.wi.gov)

125 South Webster StreetP. O. Box 7873Madison, WI 537071-800-236-8517 or (608) 266-0103 (Phone)(608) 264-8115 (Fax)

• All Questions Relating to the Insurance Laws• Questions Related to the Licensing & Regulation

of Insurance Companies• Unfair Claim Settlement Practices Questions• Unfair Marketing Practices Questions• Worker’s Compensation Rate Regulation

Questions• Worker’s Compensation Dividend Plans

Questions• Questions Related to the Licensing & Regulation

of WCRB


http://www.wcrb.org

http://www.dwd.state.wi.us


37

Glossary of Insurance Terms

Actual cash value: The value of the property whenit is damaged or destroyed. This is usually figured bytaking the replacement cost and subtractingdepreciation.

Adjuster: An insurance company representativewho seeks to determine the extent of the firm’sliability for loss when a claim is submitted.

Agent: A person licensed by a state insurancedepartment who solicits, negotiates, or effectsinsurance contracts on behalf of one or moreinsurers.

All risks: The term “all risk” means there iscoverage for all perils except those excluded. Aparticular exposure would be insured againsteconomic loss by any peril that is not specificallyexcluded under the terms of the contract.

Auto insurance: A type of insurance that protectsthe policyholder against losses involvingautomobiles. Different coverages can be purchaseddepending on the needs and wants of the insured.

Binder: An agreement to provide immediateinsurance coverage. May be oral or written and setsforth conditions of coverage. Often used during theinterval between the coverage becoming effectiveand the time a formal policy is prepared anddelivered. Normally it is issued for a limited period oftime.

Broker: A marketing specialist who representsbuyers of property and liability insurance and whodeals with either agents or companies in arrangingfor the coverage required by the customer.

Captive agent: An agent who sells insurance foronly one company, as opposed to an independentagent who represents several companies.

Claim: A request for reimbursement for a losscovered by the policy. For example, a claim for itemsstolen from the policyholder’s business.

COBRA benefits: COBRA stands for “ConsolidatedOmnibus Budget Reconciliation Act of 1985,” whichrequires companies with 20 or more employees tooffer separating employees the option to continuetheir group health-care coverage at their ownexpense.

Coinsurance: A provision that requires the insuredto share in the cost of covered services on apercentage basis. A typical coinsurancearrangement is 80% by the insurer and 20% by theinsured.

Collision: An optional auto insurance coverage thatpays for damage to the policyholder’s car caused byits collision with another vehicle or object.

Comprehensive coverage or Other thanCollision: Personal auto insurance policies use thisterm for physical damage coverage for losses by fire,theft, vandalism, falling objects and various otherperils.

Conditions: Provisions of an insurance policy thatstate the rights and duties of the insured or theinsurer. Typical conditions have to do with suchthings as the insured’s duties in the event of loss,cancellation provisions, and the right of the insurer toinspect the property.

Copayment: A provision in insurance policies thatrequires the insured to pay a flat fee for certainmedical expenses.

Coverage: The scope of protection provided underan insurance contract.

Deductible: The amount of an insured loss paid bythe policyholder. For example, if you select adeductible of $250 for your auto insurance policy, youagree to pay the first $250 worth of damages to yourcar if you are in an accident.

Defined network plan: Any health benefit plan thatrequires or creates incentives for an enrollee to useproviders that are owned, managed, or undercontract with the insurer offering the plan. This typeof plan is sometimes referred to as a managed careplan.

Depreciation: A decrease in the value of propertyover a period of time resulting from use,obsolescence, or wear and tear.

Disability insurance: A type of health insurancethat pays a monthly income to the policyholder whenhe or she is unable to work because of an illness oraccident.


38

Endorsement: An attachment to an insurancepolicy that amends and alters the coverage providedin the policy. In life and health insurance it is called arider.

Exclusions: Specific situations, conditions, orcircumstances that are listed in the insurance policyas not being covered.

Health insurance: A general term for insuranceagainst loss by sickness or bodily injury. This usuallyincludes coverage for medical expenses such asdoctor visits and hospital stays and can cover normaland preventive care such as check-ups, prenatalcare, and well-baby care.

Independent agent: An insurance agent whorepresents more than one insurer.

Insurance: A formal device for reducing the chanceof loss by transferring the risks of several individualentities to insurance companies.

Insured: The party covered by an insurancearrangement, to whom an insurance companyagrees to indemnify for losses, provide benefits, orrender services.

Liability: Individual responsibility for causing,through negligence, injury to another person ordamage to another person’s property.

Managed care: (see Defined network plan)

Market value: This is a value placed on real orpersonal property which relates to its resale value inthe market place. Since the object of most propertyinsurance policies is to pay the insured the actualcash value or the cost to repair or replace thedamaged or destroyed property, the “market” or“book” values are not used in loss settlements.

Medical payments insurance: A form of coverage,optional in various liability policies such as autoinsurance, that provides for the payment of medicaland similar expenses regardless of liability.

Named peril or specified peril: This is a perilindicated or identified in the contract as a cause ofloss for which insurance is being provided. Undersuch contracts if a peril is not named or specified it isnot covered.

Package policy: A single insurance policy thatcombines several coverages available separately.For example, business owner’s insurance is apackage policy, combining property, liability, and theftcoverages.

Peril: A property insurance term referring to thepossible cause of loss such as a fire or windstorm.

Personal property: All tangible property notclassified as real property.

Policy: A written contract for insurance between theinsurance company and the policyholder.

Premium: The amount of money an insurancecompany charges, based on a given rate, to providethe coverage described in the policy, or simplystated, the price of insurance protection for aspecified risk for a specified period of time, typicallyone year.

Property/Casualty insurance: Property insurancecovers damage to or loss of the policyholder’sproperty. The terms “casualty” and “liability”insurance are often used interchangeably. Bothcover the policyholder’s legal liability for damagescaused to other persons and/or their property.

Rate: The cost of a unit of insurance as determinedby insurance companies and state regulators. Therate serves as the basis for the premium.

Real property: Land and most things attached tothe land such as buildings and vegetation.

Replacement cost: The cost of replacing propertywithout a deduction for depreciation.

Risk: This word has two meanings for insurers:(1) the chance of loss such as from a peril; and(2) the person or entity that is insured by a policy.

Theft: The act of stealing or taking the property ofanother.

Umbrella liability: A form of insurance protectionagainst losses in excess of the amount covered byother liability insurance policies; also protects theinsured in many situations not covered by the usualliability policies.

Underwriting: The process by which an insurancecompany selects and classifies risks according totheir degree of insurability.


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Underinsured motorist (UIM) coverage: Acoverage in an automobile insurance policy underwhich the insurance company will pay damages tothe insured for which another motorist is liable if themotorist causing an accident has lower bodily injuryliability limits than your UIM limits. The maximumdollars paid is then the difference between the twolimits.

Uninsured motorists (UM) coverage: A coveragein an automobile insurance policy under which theinsurance company will pay damages to the insuredfor which another motorist is liable if that motorist isunable to pay because he or she is uninsured. Thiscoverage applies to bodily injury damages only.Injuries to the insured caused by a hit-and-run driverare also covered.

Utilization review: A method of claims reviewwhereby the insurance company analyzes a case,either prospectively, concurrently, or retrospectivelyto determine if the treatment given is necessary andappropriate.

Worker’s compensation: A policy conforming tostate law which pays benefits to an employee (or anemployee’s family) if the employee suffers a job-related injury (including death) or occupational injury.

Date post:	14-Jul-2015
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