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Author Topic: Liability Insurance- what's reasonable?  (Read 2643 times)

drewgandy

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Liability Insurance- what's reasonable?
« on: November 17, 2004, 09:58:29 pm »

This is probably a US question and even then probably varies considerably with region but....
Calculated out, what is the approx. per gig cost of liability insurance for a small to medium sound co?  Should this be a poll question?  

Warren

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W. Mark Hellinger

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Re: Liability Insurance- what's reasonable?
« Reply #1 on: November 18, 2004, 09:47:55 am »

Single event liability insurance is fairly expensive.

It seems like our general liability insurance runs about 2% of gross.  I have never had a claim and I do all that is reasonable to do so I can to keep it that way.  I would guess the rate could wildly fluctuate.  If you're perceived as high risk or have have no track record, I'm sure it would be difficult to qualify for a decent rate.  My numbers are based on my size of business in my area.  If you're working twice a month for $100 per show, I doubt you could find liability insurance that would cover you for $4 per month.  OTOH, if you're grossing $1M per year, I would think the liability coverage portion of your business insurance umbrella would be slightly less than $20K per year.

I suspect that a good business policy with $1M/$5M liability coverage cannot be had for much less $3K - $4K per year even if your gross is fairly small.  If you're working a couple times a month at $100 per show, well... your liability insurance alone could easily cost you 100% of gross.  If you're busy 200 days a year at about $500 per day per employee, I'd say your liability coverage alone should cost between 1% and 2% of gross.
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drewgandy

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Re: Liability Insurance- what's reasonable?
« Reply #2 on: November 18, 2004, 11:18:02 am »

This past year I was doing most of my live work on other peoples gear.  My liability insurance has been based more upon installation work but now that I'm pushing the event services more they want to change my category.  This insurance company (American Family) is asking how many events a year I do which leads me to look at this on a per gig basis.  After calculating out the quotes it looks like probably 10% of my gross will go to liability which is hard to swallow.  I'm definitely not in the $100 a show bracket but it's still eating the profits quite a bit.  I like your 2% rate.  Who are you insured with?  

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Bennett Prescott

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Re: Liability Insurance- what's reasonable?
« Reply #3 on: November 18, 2004, 04:21:48 pm »

I'm paying $2500 yearly for $1 million in per incident liability coverage, which is a significant portion of my gross. I work at around $500 an event, 2-3 events a month. However, because I'm "higher quality" than Billy Bob's sound company down the road and can therefore work venues he can't, I have to carry it or they won't let me in.
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eric (e.t.) torgerson

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Re: Liability Insurance- what's reasonable?
« Reply #4 on: November 18, 2004, 10:39:50 pm »

I pay about $1500 / yr. for $500,000 of liability coverage which was the minimum amount required by my main venue/client. That was also the minimum amount any insurance company would write the policy for. It was not easy to find someone to write a minimal policy like this. It's worth it to find out what your clients want you to carry then shop around for it.
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Marc Schwartz

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Re: Liability Insurance- what's reasonable?
« Reply #5 on: November 19, 2004, 02:40:08 pm »

Reasonable? Hmmm....Well, I suppose with business liability insurance it is a lot like the phrase "reasonable attorney's fees" when it is used in conjunction with the enforcement sections of contracts. It is a bit of an oxymoron. No offense to the lawyers out there, but, I digress...
At any rate, I too grapple with how to deal with the costs associated with liability insurance for my sound company. So long as everything goes smoothly and I never have to make a claim, carrying the insurance is a necessary business expense. Without it, many potential and existing clients will not consider hiring me. OTOH, just because I am insured does not get me the job. I have to maintain a relationship with a good insurance company, one that also has as good a reputation for solid financial management. I have a couple of clients that check the rating of my insurance company, and they will except nothing less than an "A" rated carrier.
For that reason, I spent a considerable amount of my time researching what agents and insurance companies write policies for sound companies. From what I learned, it is wise to consult an insurance professional with experience in the entertainment industry. It helps because when the agent goes to look for a company to write the policy and give a price quote, they are working with an insurer who has written this type of business insurance before, and understands the market.
You can find yourself spending many hours answering seemingly bizarrre questions from insurance underwriters if you deal with people without experience in our field.
If you can avoid the above mentioned pitfalls, and find a good insurer that you can afford, the cost of keepig your insurance should become a part of your business planning. I allow for a percentage increase in the cost of insurance each year, because even when not making claims, it seems like the costs continue to rise. So long as the insurance price hikes don't become absolutely outrageous, I can plan for my insurance costs in my financial and business strategies for coming years.
Bottom line is to shop around and do your homework. Part of being in business is dealing with this stuff. Not as fun for me as doing sound at the gig, but every bit as important. Sorry for the long answer.

-Marc
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George Blun

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Re: Liability Insurance- what's reasonable?
« Reply #6 on: November 19, 2004, 03:13:17 pm »

How do you live on 1,000 - 1500 per month. I must be missing somthing here. Can you please pass along your secret.
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W. Mark Hellinger

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Re: Liability Insurance- what's reasonable?
« Reply #7 on: November 21, 2004, 11:44:00 am »

chmed wrote on Thu, 18 November 2004 08:18

I like your 2% rate.  Who are you insured with?  



I belong to NAMM.  My insurance is through NAMM.  I'm sure your milage will vary depending on driving conditions; however, the NAMM related insurance seems to be one of the best deals around for insurance that will actually insure you in the event you need it.  I say that because:  I was insured through a local agency for years.  In rough change, over the years that I was insured through the local agency, I probably spent well over $100K in insurance premiums and (knock on wood) never had a claim.  That was bad enough; however, when I signed up with the NAMM related insurance, the agent there looked over my existing policy.  The agent basically said I wasn't insured for what I do, and if I ever did have a claim, it's doubtful the claim would have been paid.  That was quite a lesson.  All that money spent on premiums just to find out I wasn't actually insured in any meaningful way.  

I hate betting against myself... but if I am going to bet against myself, I'd like to be somewhat assured that if I loose there is some chance of it not being a total loss.

Regardless of the percentage of gross: make sure that the money you're shelling out in insurance premiums is actually going to something that will cover you.
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