Chapter 7,8
Insurance Considerations
Assume the Worst Case
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Injuries/accidents
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Could the incident have been prevented through
better training, preparation, or signage?
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In some cases, the answer is no
That’s why you have insurance
Litigious society
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People may see HF centers as prime targets for fraud
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Intentional slips/falls
Purposely using faulty equipment
Aquatic situations
Types of Losses
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Property losses
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Building, equipment, furniture, inventory, money
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Fire, smoke, explosions, windstorms, hail, vandalism, etc.
Insurance covers these incidents
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Consider amount of coverage by replacement costs vs. depreciated value
Net income losses
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Facility closing due to an unforeseen event (fire)
Cannot collect membership dues, open restaurant, conduct personal
training, or any other service
 Consider amount of coverage for sustaining through repair period
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Liability losses
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An individual sues for alleged wrongdoing
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Bodily injury cases – CRUNCH FITNESS CASE
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http://www.fitnessmanagement.com/FM/tmpl/genPage.asp?p=/informatio
n/articles/library/liability/guested0999.html
Personnel losses
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Injury to employees – can be catastrophic
Benefits of Insurance

Provide payment for losses, allows for
recovery from misfortune
 An
absolute necessity in the HF business
 Fire
can cause immediate unemployment and loss
of all assets
 Insurance all but eliminates the concern because
reconstruction can begin almost immediately
Choosing a Carrier

Find a broker
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Their job is to convince insurance carriers to accept the potential
loss exposures of a business in exchange for the lowest premium
payment
Establish criteria for potential loss
Identify which carrier is best prepared to cover the
potential loss
Make a presentation to a few companies outlining the
exposures and requirements
Play an active role in insurance premium negotiation
Negotiate the final terms of premiums vs. coverage
Determine Your Needs

Along with the broker, evaluate total value
of building, assets, net income loss, etc.
 Special
services may not be covered unless it
is specified in the policy
 Massage

equipment, tanning beds
Double check everything!
Purchasing Insurance

Consider the Market
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Buyer’s market vs. carrier’s market
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Shop for the right climate
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In carrier’s market, you may need to shop longer and more
carefully
Be thorough
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Fully understand all aspects of coverage
Don’t take the broker’s work for it
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What’s the difference?
Make sure policy outlines everything you need it to
Negotiate

Carriers will fight for such a large client, so use them as
competition against each other
Warning Signs
(potential and current carrier)
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Premiums have risen significantly over the past
few years
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Premiums are too good to be true
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May indicate poor management
What’s the catch?
Excessive delays in settling small claims
Many complaints filed against company
Unusually high rate of management turnover
Downward trend in ratings
Below average ratings in the most recent year
by 2 or more top rating agencies
Property and Casualty Insurance
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Package policy
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Building only
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Must have a separate policy for this – regular inspections are included
Automobile
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Committed by employees or outsiders
Extortion, robbery, theft, destruction, burglary, computer fraud, forgery
Boiler and machinery
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Estimated from past financial statements – Fire sale anyone?
Crime
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Protects from negligence
Manage the exposure – pools, hot tubs, showers, floors, sidewalks
Business interruption
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Furniture and fixtures, machinery and equipment, supplies
General liability
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Additions, permanent fixtures, outdoor fixtures
Contents only
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The whole deal
Accidents in employee-driven vehicles – kids programs?
Umbrella liability
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Provides excess coverage for general, auto, etc. Broader coverage policy
Employee Insurance

Worker’s Compensation
 Injury
must cause an impairment
 Must be the result of an accidental or
occupational disease
 Must be work related
 Worker’s compensation act
 Protects
employer from fraud
 Can elect to be governed or not be governed by it
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If you elect no, you cannot use employee negligence as
a defense for not paying worker’s compensation
Employee Insurance
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Group Health Insurance
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Medical, Dental, Life and Disability
Providers
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HMO’s vs. PPO’s
HMO requires specific providers
 PPO’s allow employee to choose
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C.O.B.R.A. compliance
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Consolidated omnibus budget reconciliation act (1985
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Protects employees against loss of health insurance due to job
termination, death of spouse, divorce, etc.
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18 months of coverage for employment termination
Paid 100% by employee
Someone within your organization must be in charge of administering
COBRA coverage for eligible employees
Life Insurance
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Whole
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Provides lifetime protection and is considered permanent insurance
Term
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Coverage for a specified period (5-10 years)
Bottom Line

Become familiar with various insurance
aspects before purchase
 Providers
 Policies
 Coverage
options
 Legal considerations
 # of employees eligible
 Brokers