AT YOUR OWN RISK
Papers & Records
How To Organize Your Insurances Files
by Peter Schlactus, CIC, AAI [ Back To Table Of Contents ]
Any decent office
insurance policy should include at least s6me coverage for reconstructing
"valuable papers & records." This
protection would apply to - among others - your insurance policies. The alarming fact is that the insurance records of most
businesses require substantial "reconstruction'' even without a fire, flood, or computer crash.
Insurance files are important documents and the prudent business will not treat them like an indoor compost heap.
The Case for Care
Does it really matter if your insurance records are disorganized and vulnerable to loss?
What if you want a second
opinion on your insurance? What if your carrier drops you and you need to turn
to another broker for
help -- fast!
What if you have a loss
and get into a dispute with the insurance company, the adjuster, your agent, or
all of the above? How do
you protect yourself without records?
Worse yet, what if an old
loss surfaces after several years and you no longer use the same carrier or
agent? What if your previous
agent has gone out of business? Insurance companies do not keep policy records readily accessible for years, and the burden of
proof is on you to show there was coverage in force at the time of the loss.
Insurance is simply a
written contract. Cynics would say that, like other contracts, insurance is
"worth the paper it's printed on."
Well, if you can't even find the paper, then what is it worth?
The problem for most
businesses is: how to stay on top of your insurance when you may not understand
it well, and without
spending too much time on the project.
The solution is pure
common sense. Familiarize yourself with the basic types of insurance documents
(see below). Then set up
files once - right now - in a way that makes them easy to maintain. Finally, keep your records in a safe place to guard against loss.
Organizing Your Files
Our goal is a simple yet accurate
filing system that is easy to update and to purge. Remember that, like exercise,
part will be the beginning. The system described below lets you reuse many folders for years. Once you sort through the current
mess, it's gone (with luck) forever!
For the sake of simplicity
let us imagine a filing cabinet with hanging files inside of which are manila
folders. You may choose to
use binders, accordion files, or other means but the organizing principles will be the same.
I recommend that you set
up your files into three sections: POLICIES, CERTIFICATES/SCHEDULES, &
LOSSES. Each section
will involve more than one hanging file. Using different-colored hanging files, you can distinguish between the three sections
at a glance without additional labeling.
POLICIES SECTION: Set
aside a hanging file for each policy type. Keep extras handy in case you decide
to purchase a new type
of insurance. Label each hanging file with the type of policy, e.g. "Auto," "General Liability," or "Workers Comp."
Take the time to have labels typed or printed. Neatness in set\-ting up will promote neatness later on.
Prepare three manila
folders for each hanging file. Label them with the policy type and a suffix:
and "Correspondence." Again it is a good idea to use color-coding. For example, all of the "Endorsement" folders could be yellow,
but each would reference its own policy type.
Prepare two hanging files
for expired policies. Label one, "Expired Property" and the
other, "Expired Liability." As we shall see you
should treat these two categories differently. Place some unlabeled folders (use a new color) in each.
SECTION: Since both of these documents provide information on multiple policies,
they should be
kept separate from your individual policy files.
Each should require only
one hanging file and one manila folder labeled, "Certificates" and
"Schedules" respectively. In the
Certificates file you may wish to prepare a separate manila folder for "Customer Specs." so that you can save the insurance
specifications your customers give to you.
LOSSES SECTION: Set up
three hanging files: "Property Losses," "Liability Losses,"
and "Work. Comp. Losses." Each hanging
folder should be well-endowed with its own set (and color) of folders. No need to label them yet. Each folder will be used for a
particular claim. A fourth hanging file should be labeled, "Loss Runs," and sport a single manila folder. If you have any frequency
of claims, you should designate a fifth hanging file for "Dead Claims."
Using Your Files
The policy folders should
make filing easy. Normally the first thing you will receive is a binder. Once
the policy arrives you can
slip it into the same folder. "Policy" folders are good places to jot down notes on phone conversations you have with your agent.
As policy endorsements come in, place them consistently in the back of their folder. This way, you preserve their chronological order.
When a policy renews,
simply combine the contents of all folders into a single expired folder. Label
the folder with policy type and
year and store in the appropriate expired file until purged. Now your policy folders are empty and ready to receive the new policy
Certificates and schedules
can be dropped into their designated folders as you receive them during the
course of the year. It is a
good idea to mark certificates that you know you will need again the following year. Upon renewal, review the necessary certificates
with your agent.
every loss or claim set up a manila folder in the
appropriate hanging file. The folder's label should display the loss date,
the date you learned of the loss, the policy type, and the person involved (if any). As documents and correspondence flow, place
copies in the folder. Notes on phone conversations and the like can be written directly onto the folder. Try to be consistent about
placing all new items in the back so that chronological order is maintained.
If you believe a claim has
been fully settled and want to reduce clutter in your main files, move the
folder to the "Dead Claims" file
to await purging.
As for Loss Runs, these
are immensely useful to have and an annoyance to reorder. The easiest thing to
do is label the loss run right
away when you receive it. Indicate the insurance company name, the type or types of policies, and the policy year or years covered.
If you wait, it becomes notoriously difficult - even for agents - to decipher the lingo and abbreviations used on loss runs.
Purging Your Files
Here is where the
distinction we have made between property and liability files comes into play.
Treat as "property" insurance policies
that protect against loss of your property only. Treat everything else as "liability,'' whether or not it is in a strict sense. When in doubt,
treat as liability.
Generally speaking, you
need to hold onto "liability" files much longer because it may take
years for you to be served notice of a loss.
Also, liability claims can flare back to life after a long period of dormancy. With "property" claims, you normally learn about and settle
losses fairly quickly.
Now let's examine each
file in turn. Expired Property policies need not be kept longer than one
year after they expire. During this time
they may be useful mainly for comparative purposes. Expired Liability policies should be kept for at least six years after termination,
depending on your state's statute of limitations.
be discarded at the end of each policy year to make room for the new batch. You
can treat Schedules of Insurance
similarly, but you may wish to keep a few years' worth since they take up little space and give you a broad view of your insurance over
A good rule of thumb for
losses is to keep Property Losses for four years, and Liability and Workers
Comp. Losses for six years.
Start counting from the time you learn of the loss.
Loss Runs should be kept
for five years, counting from the most recent policy expiration. Make it a
practice to purge all files once
a year when your policies renew. Also, use these guidelines to purge your current insurance records before sorting outdated documents
into your brand-new file system.
A warning about agent-provided insurance binders: touted as a value-adding service by some firms, these binders often grow rapidly
obsolete and become counterproductive.
Prepared insurance binders
may display your policies handsomely, but not leave room for endorsements,
schedules, certificates, loss
runs, etc. Over time your files will tend to revert to a Jekyll & Hyde combination of neat binder plus disorganized jumble. As your policies
are amended and losses occur, the binder will be worthless without the rest.
Thank your agent politely
for the thoughtfulness. Then file the policies in your own system. Don't worry
about your agent taking offense.
On the contrary, he or she will be grateful if needed records can be retrieved efficiently.
Safeguarding Your Records
Keeping your insurance
records away from the premises is one obvious way to protect yourself. You will
never have to worry about
losing both the insurance and the property that insurance is protecting.
The drawback of course is
that you lose easy access to the records for filing and in case of a loss or
inquiry. Perhaps a better strategy
is to keep your records in the office, but protect them from fire, smoke, flood, and sprinkler leakage.
A fire-proof safe works
well, especially if you use free-standing (e.g. accordion) files or binders. At
a minimum, keep records enclosed
in a secure cabinet well off the floor. Make sure someone other than yourself knows where your files are to facilitate rapid evacuation
Your insurance file is
composed of valuable papers and records that should be kept organized and
protected against loss. Having
well-maintained insurance records can pay tremendous dividends in many cases and contingencies.
Once you are familiar with
the basic types of insurance documents, it is possible to set up an inexpensive
insurance filing system
that is easy to maintain. A properly designed system will provide a place for all documents and facilitate ease of use over time.
Following a few simple
rules you can purge your file each year to avoid storing unnecessary records.
Keep in mind, however,
that most businesses do not keep insurance records long enough.
Finally, safeguard your
investment -- in every sense of the word by keeping your records as safe and
secure as possible without
sacrificing needed access.
Congratulations! You have
tamed the monster. Now sit back and enjoy your well-earned peace-of-mind. Not
only are you protected
by insurance, but also your insurance is protected.
Peter Schlactus, a Certified Insurance Counselor and Accredited Advisor in Insurance, is Co-President of KBS International Corp., which provides specialized insurance programs, benefits, and risk management services to courier companies and executives nationwide. Mr. Schlactus is available to answer inquiries at 1-888-KBS-4321 or via e-mail at firstname.lastname@example.org.
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