Michigan Finance Company Insurance Policy Information
Michigan Finance Company Insurance. Finance companies are an increasingly popular option among private individuals and businesses seeking loans.
Finance companies are financial institutions that accept monetary deposits from banks and other money market sources and use those funds to make loans to individuals and businesses for a variety of installment sales such as automobiles, boats, or equipment.
They may be affiliated with a manufacturing firm, such as an automobile manufacturer, and finance installment sales solely for that firm's products. Finance companies earn income from interest charged on loans, profits from investments, and transaction fees.
They may also service escrow accounts, may be involved in real estate services and transactions, or broker and sell loans to other operations.
While consumer finance companies and sales finance companies represent an alternative avenue to obtain short-term loans to individuals and commercial ventures respectively, finance companies can also be associated with larger parent companies.
Because of the nature of their work, finance companies are well-versed in risk assessment and management - but the fact remains that finance companies, too, can find themselves facing circumstances beyond their control.
That is why it is crucial for these businesses to protect their interests with outstanding insurance coverage. What types of Michigan finance company insurance are needed? Read on to learn more.
Michigan finance company insurance protects your financing and loan business from lawsuits with rates as low as $37/mo. Get a fast quote and your certificate of insurance now.
Why Do MI Finance Companies Need Insurance?
Finance companies should carry comprehensive insurance primarily because they, like any other business, are vulnerable to a wide range of hazards.
The risks finance companies face include universal risks as well as threats unique to this branch of commerce, and while not every eventuality is insurable, many of the perils that can take down a business are.
A finance company's commercial premises could, for example, be impacted by an act of nature - like a wildfire, earthquake, or hurricane. Theft, vandalism, and accidents can strike almost any business.
Without the right Michigan finance company insurance, the resulting losses could easily be so extensive that the company would go bankrupt, but equipped with excellent coverage, these challenges can be overcome.
Liability risks represent the other major category of concern. An employee could sustain a work-related injury, a third party, such as a client or vendor, could be hurt on the premises, or a MI finance company could face a lawsuit alleging negligent work. The legal costs that can arise from liability risks can, again, be massive.
The term "unforeseen circumstance" exists with good reason - it is impossible to predict when a major peril will impact your business, and even with the most effective precautions, mishaps may not be preventable. Finance companies that have invested in top-notch insurance will never have to worry that they are unprepared.
What Type Of Insurance Do Michigan Finance Companies Need?
The precise types of coverage that will best protect a finance company against financial losses, as well as the cost of insurance, depends on numerous factors.
The location of the company, the size of the business, and the number of employees are merely some examples of the variables that influence a finance company's insurance needs.
For this reason, it is imperative to consult a skilled commercial insurance broker, who will create the best possible insurance plan. With that in mind, here is a look at the essential types of Michigan finance company insurance that are usually needed:
- Commercial Property - This type of Michigan finance company insurance is designed to help businesses manage events in which their commercial premises are damaged, such as theft, vandalism, and natural disasters. The building is covered, alongside many of its contents, such as furniture and computers, and that means your insurance will pay for repair and replacement costs. With additional business interruption coverage, it is additionally possible to recover some of the revenue lost to temporary business closures resulting from the peril.
- Commercial General Liability - Should a finance company face a third party property damage or bodily injury claim, commercial general liability insurance pays for a significant portion of the associated legal costs, whether they arise in the form of attorney fees or settlement payments. This form of coverage is an essential part of any company's legal defense plan.
- Errors And Omissions - Also called professional liability insurance, E&O coverage shields your company from the legal costs associated with allegations that it was professionally negligent in carrying out its work.
- Workers Compensation - Even in companies where the majority of employees carry out administrative tasks, workers can be injured on the job. Should this happen, workers comp covers their medical costs, but also reimburses their lost wages if they are rendered unable to return to work for a time.
While these examples of coverage that should carried will get your business closer to being fully insured, be aware that you may require additional forms of Michigan finance company insurance.
To discover more, discuss your unique circumstances with a skilled commercial insurance broker.
MI Finance Companies' Risks & Exposures
Premises liability exposure comes from slips and falls due to public access to the premises. Customer safety and security are very important. Floors, stairs, and elevators need to be in good condition, with steps and uneven floor surfaces prominently marked. The number of exits must be sufficient and well-marked, with backup lighting in the event of a power failure.
Steps should have handrails, be well-lighted, marked, and in good repair. Parking lots and sidewalks need to be in good repair with snow and ice removed, and generally level and free of exposure to slips and falls. There should be security in the parking lot equal to or better than the surrounding area.
Personal injury exposure arises from breaches of customers' privacy and confidentiality of their financial records and discrimination in lending practices.
Product liability exposure is very low as financial products sold to customers are intangible. There may be some minor exposure if the company sells items like tee shirts or advertising novelties or offers small gifts to customers as a reward for doing business with them.
Directors' and officers' exposure can be substantial due to competing priorities of numerous stakeholders such as stockholders, bondholders, depositors, loan holders, employees, and regulators. Directors and officers are more likely to be sued for results of their decisions in times of economic downturn and well-publicized excesses within the financial services industry.
Finance companies may offer escrow fund handling and other financial activities. Directors and officers can be sued if funds from any of these are mismanaged. Officers must be thoroughly knowledgeable about the finance business, able to operate competitively while maintaining profitability, and able to oversee ongoing operations effectively.
Directors should include representation from a wide variety of business interests with no conflicts of interest.
Errors and omissions exposures from accountants and auditors can cause significant loss. There must be checks and balances in place to quickly catch and fix errors that are made. The background and training of all professional-level employees must be thorough and continual to keep up-to-date with industry changes. Monitoring is necessary.
The loan handling, record keeping, and accounting of the inflow of payments from customers is an area to review. If the finance company services mortgages, they must verify that all mortgaged properties have hazard insurance. A mortgage errors and omissions policy provides blanket coverage for any inadvertent omission.
Workers compensation exposure exposures are generally light as finance companies are less visible and less attractive for holdups than other financial institutions. As most work is done on computers, employees are exposed to eyestrain, neck strain, and repetitive motion injuries including carpal tunnel syndrome. All workstations should be ergonomically designed to reduce the chance of such injury.
Property exposures are primarily from fire due to the electrical wiring for computers, printers, and other electronic office equipment, heating, and air conditioning systems. All wiring must meet current codes, be well maintained, and be adequate for the company's operations.
Circuitry on electronic equipment may be easily damaged from smoke, water, and heat, which will cause a total loss even with a small fire. Extra expense coverage should be considered as the finance company must continue operations after a loss.
Crime exposure is primarily from employee dishonesty, either from the theft of cash or from the improper transfer of funds held for customers. Finance companies need a Financial Institutions Bond to cover these exposures. Background checks should be conducted for anyone who will have access to the accounts. There must be regular monitoring and auditing of the books by outside auditors to prevent and identify problems.
All employees must take at least one continuous week of vacation a year. Controls and programming to prevent computer fraud should be reviewed. Extortion is a growing concern due to the high value of assets held by these companies.
Inland marine exposures are from accounts receivable for billings to customers, computers for tracking financial data, and valuable papers and records for customers' and regulatory information. Backup copies of all records, including computer records, should be made and stored off premises for ease of restoration in the event of a loss.
Business auto exposures may be limited to hired and non-owned for employees running errands. If vehicles are provided to officers or key employees, policies should be in place for personal and permitted use of the vehicles. Any driver must have a valid driver's license and acceptable MVR. Vehicles must be well maintained with records kept in a central location.
Michigan Finance Company Insurance - The Bottom Line
To learn more about the specific types of Michigan finance company insurance policies you'll, what limits to consider and the associated premiums, consult with a reputable broker that is experienced in commercial insurance.
Michigan Economic Data And Business Insurance Requirements
Business owners who are interested in establishing operations Michigan must have a thorough understanding of the state's economy. They should also familiarize themselves with any regulations and limits that state may have in place for commercial insurance.
Any entrepreneur who is thinking about starting a business in the Great Lake State first needs to determine if it's a feasible location for business operations. As such, it's important to have a keen understanding of pertinent details regarding the economy of Michigan, in addition to the types of insurance coverage that are mandatory for corporations that operate within the state.
Economic Trends for Businesses In Michigan
After a long period of stagnant job growth in the early part of the 21st century, MI has been experiencing a steady increase in employment gains. Between 2009 and 2018, the state has enjoyed a period of uninterrupted job growth; the longest stretch of job growth since World War II. According to economists at the University of Michigan. While there has been a slight decline in the rate of job growth, job creation continues and forecasters say will continue for the next two years, into 2021.
In 2018, an estimated 55,200 jobs were created; in 2019, it's expected that 35,800 jobs will be created, and in 2020, economists believe that there will be a total of 39,300 jobs created in Michigan. While that rate of growth is 1.9 percent slower than the job growth rate between 2011 and 2016, it is still a steady increase overall. In total, approximate 683,200 jobs will be created in MI between 2099 and 2020; almost four out of the five jobs that were lost during the early part of the 21st century will be recovered.
While the unemployment rate has steadily improved, it is still above the national average. In March of 2019, the national unemployment rate was 3.8 percent, while in the state of Michigan, it was 4.0 percent. Mid-Michigan has experienced the largest growth rate in the state, and according to forecasters, it looks like that trend will continue, moving forward. Industries that are expected to see the most growth include:
- Energy, due largely to research and development in clean energy
- Food and agriculture
- Transportation and mobility
- Healthcare industry
- Information and technology
In the state of MI, business owners are not legally required to carry liability insurance; but most entrepreneurs opt to invest in a General Liability or Business Owner's Policy (BOP). A commercial auto insurance policy is also required for any businesses that use motor vehicles to conduct any aspect of their business operations. Workers' compensation insurance is also required for any businesses with non-owner employees. While the following forms of coverage are not required, depending on the type of business you operate, they are recommended:
- Data breach insurance
- Business income insurance
- Commercial Umbrella insurance
Additional Resources For Financial Institutions Insurance
Discover the types of commercial insurance that banks, finance companies and other financial institutions need to protect their asset management, deposit, lending, investment and other operations.
- Check Cashing
- Credit Union
- Currency Exchanges
- Finance Companies
- Insurance Company
- Mortgage Broker
Financial institutions handle, receive, disburse, and invest money of others.
They are subject to regulations specific to their operation but they are also subject to legal and moral obligations for their customers.
Customers entrust their funds to these institutions because of their confidence in the management's ability.
Insurance is a necessary means to protect the financial institutions and their customers against various types of losses.
The financial services offered and the personal relationships created by the institution can only be protected through the use of a sound insurance program and appropriate bonding practices.
Minimum recommended small business insurance coverage: Business Personal Property, Extra Expense, Equipment Breakdown, Financial Institutions Bond, Accounts Receivable, Computers, Valuable Papers and Records, General Liability, Directors' and Officers' Liability, Employee Benefits, Fiduciary Liability, Professional, Umbrella, Hired and Non-Owned Auto, Workers Compensation & Surety Bonds.
Other commercial insurance policies to consider: Buildings, Earthquake, Flood, Leasehold Interest, Real Property Legal Liability, Computer Fraud, Extortion, Fine Arts, Signs, Cyber Liability, Employment-related Practices, Law Enforcement Professional, Business Auto Liability and Physical Damage And Stop Gap Liability.
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