Massage Insurance Course
Massage Liability Insurance Class 101
What exactly is insurance?
To begin with insurance is shared risk. Each person in a group of people deposits some money into a pool and protects all of the other contributors for a set amount of risk. The deposits are called premiums and the amount of premiums paid is in direct proportion to the risk.
The idea is that there will be enough money in the pool to pay the claims that arise.
Insurance companies back these pools with their assets to make these pools work, but they keep the excess money. As an example the face value of a policy is $1,000,000. There is a pool of 10,000 people. Ten thousand divided into one million is $100. If each person deposited $100 that would cover one claim.
In reality there are few claims so the insurance company collects the $100 and may only pay out $100,000. There is $900,000 left over that becomes insurance company profit.
A good insurance policy has a less than 40% pay out. Anything over that would be considered bad business. The policy is called a book of business.
A really good book of business would only pay out 10%. This is where the Massage, Dance and Yoga industries are. Hair, Skin and Nail care are a little higher risk but still in the 10% to 15% range. This is how it is possible to offer insurance to groups at such low premium rates.
To recap, insurance is shared risk with an insurance company guaranteeing the policy with their assets.
The TWO kinds of insurance coverage.
It is very important that you understand the difference between a “Claims Made” and an “Occurrence Form” insurance policy.
Insurance companies use claims adjustors to handle their claims. The job of an insurance adjustor is to make certain that the claim is real. He or she investigates the claim.
The claims adjustor also tries to find a way not to pay the claim if at all legally possible. Paying a claim cuts into the insurance companies profit.
A “Claims Made” insurance policy is only valid if you are insured at the time the claim is filed. If your policy is no longer valid, if you are not current and a claim is filed for an incident a year ago, you have no coverage.
You want to be very careful to know whether or not your coverage is going to keep you safe if you change careers or retire. What are the parameters of your policy?
An “Occurrence Form” insurance policy will cover you if you had coverage at the time of the claim, regardless if you are currently covered or not.
“Occurrence Form” insurance is the better choice.
Insurance companies are governed by states. Each state has its own rules and regulations. New York is the toughest state for insurance companies and Texas is a close second.
Each state mandates an insurance pool that protects everyone who is insured. If an insurance company goes bankrupt, the pool covers their claims and other companies in that state pick up the book of business.
These pools are only for “Admitted Carriers” that are approved by that state. Not every company is approved in every state.
The other class of insurance carrier is called “Surplus Lines” and this class insures most of the other associations. A surplus lines insurance company is not included in the insurance pool.
Up until a few years ago “Admitted Carriers” would not insure organizations of Massage, Yoga or Dance.
The best choice to be with a premier carrier is to be in a state insurance pool. State Farm?, Nationwide? and Allstate? are “Admitted Carriers”. The two organizations with admitted carriers at this time are AMTA and NAMT.
Understanding Policy Limits.
When you buy insurance from an insurance company you receive a policy that is only yours. You own your policy.
This is what we are normally used to. We buy car insurance, homeowners insurance or health insurance and the insurance company or insurance agent sends us our policy with the insurance company name and our name on the cover page.
When you own an individual insurance policy you get to see the whole policy. Nobody can hide anything from you. Group policies belong to the organization, you are added onto them, they do not belong to you individually.
Massage liability insurance is the same except for getting your insurance through an association. The association owns the policy and you are added onto it. This was fine until a few years ago when the insurance companies began to put a cap on the policy coverage.
Aggregate limits are unlimited unless the limit is stated. For example a $1,000,000 policy covers any number of claims up to $1,000,000. A $1,000,000/3,000,000 policy covers a single incident for $1,000,000 but the second number limits it to that cap during the term of usually one year. The second number, 3,000,000, is the aggregate coverage, the amount of coverage in one term, again, usually the term is one year when the policy lapses.
A policy cap is the total aggregate coverage on the entire policy. A group policy with a cap would mean that if all of the claims exceeded that limit, nobody would be covered for the rest of that term or year.
For example, most “Surplus Lines” policies have a single $ 10,000,000 cap, however, the thousands of members think they have $ 1,000,000 or $ 2,000,000 each per claim. The truth is they all have to share the cap. They are all part of one policy owned by the association. Some of the insurance brokers and agents have hidden the truth even from the association’s management team.
Even the “Admitted Carrier” member policies that are a group policy have a cap. This information is usually kept from the members too. It is worth getting this information directly from the insurance company, not from the association or the agent.
Ask your association if you get your own individual policy or are part of the association’s group policy?
The NAMT insurance carrier issues individual insurance policies to each member. To the best of our knowledge the NAMT is the only one doing this as of September 1, 2010.
Each additional insured should be able to get a certificate from you on an Acord? insurance form with their name on it. You do not want all of your other certificate holders listed.
Each time you add a Certificate Holder, they get half of your coverage and you get the other half. The coverage is split in two.
For example, you have a policy for $1,000,000 per incident and now you have $500,000 and they have $500,000 for each claim you have that involves them.
Each additional insured has half of your coverage when you are working on their property or in their service.
Getting Insurance questions answered.
Who is qualified to answer insurance questions? Every state insurance law requires a licensed insurance agent answer the insurance questions. You want to talk to the agent of the insurance policy in question.
You can also get your questions answered by the insurance company. You should get the number of the broker on your certificate of insurance. If you do not, you do not have an individual policy!
The legal document that shows that you are insured is your certificate of insurance. It should be signed by your own insurance broker or company representative.
Do your own homework.
Get online, talk with local insurance agents and get the absolute truth. This class could be very valuable to you as a massage professional or as a school owner because you are an insurance purchaser.
As a massage professional or school owner it is important to have your very own individual policy. As a school, you may find the best choice is an independent insurance agent in your own community. I hope this helps you stay safe and prosperous.
If I had not been working with the FBI and the Insurance Fraud Division of the U.S. Justice Department for the past three years I would not have ever found this information.
The lessons have been difficult but the knowledge is extremely valuable and needs to be shared.
Do not take what I have written here as fact, check it out for yourself. Education is about wanting to receive knowledge.
Who can you trust today? You are the only person you can be absolutely sure of! Do your homework!
I learned the hard way. You can learn from my mistakes or not. I thought I knew the massage insurance liability business. I was lied to for 16 years. Lies only last for a season but the truth lasts forever.
Thank you for supporting the IMA for the past sixteen years, from 1994 until 2010. Over 80,000 people joined us during that time period.
The founder of the IMA owned this web site and promoted schools and associations free of charge for over ten years. It will stay a free site and will soon promote individuals free of charge also.