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 Minimum insurance requirements
Make the right choice
By Josh Ring
EL DORADO INSURANCE
Some of the most frequent questions we are asked at El Dorado pertain to limits of insurance. Specifically, security companies are interested in how much insurance is enough, and if
the Texas Private Security Board only requires $100,000 in
coverage, why should they carry anything higher. I would like to take some time to expound on these topics and explain why only accepting the minimum requirements can be more costly to a private security owner in the long run.
As you all certainly know by now, it is true that the Private Security Board’s insurance requirements for a licensed firm in the state of Texas are $100,000 per occurrence, with a $200,000 aggregate limit.
I am not going to take this time to tell any security company that any specific insurance limit is enough to protect you from all
claims. There are simply too many variables and situations that could arise which can exhaust even the highest of limits. Imagine a patrol operator who has a collision with a school bus on its way home in the afternoon with 30 or more kids on board. Is $5,000,000 enough? $10,000,000? There is not a correct answer to that question. Instead, El Dorado has always suggested that a security firm take a look at the marketplace and make an educated decision based on what the markets will dictate.
Primarily, what are your clients going to require of your company? El Dorado reviews hundreds of contracts and insurance requirements per week on behalf of our customers. It would be our estimate that less than .1% of these contracts require anything less than $1,000,000 in liability coverage.
Many requirements today are now in excess of $1,000,000 and are asking our customers to carry umbrella policies to increase their limits to $2,000,000 and
beyond. The simple reason for this is that we live in an ever increasingly litigious society, and the companies who are hiring private security are concerned with protecting their own assets.
For the security owner who chooses to purchase an insurance policy at the state required minimum level, they would be ineligible to take on the 99.9% of contracts available. Even though they are saving a few dollars on their insurance costs up front, how much work and potential revenue are they leaving on the table? Additionally, if a security company is awarded a contract and they opt to then purchase a policy with the higher limits, there are administrative fees and cancellation issues they must fight through in order to rewrite their coverage with the higher limits of insurance.
This same logic holds true for workers compensation insurance. Owning a company in this state, you are not required to carry this type of insurance for your employees. However, a security firm not only leaves themselves open to potential claim situations and lawsuits when they
non-subscribe, but how much revenue are you leaving on the table? If the majority of the marketplace is going to dictate that you carry this coverage, the short-term savings are going to be offset by the increased business that your firm will be able to produce.
In conclusion, although the minimum requirements set forth by the state may make sense at first, after examining the big picture, it strongly benefits any security firm to reassess their insurance limits to make certain they can compete.
Josh Ring
Vice-President
El Dorado Insurance Agency, Inc.
P.O. Box 66571
Houston, TX 77266
800-221-3386
800-700-0126 Fax
E-mail: joshring@eldoradoinsurance.com
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