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Hello Insurance. Goodbye Risk.


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Hello Insurance. Goodbye Risk.

When it comes down to it, all insurance really serves a single purpose. It reduces your risk. Perhaps you cannot afford to risk having to pay $100,000 if someone is badly injured on your property. You'd buy homeowners insurance to protect you from that risk. Maybe you don't want to have to shell out $20,000 for a new car if someone drives into the side of yours in a parking lot. You'd buy comprehensive car insurance to cover that risk. More insurance equals less risk. But how much risk do you need to protect against, and how much insurance is enough? Only you can answer that question, and you should have a better idea of your answer after reading the articles on this website.

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Understanding Arbitration Clauses In Business Insurance

You may come across an arbitration clause when shopping for business insurance. Below is an overview of arbitration clauses.

What It Means

Arbitration is an alternative dispute resolution method — it is an alternative to litigation. Arbitration involves the parties in a disagreement sitting down with an arbitrator to get a solution for the disagreement. Therefore, the arbitration clause in an insurance contract means that you will arbitrate your disagreements with the carrier.

Types

There are two types of arbitration clauses.

Binding

In binding arbitration, all parties to the agreement must abide by the decision of the arbitrator. None of the parties can sue the other one even if they are not satisfied with the arbitrator's resolution.

Non-binding

In non-binding arbitration, you reserve the right to sue the other party even after the arbitrator has made their decision. You only use the arbitrator's resolution if you find it acceptable.

The Process

Here is a brief overview of a typical arbitration process:

  • You choose an arbitrator
  • You file your case
  • You engage in a preliminary hearing to introduce the disagreement and discuss procedural issues
  • You exchange relevant information and documents
  • You make submissions (this is the hearing)
  • The arbitrator makes their decision

The above are the general stages of arbitration, but the exact steps will depend on the arbitrating party.

The Rationale

Arbitration clauses have several benefits, but the following are the major ones.

Dispute Resolution Costs

Proponents of arbitration clauses argue that arbitration reduces the cost of dispute resolution. This claim makes sense if you consider the legal costs of litigation. Lawyer fees, court fees, travel costs, and document costs are just a few of the costs associated with litigation.

Dispute Resolution Time

Court cases do not just cost a lot of money — they also take a long time. Arbitration is relatively faster than litigation. In arbitration, the parties involved can easily set the timelines they desire and determine the progress of the case. This is not always the case with litigation, where you are likely to be at the mercy of the court.

Publicity

The submissions during arbitration and resolution are typically kept private. Thus, arbitration allows you to keep your information private. This can be good, particularly if the disagreement involves sensitive information.

As you can see, you really do need to scrutinize and compare business insurance policies before purchase. Consult an insurance agent to help you understand any complicated clauses before settling on a policy.

For more information on business insurance, contact a company like Welsh Insurance Agency Inc.