Do-It-Yourself, Broker or Second Opinion: Who Should Review Your Insurance?

Most new owners should start with a quick do-it-yourself (DIY) pass to learn what they own, then have the current broker walk them through the program. Add an independent second opinion when the program is large, complex or close to renewal. Each option costs something different and catches problems the others miss. This guide is for buyers who inherited the seller's policies and broker and want an honest way to decide who should check them.

What are the three ways to review inherited insurance?

• Do it yourself. You, your finance lead or a board member read the declarations pages, policies and contracts with a checklist.
• Ask the current broker. Usually the seller's broker, who placed the policies and services the account. You ask them to walk through the program with you as the new owner.
• Get a second opinion. Another licensed broker, or an insurance consultant (some states license consultants separately), reviews the same documents independently and tells you what they would change.

None of these is a coverage decision. Whether a particular claim is covered depends on the policy wording and the facts, and only the carrier decides. A review tells you where the risks and gaps are so you can act before a claim tests them. If you are not yet sure what a review should produce, start with what a business insurance review is.

How do the three options compare?

Broker compensation varies. Some brokers charge disclosed service fees where state rules allow, and you can ask any broker how they are paid on your account.

What can a do-it-yourself review catch, and what does it miss?

A careful owner with a checklist can catch a surprising amount, because many post-closing problems are visible on the declarations page. Work through this list:

1. Does every policy name the legal entity that now runs the business (your new company after an asset purchase, the same company after a stock purchase), plus any holding company you want covered? See named insured.
2. Are the policy periods current, and do you know every renewal date?
3. Are all locations, vehicles and major equipment listed, and are sold items removed?
4. Do the limits meet the numbers in your customer contracts, lease and loan agreement?
5. Does the description of operations match what the business actually does?
6. Are payroll and revenue estimates close to today's figures?
7. Are the lender and landlord shown the way their documents require?
8. Do you have loss runs for at least the past five years?

How to read a declarations page in 10 minutes walks through each box, and the documents you need tells you what to collect.

What a DIY pass usually misses is in the policy forms rather than the summary. Endorsements can narrow coverage in ways the declarations page never shows. Workers' compensation class codes, property coinsurance clauses, retroactive dates on claims-made policies and whether an umbrella sits over every primary policy take training to read well. A DIY review also cannot tell you whether the price is reasonable for the risk, because that takes a view of the market. See why the endorsements matter more than the declarations page.

What can the current broker do well, and where are the limits?

The incumbent broker is often your fastest and best-informed first call. They know why the program looks the way it does, which carriers were approached, what claims happened and how they were handled. They can usually issue endorsements quickly, pull loss runs, and update the named insured, vehicles and locations without starting over. Many seller's brokers did careful work for years.

The limits come from the situation, not the person. The program was built around what the seller asked for, the seller's appetite for risk and the seller's plans. The broker may not know your lender's requirements, your growth plans or the add-ons you are considering until you tell them. And anyone reviewing their own work has a harder time seeing it fresh, which is true in every profession.

Questions to ask the current broker as the new owner:

• Which policies have to change because of the ownership change, and by when?
• What would you change if you were designing this program for the business as I plan to run it?
• Which exclusions or endorsements on these policies worry you most?
• When was this account last marketed, and to which carriers?
• Are the payroll, revenue and property values current?
• How are you paid on this account?

Clear answers to these questions are a good sign. Vague ones are a reason to add a second opinion.

When is a second opinion worth it?

A second opinion adds the most when the stakes or the complexity are high. Consider one if any of these apply:

• The business works in several states, runs a fleet, or has customer contracts with detailed insurance requirements.
• The lender's insurance requirements are not yet met, or your board wants an independent view.
• The loss runs show open claims or a pattern of claims.
• A renewal is less than 120 days away and you have not seen the program before.
• You plan add-on acquisitions and want a program that can grow.
• The premium feels out of line with the risk, in either direction.

A useful second opinion compares coverage, not just price. Ask for a written gap list that names the policy, the endorsement or exclusion involved and why it matters to your contracts or lender. A competing quote with no coverage comparison is a sales proposal, not a review.

Expect the reviewer to ask for the same documents a full review needs, and expect them to hope to earn the account. That is fine as long as you are clear about what you are asking for. One practical rule: carriers usually work with only one broker on a given account at a time, so agree who will approach which carriers before anyone requests quotes. If you later decide to move the account, a broker of record letter changes the broker without necessarily changing the policies, and each carrier sets its own process for it.

Before relying on anyone's advice, confirm they hold an active property and casualty license in your state, and in the other states where the business operates, through the state insurance department or the National Association of Insurance Commissioners (NAIC) lookup tool. If you pay a consultant a fee, ask whether your state requires a consultant license. Why use a commercial insurance broker explains what a broker does and does not do.

If you want an independent view, Morrow offers second opinions on inherited programs in the states where it is licensed and will tell you what it would leave alone as well as what it would change. Like most brokers, Morrow is usually paid commission by the carrier if it later places coverage; ask any reviewer, Morrow included, how they are paid.

How do you combine all three without burning bridges?

Most new owners get the best result by using the options in sequence:

1. Week one: do your own pass with the checklist above and write down your questions.
2. Week two: meet the current broker, go through your questions and ask for urgent fixes such as the named insured.
3. Weeks two to four: if the program is complex or a renewal is near, send the same documents to a second reviewer.
4. Decision: compare the two views, fix what is urgent now, and decide whether to remarket at renewal, stay with the current broker or move the account.

A hypothetical example. A buyer closes on a $6 million revenue distribution company with a 7(a) loan backed by the Small Business Administration (SBA). The buyer's own pass finds the auto policy still names the seller's old company. The seller's broker gets the carrier's agreement to change the named insured within a week and explains that the property values have not been updated in years. A second opinion finds two gaps. The largest customer contract requires the customer to be an additional insured with the company's policy paying first (primary and noncontributory wording), which the general liability policy does not provide. And the umbrella does not list the auto policy underneath it. The buyer asks the current broker to request the endorsements now and to update the property values, keeps the account through renewal and asks both brokers to agree on which carriers each will approach. The carrier issues the endorsements, no one is blamed, and the gaps are closed before renewal.

If you decide to stay, keeping the seller's insurance or starting over covers what to fix. If you decide to shop, see how to remarket an inherited insurance program.

Keep reading

• What Is a Business Insurance Review and When Do You Need One?
• What Happens in a Business Insurance Review, Step by Step
• Broker of Record Letters: Switching Brokers Without Switching Policies
• How to Remarket an Inherited Insurance Program After an Acquisition
• Should I Keep the Seller's Insurance or Start Over? A Decision Guide
• All guides for new business owners

Frequently asked questions

Will my current broker be offended if I get a second opinion?

Most experienced brokers expect a new owner to look around, especially after a sale. Be open about it, give the current broker a fair chance to answer your questions, and keep the conversation about what the business needs now rather than what was done before.

Do I have to pay for a second opinion?

Often not, when the reviewer is a broker who hopes to place the business. Independent consultants usually charge a fee. Ask up front how the reviewer is paid and whether anything is expected of you in return.

Can I review my business insurance myself without a broker?

You can catch a lot yourself: names, dates, schedules and limits against contracts. Changes are made by the carrier, usually through your agent or broker of record, and policy wording, class codes and property valuation are easier to get right with help.

Can two brokers quote my business at the same time?

Yes, but usually not with the same carrier. Carriers generally accept one broker per account, so split the carriers between brokers or decide which broker leads before any submissions go out.

Does getting a second opinion mean I have to switch brokers?

No. A second opinion is information. You can use it to have your current broker make changes, to remarket at renewal, or to move the account if that serves the business better.

References

• National Association of Insurance Commissioners: State Based Systems licensee lookup
• State Compensation Insurance Fund (California): Broker of Record Process

This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.