When you bring a partner into your business, you’re sharing a lot: decision-making, profits, and liability. Your partner’s risk exposures are your risk exposures, and vice versa. As a result, if you’re making a change in your partnership structure — whether that’s adding or removing a partner — it’s an insurance event that usually warrants revising your policies.
This is true in most businesses, but it’s particularly important for Residential Care Facilities for the Elderly (RCFEs). Because these facilities have such unique and specific risk exposures, a partnership change is absolutely worth discussing with your insurer.
Plus, in California, if the addition or removal of a business partner changes the RCFE’s ownership interest by 50% or more, you need to report it to the Department of Social Services. All told, this isn’t an adjustment you can just gloss over.
Named Insureds and Your Coverage
When it comes to your RCFE’s insurance coverage, there’s one area where business partnership changes almost always require an update: named insureds.
The named insured is just what it sounds like. If you’re named, it means you’re insured by the policy.
Removing a Named Insured
If you’re removing a partner but don’t pull them off your policy, you risk extending coverage to someone who no longer needs it. Their leaving could create a gap your insurer isn’t happy to discover down the road. For insurance purposes, it’s important that the named insureds match up with who actually owns and operates the RCFE. If they don’t, any claim of yours could potentially get denied.
Adding a New Partner
If you’re adding a partner, it’s just as important to update your named insureds. That new person increases your exposure. If they make a decision that results in an incident with a resident, you want your liability policy to extend to them. Having their name on that policy makes a world of difference here.
Talk with your insurance agent about the right way to update your policies when you’re adding someone new. Sometimes, it’s better to add new partners as additional insureds rather than named insureds. If your new partner has a smaller role/ownership stake than you, this structure might make more sense.
An Agent Can Help You Keep Your Policies Updated
Adjusting your policy’s details might feel daunting. When you have an RCFE insurance agent in your corner, though, things get simple. They can work with your insurer to make sure your policies get properly updated.
Beyond that, your agent can advise you on any adjustments your coverage might need when you add or remove a partner. You might need to expand your liability coverages. If you have directors and officers (D&O) coverage, you almost certainly need to update that policy.
Failing to keep your policies updated with pertinent information — which definitely includes your partnership structure — can result in denied claims and policy cancellation. On the flip side, working with an RCFE insurance agent can make it easy to keep your policies up to date, extending the coverage your facility needs.
If you want support as you add or remove a business partner, our team of experienced agents is here to help. Contact us at InsureMyRCFE at (805) 413-5668.
