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  1. #1
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    Telx wants $5 million liability insurance!!

    Signed a contract with Telx, reviewed the service agreement which states that we have to carry $3 million insurance.
    Laughed at that, so the sales rep sets up a conference call, during which they stated that Telx wants $5 million liability insurance!!

    Too funny!

  2. #2
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    Some datacenters do require this. I've only worked with datacenters that require a $1 million dollar policy though.

    Have you talked with an insurance agent to find out the cost?
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  3. #3
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    When dealing in insurance... If you ever need to use your policy (which is normally a pretty bad situation), you will find that 1 million doesn't go very far these days.

    Even though we are in a much lower risk business, it's good to be covered. Plus, the DC requiring you to have your own policy will reduce their insurance costs... So the cost savings should be passed on slightly in the agreement you signed (technically).

    That being said, 1 million dollar coverage and 5 million don't have that big of a difference in price (as far as the premium goes).
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  4. #4
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    This is another reason to work with someone who can resell you some space there...

  5. #5
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    Have you read also the small print that says they will charge you for riser rights for any carrier that is not directly on their MMR? And the other fine print that says they will send you a bill of an unknown amount in the end of the year for your share of the building maintenance costs (NNN / triple-net leasing)?

  6. #6
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    Quote Originally Posted by Techee View Post
    Signed a contract with Telx, reviewed the service agreement which states that we have to carry $3 million insurance.
    Laughed at that, so the sales rep sets up a conference call, during which they stated that Telx wants $5 million liability insurance!!

    Too funny!
    So you signed the contract before negotiating the terms of the deal and now are having a conference call about it after the fact?

  7. #7
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    Quote Originally Posted by Techee View Post
    Signed a contract with Telx, reviewed the service agreement which states that we have to carry $3 million insurance.
    Laughed at that, so the sales rep sets up a conference call, during which they stated that Telx wants $5 million liability insurance!!

    Too funny!
    I guess I missed the funny part. Requiring colo customers to carry liability insurance is pretty standard. As a provider of enterprise level colo solutions, we have never received push back from any of our clients or potential clients on this requirement. We do only require 1 million and I find 5 million a little high as a mandatory requirement, media-hosts_com is correct on the realtively small difference in premium costs between a 1 million and a 5 million policy.

  8. #8
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    Pretty standard. I'm sure if you've done colo anywhere before they've required it, but just didn't ask for a COI.
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  9. #9
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    5 Million PLI is becoming the near standard in todays terms, even then it wouldnt go far if you caused mass destruction, One of my businesses has 10 Million PLI due to nature of work we undertake, Still that is virtually the bare min for us.

  10. #10
    Quote Originally Posted by 360TCS View Post
    media-hosts_com is correct on the realtively small difference in premium costs between a 1 million and a 5 million policy.
    Yeah, there are a lot of places that require it. It's kind of like car insurance, minimum insurance is $800, insure to 10x that amount and its not $8000, its like $890.

  11. #11
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    General Liability insurance is cheap, even for $5 million worth. No big deal.
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  12. #12
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    Quote Originally Posted by bqinternet View Post
    General Liability insurance is cheap, even for $5 million worth. No big deal.
    Exactly... Getting a basic level of PLI is cheap and easy these days, claiming on it is another story

  13. #13

    Thumbs up

    Standard and cheaper then you think. Also no one really checks to make sure its kept up to date so you just have to pay for the first year.

  14. #14
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    So you signed the contract before negotiating the terms of the deal and now are having a conference call about it after the fact?
    No, we signed the service agreement that said $3 million (which we redlined to the $2 million that we have) and AFTER we sent all the paperwork in, during the install call, they said they want $5 million.
    I'm sure if you've done colo anywhere before they've required it.... Also no one really checks to make sure its kept up to date so you just have to pay for the first year.
    Yeah, we are in a dozen data centers, so we have been through this before. The issue is that if you bump it up to $5 million, you aren't paying just for that one data center, you are paying for all of them, as it is based on gross revenues.

  15. #15
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    Its pretty standard, and you should get it for around $150/ 6 month or so.
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  16. #16
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    Let me know where you can get $5MM in liability for $300/year. Its not happening AFAIK.
    You are more likely to be around $1200-$1500+/year.

  17. #17
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    Quote Originally Posted by CGotzmann View Post
    Let me know where you can get $5MM in liability for $300/year. Its not happening AFAIK.
    In some industrys PLI can be had for less than that per year

  18. #18
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    Farmers, I had it done for a customer of ours last year but it was $3MM and not $5MM.

    Quote Originally Posted by CGotzmann View Post
    Let me know where you can get $5MM in liability for $300/year. Its not happening AFAIK.
    You are more likely to be around $1200-$1500+/year.

    edit: I just check and its actually $325 annually
    Last edited by Kusai; 05-26-2011 at 09:59 AM.
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  19. #19
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    Quote Originally Posted by cresci View Post
    Have you read also the small print that says they will charge you for riser rights for any carrier that is not directly on their MMR? And the other fine print that says they will send you a bill of an unknown amount in the end of the year for your share of the building maintenance costs (NNN / triple-net leasing)?

    Great point. These are definitely hidden costs. It can get very expensive vs a provider that will give you free cross connects and no building shared maintenance. Its a way for them to make their colo rate look low. I have also seen providers that like to sell you a low short term contract to get you in the door and then at the renewal they jack you. It can be pretty ugly for those that are still getting things online financially but its never pretty.
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  20. #20
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    I have also seen large providers put space on annual agreements and fine print that puts power rates on a month to month...

  21. #21
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    Quote Originally Posted by circus&back View Post
    I have also seen large providers put space on annual agreements and fine print that puts power rates on a month to month...
    Power is more difficult though, in many markets the colo provider has no control over the power rates and they can fluctuate significantly. Different companies will manage that risk in different ways.
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  22. #22
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    Yeah.. I understand this but when you are locked in on the space and your power rates go up, you are stuck paying more than you thought you were going to. Just something to watch out for. A service order says 1 year term and the fine print in an MSA says they can raise your rate. You got to read every word.

  23. #23
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    I am curious if anyone wants to share the company who offers this type of insurance for 325 bucks a year.

    For NY I just received quotes of $1000 for the general 1M insurance and another $2500 for the 5M Excess/Umbrella Liability through Tech Insurance.

  24. #24
    I've been selling COLO for 10 years for a major Telco and I can say with all honesty I HAVE NEVER ASKED TO SEE THE INSURANCE COVERAGE. Its in the contract to cover everyone's butt in the event your equipment has a heat melt down catches fire and burns up your neigbors equipment. Most Telco hosting centers provide fail-safes so this does'nt happen. Thats whay they NEVER ask to see it. Its like the Anchovies in the Salad Dressing...you just expect it that you have it and let it go at that. Most of my customers just have General Business Laibility that in the event that something does happen...which in 10 years has never happened...would go to that as a recourse.

  25. #25
    Quote Originally Posted by KarlZimmer View Post
    Power is more difficult though, in many markets the colo provider has no control over the power rates and they can fluctuate significantly. Different companies will manage that risk in different ways.
    A lot of that can be mitigated by just putting in some extra margin for it, especially on longer term contracts, have the price rise by a defined amount every year, or amortize that increase over several years. Looking at power prices in Phoenix, the raw cost of electricity is around 1/4 or 1/5 of the cost of the colo I'm getting. It would certainly not be fun for my provider to see a 20% increase in their power costs overnight, but if they did, it would probably only increase their total costs by maybe 5% or so, which incidentally is the amount that the contracts increase in price each year automatically. If you're not on the red line for margins and picking up only the most cost sensitive customers, it's a risk that can be mitigated without too much effort.
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  26. #26
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    Quote Originally Posted by nofrillsunder500 View Post
    I've been selling COLO for 10 years for a major Telco and I can say with all honesty I HAVE NEVER ASKED TO SEE THE INSURANCE COVERAGE. Its in the contract to cover everyone's butt in the event your equipment has a heat melt down catches fire and burns up your neigbors equipment. Most Telco hosting centers provide fail-safes so this does'nt happen. Thats whay they NEVER ask to see it. Its like the Anchovies in the Salad Dressing...you just expect it that you have it and let it go at that. Most of my customers just have General Business Laibility that in the event that something does happen...which in 10 years has never happened...would go to that as a recourse.
    If I remember correctly, TelX requires a copy of proof of insurance before service begins. Again this is what their contract says in writing - not sure if they enforce it.
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  27. #27
    That makes sense. They enforce it because they don't have adequate fire protection systems or the power grid of the center is not managed to the rack for early warning breaker systems. This is common in non-telco centers that like to get by on the cheap to keep prices low.

  28. #28
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    Quote Originally Posted by funkywizard View Post
    A lot of that can be mitigated by just putting in some extra margin for it, especially on longer term contracts, have the price rise by a defined amount every year, or amortize that increase over several years. Looking at power prices in Phoenix, the raw cost of electricity is around 1/4 or 1/5 of the cost of the colo I'm getting. It would certainly not be fun for my provider to see a 20% increase in their power costs overnight, but if they did, it would probably only increase their total costs by maybe 5% or so, which incidentally is the amount that the contracts increase in price each year automatically. If you're not on the red line for margins and picking up only the most cost sensitive customers, it's a risk that can be mitigated without too much effort.
    That is certainly one way to do it, and why I said "Different companies will manage that risk in different ways." Some people just want the lowest rate possible NOW and some want to know their long term costs, there are different models for each.

    As for the overall insurance, you should hold a base $1m type policy anyway as base business insurance, etc. and basically every colo facility will require that. That they require $5m is a bit odd, but in many cases those sorts of clauses are checked to help weed out the trouble customers. if a customer doesn't even have base business insurance or getting such a policy is an issue for them, they may not be a good long term customer or may not have the size to pay out on a contract dispute, etc.
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  29. #29
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    Quote Originally Posted by Kusai View Post
    Farmers, I had it done for a customer of ours last year but it was $3MM and not $5MM.




    edit: I just check and its actually $325 annually
    What cut rate insurance company are you using?

    We pay a couple grand a year for our insurance coverage and this is with the hartford. though i'm not sure what the exact number is on just liability insurance i think its 2-3k somewhere.

  30. #30
    Farmers is that cheap?
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  31. #31
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    Maybe it's for a farm not a dc LOL
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  32. #32
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    Just a side note, but Verizon/AT&T requires all CLEC's to carry a 10 million dollar insurance policy to colo inside of their central offices. It’s weird because my insurance company gives us 4Mil worth for like $425 a year, but then to make it to 10Mil they want an additional $3,502 per year!

  33. #33
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    TelX and Coresite will require the certificates prior to allowing you physically inside the datacenter.

    The annual premium is based on your company's size, revenue and history. A brand new company with no history is like that, $300-500 a year for those policies (at The Hartford that I had for example for two of my former companies, it was $270 for one company and $440 for the other one, in different years).

  34. #34
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    I dont think "Farmers" are cut rate in any ways. Feeling is a side effect of overpaying for same thing.

    Quote Originally Posted by Spudstr View Post
    What cut rate insurance company are you using?

    We pay a couple grand a year for our insurance coverage and this is with the hartford. though i'm not sure what the exact number is on just liability insurance i think its 2-3k somewhere.
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  35. #35
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    Quote Originally Posted by Spudstr View Post
    What cut rate insurance company are you using?

    We pay a couple grand a year for our insurance coverage and this is with the hartford. though i'm not sure what the exact number is on just liability insurance i think its 2-3k somewhere.
    We use the hartford as well, for a company that has been around a while, with employees,and revenue, it simply costs more. The Hartford was about $200 a year less than Farmers for us, but the local rep for Hartford SUCKS. The farmers guy was much more knowledgeable. the good thing is now I go direct to the hardford and ignore the locals, they are useless and get nothing right. they even put my address in wrong initially on my quote and it was significantly more expensive on that quote.

    Quote Originally Posted by Nick A View Post
    Farmers is that cheap?
    No.

    Quote Originally Posted by Kusai View Post
    I dont think "Farmers" are cut rate in any ways. Feeling is a side effect of overpaying for same thing.
    Not overpaying, more like larger/been around more/more revenue company, pays more....

    At this point now if needed, we just tack on a new location to the policy and the way it is written we have 90 days from movein to do that as we have 90 days of coverage 'anywhere'

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