Insurance Coverage For Small Businesses
Besides your attorney and accountant, another professional you
will need to bring into the start-up process will be your
insurance agent. It may be helpful to have one agent who can
handle all of your insurance needs. There are policies available
that are specifically designed to cover small businesses that, in
one package, will cover most of your insurance needs.
Insurance is not only going to be important to you but it will be
important to your other business relationships. For example, if
you choose to lease office space, the landlord will typically
require that you furnish a certificate of insurance or be listed
as an additional insured on your policy as assurance that your
business will not disappear overnight in the event a loss occurs.
Here are some of the risks that should be protected by insurance:
Business property insurance
Property insurance should include a broad form of coverage to
protect you from a wide variety of losses. Your insurance should
include:
Buildings. Coverage would be required here if you own the building
your business occupies. In the event you lease a premises, your
landlord should provide this coverage.
Business personal property includes your tables, desks, chairs and
equipment. Also, you will want to include the tenant's
improvements you might make to leased premises. An example would
be a room divider you add, or a display case, or a custom built
counter that forms part of reception area for your clients.
Loss of Income
Earthquake
Flood (which may or may not be available)
Keep in mind that an all-risk policy can be structured to cover
all of your equipment, including computer hardware and software,
plus your valuable records. A properly written policy will include
loss of income that might result from breakdowns, as well as loss
of income from other hazards that would temporarily close down
your business.
Liability Insurance
A Comprehensive General Liability (CGL) policy is designed to
provide coverage to third parties for the following:
Personal and Advertising Injury
Fire Legal Liability, which is often mandatory if you lease your
premises. This protects you in the event your negligence results
in damage or loss to your landlord's property. For example: you
mistakenly leave a small electric space heater running and go home
for the evening. During the night, the heater shorts and starts a
fire, resulting in fire and smoke damage to your landlord's
building. In this case, the negligent act of leaving the space
heater on caused the loss. This is where Fire Legal Liability
protects your investment.
Products and Completed Operations
Medical Expense or medical payments
General Liability for your premises. The best illustration is the
common "tripping over the torn carpet, resulting in an injury"
loss.
On occasion, some policies will exclude Products and Completed
Operations and/or Personal Injury and Advertising Coverage
depending on the services your business provides. In these
instances, a Professional Liability, Malpractice, or Errors and
Omissions Policy might be available for your type of operation
that will cover the errors and omissions that might result in
suits against your company. This is particularly true of
professions that are held to a higher degree of care or standard,
for example, attorneys, engineering consultants, insurance agents,
realtors, doctors and dentists.
Worker's Compensation Insurance
If your business has employees, Worker's Compensation insurance
will be mandatory. Startup operations typically find that the
State Compensation Fund can accommodate their needs. As the
business grows, you can then "shop" for better prices for the
coverage. In addition, some worker's compensation insurers provide
additional services such as risk management and loss control
services that may be beneficial to your business operation. These
services are typically helpful in holding down claim costs over
the long term. Do not confuse risk management with your taking
part of the risk. The insurance company should assume 100% of the
worker's compensation insurance risks.
Other Insurance
Auto coverage for company vehicles. (Liability, Comprehensive,
Collision and Uninsured/Underinsured Motorists.)
Health insurance plans tailored to fit the size of your business
(benefit: this coverage helps give you an edge when recruiting
good employees).
Excess Liability Coverage
These are liability limits available over and above the maximum
limit your carrier of choice may write and can be accomplished in
two ways:
Excess limits can typically be added at extra cost to the
underlying package policy in "chunks" of $500,000 or $1 million
dollar layers sometimes up to $5 million.
Purchasing what is called a "commercial umbrella," which can
typically provide excess coverage over and above most underlying
package policies, including the business policy, business auto,
and worker's compensation.
SOMETHING TO KEEP IN MIND: Your carrier of choice may offer lower
limits, which may look attractive from a premium standpoint. But
savvy business owners should contemplate liability limits of at
least $1 million. The additional cost is usually affordable and,
in today's litigious environment, makes good sense.
Example: You, the business owner, suffer an auto accident in which
you are determined to be at fault. In addition, the accident
results in the victim being rendered a paraplegic. This type of
loss can easily result in a multi-million dollar judgment against
you.
Employment Practices Liability Coverage
Employment Practices Liability insurance is a coverage that is
starting to be carried by more companies, with premiums exceeding
$2,000 annually for $1 million of coverage. While employment
practices are rarely encountered in a small operation, the threat
of wrongful termination or sexual harassment lawsuits, which are
excluded under most business policies, becomes more prevalent as
the size of your organization grows.
Life Insurance
As mentioned earlier, if you have a partner, your buy-sell
agreement can be funded by life insurance in the event of the
death of a partner. As your business grows this insurance can be
increased.
|
