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Employee Insurance

What employee insurance am I required to provide for my employees?

Often, new business owners and small business owners get confused as to what is required when hiring employees.

The only insurance required for employees is workers compensation insurance. While standards vary somewhat, for the purposes of this article and protection of your business, when you hire an employee, it’s important to purchase workers compensation insurance.

Workers compensation insurance will cover medical expenses and at least some partial wages if an employee is injured on the job. This protects the employee from financial disaster from a job related injury.

In return, the employer is protected from being sued by that employee for the injury. Obviously, this is a very generic overview and should be reviewed with a licensed insurance professional regarding your specific business. Some states may require disability insurance as well. Your insurance professional will guide you to the specific requirements of your state.

Other employee insurance programs, or employee benefits, are at the discretion of the business. When a business starts an employee benefit program, medical insurance is usually the cornerstone of the benefits package. The health insurance benefit may include dental insurance and vision insurance as supplements to the health insurance. Group life insurance and group disability coverage may also be offered. Costs may be shared between employees and the business for these benefits.

A growing business may want to consider adding group insurance benefits. While not required, a good benefits package will help in recruiting and retaining good employees for your business. Your licensed insurance professional can work with you in determining the requirements of your state for workers compensation and also developing an employee insurance benefits program.

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Business Interruption Insurance

What is business interruption insurance and does my business need it?

Any small business owner will tell you they would never consider the risk of operating without insurance to cover against fire or other damages. But many business owners make the mistake of assuming or not considering the total consequence of a business loss. They insure the property, but never think about the rebuilding process and the effect of a long shut down.

A business that is closed for repairs is subject to losing business to competition if goods and services are not available. At risk are the employees as well who no longer have a paycheck coming in.

Business interruption coverage is not sold as a separate policy. It is added to a property insurance policy or a business owner’s policy. The business interruption coverage will compensate the business for lost revenue during the rebuilding process. This important coverage will cover overhead expenses that continue even though you have had to vacate your location during the process. By covering these expenses, temporary quarters can found and employees brought back sooner. This coverage may also include rental items if needed to keep your business operating.

Business owners need to remember that property insurance only covers physical losses. Business interruption insurance will cover those expenses necessary to keep the business going. This alone makes business interruption insurance one of the most valuable additions a business owner can make in their insurance planning.

Don’t wait until it’s too late to find out if your business has this coverage. Contact your licensed insurance professional and do a complete review. Business interruption insurance can be the best investment a small business owner makes. It’s important to understand that this coverage and premium will be determined by the location, type of business, other limits included.

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Commercial Insurance Agent

Working with your commercial insurance agent …

Let’s face it, most entrepreneurs and business owners have a passion for what they do.  Whether you’re an accountant, a tow truck company, a delivery service, or a flower shop, something ignited within you to risk opening your own small business.  Many business owners forget to focus some of this fire into protecting the business and the assets they have in place.

Chances are pretty good that if you have been in business for any amount of time, you have some commercial insurance in place.  It’s also a pretty good chance that it’s time to focus on the coverage in place and make sure you are protecting the business and yourself properly.

Do you look at your commercial insurance as just a necessity and have to look up your agent’s name?  If so, it may be time to re-evaluate that outlook.  It’s important to make your licensed insurance professional part of your key advisory team.  No doubt you use a CPA for your taxes and attorney for your legal issues, but do you consider your commercial insurance agent in the same category?  If not, let’s examine why you should change that outlook.

You took considerable personal and financial risk in starting a business.  Why continue to expose your business and assets without proper protection.  One frivolous lawsuit can ruin a business.  Do you know if your general liability insurance would cover that type of lawsuit?  Do you know whether or not you need additional liability coverage from Professional Liability insurance?  Is your equipment and office fully covered under your present property insurance?  Do you know how the value of the claim will be determined?  Is it replacement cost or actual cash value?  Do you need loss of income or mechanical breakdown insurance now?  What natural disasters are covered?

Your commercial insurance agent needs to become a key part of your team.  Bring them up to date and spend some time with them.  Let them know what has changed in your business and where you project the future to be so are fully covered.  Make sure you have the proper coverage in place to protect the hard work and passion you bring to work every day.

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What does business insurance cover?

What’s covered and what’s not, you had better know.

Having business insurance in place is a big relief.  You have the peace of mind knowing that if something happens, your business is protected.  It is important to understand the risk and the type of insurance used to cover that exposure.

It is also important to know what is not covered in your business insurance policy, and what can be done to cover or minimize that risk.  The first step you need to take is to look at any exclusions written in the policy.  An exclusion is a provision written into the policy which eliminates coverage for certain acts, property, or types of damage or locations.  For instance, your property insurance may not cover damage from a flood.  In this case, it warrants determining if there is enough risk to buy flood insurance to cover that exposure.  There are many type of exclusions, make sure you ask your licensed insurance professional to explain every exclusion written in the policy.

It is also just as important to understand what is covered under any of the current policies you may have in place or are considering for your business.  There are specific types of business insurance which will cover a number of potential risks.  One important type of insurance is business interruption insurance.  This coverage is generally added to your property coverage and would replace income lost during and after a disaster which would allow your business to stay viable while repairing, rebuilding, or relocating.  Disaster insurance is another type of insurance which is purchased and normally made part of the property insurance.  Equipment breakdown insurance, also known as boiler and machinery insurance would cover repairs and replacement should a loss occur.

Finally, know what your limits are on your insurance.  In other words, your insurance will typically pay a claim up to a certain amount.  Take some time to research what an ‘average claim/settlement’ looks like in your particular industry.  See if your state falls into the norm, or often awards higher the norm.  Talk to your licensed professional to determine if raising limits or adding a commercial umbrella policy, a policy which kicks in after a limit is reached, may do the trick.

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Business Insurance Defined

Understanding your business insurance

Your business insurance is an important component of your total business plan.  It is important to know the coverage in place, where gaps exist, and what your policies mean in relation to risk and potential losses.

The first step in understanding your coverage is working with your licensed insurance professional.  Do not hesitate to call or meet with them to discuss the specifics of all your business insurance.  If necessary, have your attorney review the policies if there are terms or riders you still don’t understand.

Here is a list of terms with the definitions.  If something is in your policy and defined here, follow up with your agent.

Actual cash value:  Sometimes known as ACV.  This method determines value of loss by reducing the value of the property by depreciation.  Depreciation is typically factored by age, wear and tear, and obsolescence.

Replace cost:  This method determines value without factoring in deprecation.

Endorsement:  Also known as a rider, addendum, or attachment.  An endorsement is a written document which changes coverage offered by a policy. An endorsement can add coverage for certain scenarios not normally covered by the policy.

Exclusion:  This is a provision which eliminates coverage for various items, acts, or issues.

Business Owner’s Policy:  Also known as a BOP.  This policy will encompass liability and property insurance for the business.  It may include other endorsements for coverage.

Coinsurance:  This is a requirement in a policy to carry a minimum amount of coverage relating to an asset’s value.  It’s called coinsurance because failure to carry this amount required then makes the insured a co-insurer on any loss.

There are certainly other terms used in insurance which could need more definition.  The key is working with your licensed insurance professional in determining what information you need to make proper decisions regarding your coverage.

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Small Business Insurance Deductible

What deductible is right for your small business?

Your insurance carrier will cover almost all of a covered loss, saving your business from a large, sometimes crippling cash outlay.

The portion not covered is your deductible, the amount you have agreed to be responsible for paying. Say a covered claim is $10,000 and your deductible is $2,500, then the insurance company pays $7,500 and your business is required to pay the remaining $2,500. No matter if the claim is $2,000 or $40,000, subject to coverage limits (the maximum a policy will pay) your deductible remains at $2,500.

So, in the case of the $2,000, it is paid 100% by the business because the deductible was not met. Deductibles can usually be negotiated or have a tier system to choose from.

The higher the deductible, the lower the premium and vice versa for the policy. Determine the risk and exposure for each policy type your business has in place or may need to add. Depending on the risk, and the type of insurance, it may make sense to pay a lower premium and a higher deductible for your business.

While this would certainly be a good thing for cash flow, some risk may be high enough to justify the lower deductible and higher premium. Look at the risk and make sure a claim wouldn’t jeopardize the financial solvency of the business. Work with your insurance professional to maximize coverage while making the premiums affordable.

Property insurance deductibles can also be figured by an individual claim basis or an aggregate basis. Typically, small companies with no or few claims will find the individual claim basis attractive. However, if your company or industry has a large number of claims annually, it may be prudent to look at the aggregate basis.

Finding appropriate business insurance coverage and affordable premiums starts with your licensed insurance professional. Together with your agent, you will put together an insurance package with the right deductibles and coverage to protect your small business.

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Reduced Workers Compensation Premium

How can I reduce my worker’s compensation premium?

Your individual business will have no real effect on the industry rating you are subject to within your state. It is possible however, to reduce your worker’s compensation premiums. Workplace safety has evolved and overall, worker’s compensation claims are on the decline. Still, certain businesses and trades will continue to tick up in terms of claims and costs associated with those claims.

As a business owner, you can begin the process of trying to lower your worker’s compensation premium. The starting point is developing a risk management program for your business. Starting out, utilize the risk management staff at your carrier, the company which issues your worker’s compensation insurance. As you grow, consider adding this task to an employee at your company. At some point, you may consider hiring a professional risk manager for your business.

Developing a risk management program means adding a safety program. Implementing a safety program and developing a procedure manual as part of the risk management process can help reduce premiums. Make sure your employees are classified correctly as part of your program. Grouping all employees under the business classification can greatly increase your premiums. Check with the state and your carrier to determine the appropriate classifications and how they need to be reported. Implement a back-to-work program for injured employees, even if you never have had an employee lose time. Be prepared and have a process in place. Insure your payroll reporting is accurate. Overtime and bonuses may not have to be factored into the reporting and push your premium up.

Review your worker’s compensation annually. Work with your licensed insurance professional to manage the costs of your worker’s compensation insurance. Ask if group participation and ratings are available to your business through associations or state programs. Document risk management programs and keep your agent and carrier updated. You can work to reduce your worker’s compensation costs, but it does take work.

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Business Insurance Coverage – Many Times “No Dice”!

We often hear after an incident, I thought it was covered by my business insurance. Sadly, many estimate 75%-90% of all businesses are under insured. Many of these businesses and their owners get big surprises and out of pocket expenses because they don’t understand their insurance coverage.

Every business needs some type of business insurance to protect it and the assets of the business against potential risk. There are many types of insurance and coverage available to you to protect your business.

Some insurance is mandatory in many states such as commercial vehicle insurance and workers compensation insurance. Check with your licensed insurance professional to determine what is mandatory in your location. The additional insurance needed to protect your business will vary by industry and products and services provided. An accountant may need professional liability insurance and a flower shop may need product liability insurance.

What follows are types of insurance and coverage available to business.  Check the list and compare it to your present coverage.  Any gaps or red flags should be addressed immediately with your licensed insurance professional. We are assuming property, general liability, and workers compensation are part of your present package.

*Business interruption insurance: This covers losses and expenses due to fire or other incidents. The policy covers salaries, rent, utilities, and even lost profits.

*Directors and Officers Liability: This protects the officers and board members from suits brought against the company and its officers.

*Employment practices liability: This covers against lawsuits of sexual harassment and wrongful termination.

*Web site insurance: This covers a variety of claims relating to the company website. It includes copyright infringement, and data breach.

*Errors and Omissions: Also known as professional liability insurance. This insurance protects against legal claims of malpractice or failure to perform to professional standard.

*Product liability insurance: This protects both sellers and manufacturers against defects and injury as a result of product use or components.

*Health insurance: Major medical insurance offered to employees.

Make sure to discuss what is, and more importantly, what is not covered under your present business insurance package. In addition, the 7 noted above are just a starting point. Don’t get surprised when it is too late.

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Do I need part time business insurance?

It’s a part-time business; I don’t need business insurance, right?

Unemployment still touching double digits, many folks are now under employed. It’s estimated that 1 in 4 people today are doing some type of business from home. It may be an MLM (multilevel marketing), consulting, small engine repair, house cleaning, or handyman service to name a few.

Regardless of what your business venture is, if you are operating out of your home, including basement and garage, there are serious risk issues. Your homeowner’s policy is designed for your personal and residential use, period.

Sure, there may be some very basic coverage for some small business items, it is imperative to understand, there is absolutely no liability coverage. For instance, you have a customer come to pick up a lawn mower or sign a contract and fall and get injured. Your homeowner’s policy which normally would cover this will now deny the claim.

You have now not only exposed your business, but your home and family to major risk. This exposure is far too large to leave unchecked. One lawsuit can wipe out everything you have ever worked for and more. Don’t assume because you are at home, your automatically covered.

The first step is to talk to a licensed insurance professional to determine what needs and risk your specific business venture has. No matter what the size of the business, two basic insurance needed are general liability and property insurance. In addition, some types of businesses may need professional liability insurance. This is errors and omissions insurance to protect you for the service and recommendations provided.

Working with a licensed professional who understands small business is important to starting your new business on the road to success.

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History of Workers Comp Insurance

History of Workers Comp Insurance

When I first started looking into the history of workers compensation insurance, or workers comp, I had no idea I was going to end up going back so far into history.

I will not bore you with all the details, but suffice it to say that the first documented case of workers comp insurance for bodily injury dates back to about 2050 B.C. That’s about 300 years before the Code of Hammurabi.  The case is found in the ancient nation of Samaria in the of Ur, which codified, on a stone tablet no less, the “Law of Ur,” which spoke of monetary compensation for injuries to workers’ body parts. These injuries included broken bones.

Other cultures which had forms of workers comp insurance include Greek, Arab, Romain, and Chinese laws, each of which provided its compensation schedules with exact amounts for loss of various body parts.

During the Middle Ages and the Renaissance — the fifth to the 17th centuries — English common law was being developed to include what would later morph into modern-day workers comp insurance.

You may remember that the industrial revolution took place in the 18th and early 19th century, and it changed the way the world worked. Quite obviously, the Industrial Revolution ushered in a need for such an insurance. English Common Law struggled mightily to establish laws which would protect the new influx of the new class of workers.

Fast forward to 1911, in the state of Wisconsin. This was where the first modern-day comprehensive workers comp law was passed. Later that year nine other states followed suit, and 36 more before the end of the decade. The very last state to pass workers compensation laws was Mississippi which did so in 1948.

This legislation required regulated doctors’ fees, which led to a strong resistance in the medical community. There were allegations of attempts to socialize medicine and fears that physicians would no longer be able to learn a decent living.

Social Security Disability Insurance which rolled onto the scene in the 1930s, expanded disability to include illnesses that were non-work related. Obviously, with this expansion, more physician involvement was going to be necessary. That, as it turned out, proved to be quite popular within the medical industry.