What Insurance Do I Need?

What insurance is needed for my business?

Choosing the proper insurance and coverage amounts can be overwhelming.  Let’s look at the typical business insurance needed by almost any business as well as some additional insight to other coverage available which may fit your business.

Understanding the language in an insurance policy is important.  Work with a licensed insurance professional along the way to help you understand the specifics of your policies.  It’s important to understand what’s not covered as much as what is.  Don’t be afraid to question your agent regarding the specifics of any coverage presented.

Purchasing insurance, or risk management is generally a department of a big company, but even in a start up, the business owner has to assume that role.  Your licensed insurance professional becomes your number one resource in determining the risk you and your business have and help you determine the coverage necessary to reduce that risk.  In addition, your state department of insurance is a great resource.  Pick up the phone or even jump in your car and get the necessary information.

Generally, most businesses will find 3 primary areas of risk which need to be addressed.  The first is property insurance.  Property insurance protects your business property and inventory against loss or damage by accident, theft, or another cause or by another party.

Often, your property insurance may be purchased in conjunction with your liability coverage.  These combined policies are often sold as Business Owners Policies or B.O.P’s.  The second is general liability insurance.  Liability insurance protects the company against claims of injury either bodily or physically.  This would protect you in the event of an accident at your business or in another location where you or your employees are conducting business.

As noted above, general liability protection is offered through a B.O.P.  In some cases, a business may also need professional liability coverage.  Discuss professional liability with your insurance professional.  Medical Malpractice Insurance is an example of professional liability insurance.

Finally, if you have employees, workers compensation is required in most states.  This insurance covers medical and loss wages to an employee injured conducting company business.  It also protects the business from being sued by the employee.

Disability insurance is necessary in several states.  Check with your licensed professional and the state department of insurance in your state.

Develop an insurance plan with you licensed insurance professional to assess the risk and develop a comprehensive insurance package that fits your specific needs.  Remember, your insurance agent and the companies represented are tremendous resources available for you.

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Dissatisfaction With My Agent: What To Do?

What should I do if I am not happy with my agent?

Businesses and owners have different needs and sometimes personalities don’t mix.  Flower shops, restaurants, delivery services all have different needs and risks. What works for one and the agent servicing that business may not be a fit for another.

The words ‘value’ and ‘service’ often over used in advertising and even in the business insurance world.  Value is often subject entirely to an individual’s preference, and let’s face it; we all expect good service in any vendor/customer relationship.  So, let’s look at what expectations you can expect your licensed insurance professional to offer you and your business.

You should expect any call to your agent to be returned within 24 hours at a minimum.  An emergency number should also be provided in the event a claim is necessary during nights, holidays, or weekends.  It’s ok if the carrier provides this and not your agent.  Just be sure this number is available.

Having an annual review is critical.  An annual review is NOT here are the latest premiums, sign here.  Instead, you should expect a review of your business, what’s changed, and what has changed with your licensed insurance professional.

Depending on the type of business you have, the risk your business carries, and how fast your business is growing or changing, we also recommend a quarterly update phone call.  More contact or less needs to be determined with your licensed insurance professional and yourself depending on what you feel is important.

Make sure your agent has an interest in your business and your success.  Have they visited your site or at least asked for photos of the various equipment and location?  Make sure you are introduced to staff that may work on or service your account.  If it’s not a fit, you should feel comfortable saying something and getting someone new.  This is your business and you need to partner with an agent you can work with.

Set the expectations of what you expect from an agent or broker and find the right one to fit your needs. Your licensed insurance professional needs to be part of your advisory team.  Someone you can trust and turn to for advice and recommendations important to the success of your business.

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Retailers and Product Liability Insurance

Should a retailer purchase product liability insurance?

Often, manufacturers will need product liability insurance.  Retail stores also need to consider product liability insurance as well. Importers and distributors also need this kind of insurance. A retail store can be sued if a customer buys a product from them that causes injury or harm, even if they don’t make the product. In this case a lawsuit can be brought against the retail establishment and the manufacturer.

Product liability laws in the United States allow holding everyone responsible for that has anything to do with making and selling products. Large money awards because of injury claims can ruin any business if they do not have sufficient insurance for such cases.  Legal costs alone can ruin a business before a settlement or award is issued.

A fairly recent example of how product liability insurance works is tainted pet food manufactured in China.

The pet food was then imported into Canada and then distributed to two U.S. locations which supplied the tainted pet food to Wal-Mart which sold it to customers.  A number of pets died and barrage of law suits began.

The Chinese and Canadian were insulated from suits, and even if judgments were levied, claiming restitution was impossible.  The retail outlet, in this case, Wal-Mart, ended up facing the numerous suits filed by unhappy cat owners.  Here is an example of how product liability insurance can easily save a business from financial disaster.

Product Liability Insurance protects a retail business against claims made from the sale of goods, products, medicines or foods sold to the public.  It covers the retail sellers liability for losses or injuries suffered as a result of purchasing a product by a buyer, user or bystander.  It covers defective products or product malfunction.  In some cases, it may also protect the seller from failure to warn.  Sometimes, this coverage is found within a general liability policy for a business as products completed operations insurance.

Sit down with your licensed insurance professional and review what is available to your specific business in regards to product liability insurance.  Check with your state department of insurance for any claims or incidents on file similar to your type of retail operation, product, or industry.

Remember, it is far harder if not impossible to hold a manufacturer outside the United States responsible.  A product liability claim will often name the manufacturer, wholesaler, distributor, and seller in the suit.  Don’t risk your business on being uniformed about product liability.

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Does Homeowner’s Insurance Cover Home-Based Business?

Won’t my homeowner’s insurance cover my home based business?

Contrary to popular belief and what some feel should be included in homeowner’s policies, they generally do not cover business losses.  Homeowner’s insurance policies are written to protect the personal and day to day use of your home.  Many policies will specifically exclude coverage as it pertains to conducting business and will only go so far in covering anything related to a home based business.

It’s important to understand the risk involved with operating a business, regardless of home based or not.  If nothing else, a home based business owner should consider purchasing a business liability insurance policy.  This insurance will cover claims due to accident or negligence if another party claims injury either bodily or to their property.

Depending on the type of business, it may make sense to explore the need for professional liability or errors and omissions insurance.  A number of businesses which may be home based starting out like an accountant, consultant, or computer/web hosting company should consider professional liability insurance.  This insurance covers claims of malpractice, negligence, or improper advice given to a third party.  This insurance will cover legal costs and awards which could cripple or put a small company out of business.

If your business is storing inventory, developing and manufacturing products, or has high end or expensive equipment or furnishings, you should consider some form of commercial property insurance.  This property insurance covers a wide variety of losses and in the event of fire or other types of damage.  This type of insurance should be reviewed carefully with your licensed insurance professional.

If your business has employees, then workers compensation insurance is probably required.  Again, your licensed insurance professional will guide you in developing an insurance program for today and beyond.

Let’s Look At Small Business Insurance Basics

In this day and age of corporate job lay offs, small business start ups are on the rise.  Business insurance is part of the planning that goes into opening a start up company.

It’s normal to have questions regarding the type of coverage your business requires.  Commercial business insurance covers a broad spectrum of protection that includes your property, you and your employees, and your liability. With a start up, it’s possible as the owner you have personal assets on the line.  As you begin to understand and put the pieces together, it is important to remember the ultimate goal is to make sure you are never underinsured or exposed in the event of an incident or disaster.  Let’s look at the basics of small business insurance.

Small business property insurance will cover losses to your building, and the property housed in it.  The computer and phone systems, furniture, finished goods, as well as carpeting, lighting fixtures and supplies will be covered.  There are two options, either actual cash value, which is purchase price less depreciation, or the replacement cost of the item.  Discuss these differences in more detail with your agent.

Business liability insurance must also be in place to protect the business and the owner against lawsuits.  A general liability policy will cover most situations that may arise.  There are specific types of liability coverage for risks not covered within the general liability policy.  An example would be liquor liability insurance which is a separate coverage generally taken out by bars and restaurants.

Ask your licensed insurance professional what else you should be looking at for specialized coverage.  In some cases, a business owner’s policy will combine these two insurance policies for a start up business.  Again, talk to your agent or broker about whether a business owner’s policy may work in your specific situation.

Most businesses are required to have workers compensation insurance if they have employees.  This covers the employee from lost wages while protecting the business against being sued by the employee. Remember, even if you hire family members, they are considered employees.

More specific information is available from the insurance department of your state government as well as your licensed insurance professional.

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Annual Insurance Review

Why does my commercial insurance agent want to do an annual review?

We have always recommended using your licensed insurance professional as a trusted advisor just like your attorney and accountant. At minimum, we suggest meeting with your commercial agent/broker once a year. That meeting should typically take place 30-60 days prior to the expiration of your business insurance policies. It’s important to review any changes in your business and staffing to insure your business is still properly covered. If your agent doesn’t feel its necessary, it’s time to look elsewhere.

Here is a sample checklist of what you as the business owner should have prepared:

  • Has the name of the business changed? Logo?
  • Has the mailing address changed? Any new locations?
  • Has the scope of the business changed or new services offered?
  • Has the building or space been expanded? Any upgrades?
  • Do you have a product and equipment inventory? Have you purchased any new business or technology equipment? New vehicles? Range of service increased/decreased?
  • Have you added a security system?
  • Are you backing up computer systems off site?
  • What is the revenue this year? Change? Forecast?
  • Are your operating costs up or down? Why?
  • How many new employees? Driving record checks? Forecast?
  • Has your compensation increased? Any new management staff? Ownership changed?
  • Is professional liability insurance needed? (Your agent can help you determine)
  • Do you have a current financial statement? Current policies?

Your insurance advisor wants to be part of your team and help you succeed. Make it easy for them by helping them understand your business and your vision for your business. Obviously, your business may need to cover other items; your agent can help you determine if other information may be needed.

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Medical Billing Office Business Insurance

A client had recently signed a lease for office and was going into business after years of working for a hospital in claims and billing as a private medical billing service.  At a party, she informed some friends about her new venture and as business owners they shared their insurance rates with her.  The next day, she called in tears thinking she couldn’t afford business insurance based on the premiums her friends shared.

After calming down our new client, we discussed the business insurance options available to our new entrepreneur.  The first issue we discussed was that every business is going to have different needs, risk, and exposure.  Her friends had a number of employees and company vehicles as well as several locations, so naturally their coverage would be different than a single owner start up company.

We pointed out that every business needs a combination of liability insurance, property insurance, and workers or employee insurance.  Our discussion included business owner’s policies, additional insurance coverage like Errors and Omissions which every medical billing company needs, an umbrella policy, boiler and machinery or equipment breakdown coverage, commercial auto insurance and many different options.  As you read this, much like our no longer frantic caller, you’re probably recognizing there are many options available to business owners, not just medical billing offices.

Let’s break down why we recommended certain coverage for the medical billing business.  Every business needs general liability and property insurance which we often discuss.  Professional liability insurance is needed for the medical billing for additional protection in the event a bill is sent in error, to a wrong address or person, or the wrong billed for the practice.

Equipment breakdown coverage will protect the business in the event of a problem keeping the business from billing on a timely and efficient basis.  The umbrella coverage is additional protection in the event the professional or general liability limit is exceeded in an award or judgment.

Working with your licensed insurance professional, let them guide you through the coverage options available to you now, and as your business grows.  Make sure you are totally honest with your agent regarding the assets of your business, how much travel will be involved from driving to flying, and a review of any lease you be considering.   Together, you can create an insurance package that works for you.

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What To Look For in Property Insurance

What should I look for in property insurance for my business?

Commercial property insurance offers different options for coverage with a number of variables.  It doesn’t matter whether you are insuring the building, the business property or any combinations, a variety of options are available to pick from.  It is important to understand how the property is valued at the time of a loss, and whether replacement cost or actual cash value was chosen.  This question is really what needs to be answered first, before a claim, to help determine what works for your business.

Replacement cost is coverage which will pay with “Like kind or quality” up to the policy limit in place and subject to any deductible. Guaranteed replacement isn’t normally found in commercial insurance like it is in homeowners insurance, but if you are fortunate enough to have that coverage, the loss will be covered to replace the building to its original state, even if it means exceeding the policy limit.

Remember, it’s like kind or quality.  If you had carpeting, the policy isn’t going to replace with mahogany or bamboo flooring or imported Italian tile.  It’s always a good idea to photograph or digitally record your space and hold those off site.  When filing a claim, it is much easier to determine “Like kind or quality” from visual records.

Actual cash value is the cost of repair or replacing the property less depreciation.  Depreciation is the loss in value of the property due to time and wear and tear.  Again, this coverage is subject to limits and deductible.

Choosing which type of coverage that is right for your business is difficult.  Normally, Actual Cash Value is less expensive than Replacement Cost.  The difference in premium can be substantial.  Sit down with your licensed insurance professional and determine scenarios and risk.

Meet with a commercial contractor and ask for an estimate for rebuilding.  Make sure you review this policy at least annually with your agent and update them during the year of any changes or additions to your location.

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Business Risk

I’m just starting out in my business, what risk do I really have?

We talk a lot about new and small business insurance needs and risk exposure. The real question being asked here is, “Do I really need business insurance?” We hear that question or some form of it all the time. Instead of the pat answers of how you need to protect yourself, your business and personal assets and give you a bunch of stock answers, let’s approach it differently. Let’s take a look at some real claims from real cases from insurance carriers and courts across the country.

Here are just a few:

  • A customer walks into your store and slips, falls, breaks an ankle and will be unable to work for 8 weeks.
  • Two months after opening, your vendors are shutting down deliveries and demanding payment. You suddenly discover the bookkeeper you hired has deposited your money into a personal account and now disappeared.
  • Your old toaster oven you brought from home into your newly leased space catches on fire and burns the entire building down, destroying 3 other businesses as well.
  • The day after your grand opening you arrive to find the back door open and all your phones, computers and electronics are gone.
  • You take two clients to lunch, one leaves and you volunteer to give the other a ride back to their office. On the way, you run a red light and are involved in a serious accident with serious injuries to everyone involved, including you.
  • A reporter shows up to cover your opening and a part time employee refers to your competitor across the street as a “Sleaze ball that gouges his customers at every chance.”

Reading through these documents case shows you just some of the risk you have as a new business. Working with a licensed insurance professional is important to get proper business insurance coverage in place so you don’t risk losing everything you’ve worked for over the years.

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Raising Deductibles and Saving Money

Can raising deductibles save my business money?

That is too vague a question to answer for any business.  Most businesses have many types of insurance with many types of coverage and deductibles.  Let’s narrow down the question as it relates to specific business insurance coverage and what to consider.

Typically, the insurance carrier who issued the policy will cover the loss up to the specific dollar limit less any deductible.  This will save your company in some cases from a cash outlay which could cripple or even close your business.  The portion not covered by the deductible is what you are required to pay.  It makes sense to review each policy and determine what deductible makes sense today versus when the policy was issued.  For instance, say a covered claim is $10,000 and your deductible is $2500, then the insurance company pays $7500 and your business is required to pay the remaining $2500.  No matter if the claim is $2000 or $40,000, subject to coverage limits (the maximum a policy will pay) your deductible remains at $2500.

So, in the case of the $2000, 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.  When first starting out, it’s quite possible your business could only afford a minimal deductible.  Now, it’s possible that in fact you could cover substantially more for a deductible. As a norm, as deductible rise, the premium falls. Talk with your licensed insurance professional to determine what makes sense.  It’s also a good time to review coverage limits as well.  If your business has grown, it’s possible your coverage needs to as well.

Commercial 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.  Again, sitting down with your agent will help determine the proper course of action.

It makes sense to look at coverage limits and duplicate coverage as well.  Are policies offered with lower limits which can still protect your business? Is duplicate coverage costing extra? Can one be eliminated with a savings? Lower coverage limits may lead to savings as well.

The way to reduce costs is work with your licensed insurance professional.  Review each business insurance policy and together determine what deductibles make sense and offer the protection needed in the event of an incident.

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