Determining the Proper Business Insurance Coverage

In determining the proper business insurance coverage, have the information need.

Trying to determine coverage without the help of a commercial insurance professional is like trying to defend yourself in superior court.  You need to take the time to meet and discuss insurance needs with the proper information in hand to get maximum value and protection in coverage.

Here’s how to simplify and maximize your time and efforts in determining the proper coverage needed for your business with your broker.  Here are a list of items and documents you should have available when you meet with your insurance professional:

Business Location(s) Information
Copies of all leases and landlord information
Construction and building types
Square footage / floors
Additional locations where employees may be contracted
Equipment and materials inventory

Remember, if you are leasing space than decorative items, kitchen wares….must be listed.  A video recording, simple with smart phones today can be a great help.

Vehicles and Equipment

Make, models and color
Mileage and title(s)
Vin numbers
Titles and registrations to any trailers and road equipment.
Approved drivers list with drivers license information

Owners, Officer’s and Employee Information

Spouses and children
Date of birth
Social security numbers

This may be time to discuss growth and workers compensation insurance.

Banking and Financial information

Bank records
Cash flow/Profit and Loss statements
Loan documents
Present insurance declaration pages
Attorney and CPA contact information

Now is the time to look at business interruption insurance.  How could your business survive a long term shut down and rebuild?

Putting together this information and updating it annually is not only going to save time when meeting your insurance agent, it serves as a great review for your business.

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Business Owner’s Policy: A Good Starting Point

In the past, we have discussed that a Business Owner’s Policy or BOP’s may be a good option for your new or small business.  BOP’s can cover many of the risks associated with a business while keeping the premium you pay in balance with a small business or start up.

A business owner’s policy is generally quite inclusive.  It is important for you as a business owner to review the specific coverage in detail with your commercial broker.  More important however, is a review of the exclusions.  You need to know what is not covered as well as what is.  Exclusions are damages not covered by your policy. Here are some of the common exclusions to BOP’s you want to be aware of as you consider a BOP.

Boiler and Machinery insurance, also know as equipment breakdown or mechanical failure is often not included in a business owner’s policy.  Review with your commercial insurance broker if this is a coverage your business would need.

Commercial Fleet (vehicle) insurance is generally not covered in a business owner’s policy.  Since vehicles are an expensive asset, it is important to maintain coverage on them.  A loss of a truck, a delivery van, or other vehicle(s) critical to your business could have a serious impact on your business and its cash flow.  Commercial vehicle insurance should be discussed with your broker if your company owns vehicles or equipment, or if driving may be a component of your business.

Debris Removal insurance is also coverage generally excluded by a business owner’s policy.  Businesses located in areas where tornadoes, hurricanes, and flooding exist may want to consider this type of coverage.  Property insurance will generally cover rebuilding, but not the clean up and debris removal necessary to get the rebuilding process started.

Every business owner’s policy is specific to you.  Just make sure you understand both the protection offered, and risk still exposed.  Work with your broker to customize the best coverage for your premium dollar.

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Knowing Your Coverage Of General Liability Is Important

Today, a spilled cup of coffee or the twist of a knee on your property can result in a lawsuit.  As a business owner, you need to be keenly aware that what appears to be a minor incident could result in a big legal problem.

General liability insurance, property insurance, and worker’s compensation insurance are a must to be in business.  General liability insurance will protect the assets of your business in the event it is sued for something perceived (right or wrong) to have done to injure or cause damage.

General liability coverage can be purchased as part of a business owner’s policy or separately.  A business owner’s policy will package the liability with the property insurance.  Sometimes, when part of a business owner’s policy, the liability limits could be fairly low.

Make sure to review and assess risk with your commercial insurance agent.  Keep in mind what can be your perceived risk, like operating a lot of heavy machinery or have a fleet of vehicles on the road.  How does it differ from other businesses you know? Look to trade associations, the state department of insurance and your agent for guidance regarding damage awards in your state as well.

The general liability coverage will include legal fees and damages in a covered claim and/or lawsuit.  Bodily injury, property damage, personal injury, and general damages are normally covered.  Punitive damages are usually not covered as they are awarded when it is determined the act was intentional.

In addition, your policy will spell out maximum coverage and limits during the policy period.   It may make sense to purchase a commercial umbrella policy to cover additional risk.  Review the limits and work with your commercial to determine what is best for your business.

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Home-Based Businesses and Insurance

We’ve heard it before: “It’s just a home based business, why should I spend money on business insurance?”

A recent survey showed that up to one in ten households operate some type of home based business from their home.  Many of these same small, part time business owners have not put some sort of business insurance in place.

In fact, many of these part time business owners mistakenly think their personal insurance will protect them.  That type of thinking could put their home and assets at incredible risk. Home based business owners are at risk for serious financial losses in the event of theft, accident, damage or perceived damage to a client, natural disaster, vehicle accident or other types of loss or damage.  Most homeowner’s policies won’t cover business related losses.

If you’re operating from home, not only can you be risking business property, but personal property which won’t be covered with a business incident.

There are steps a home based business owner can take to reduce their risk exposure. One possibility is a business rider added to your homeowner’s policy.  If you’re writing or just using a phone and computer for your part time business a rider may be all that’s needed.

However, if you’re manufacturing or perhaps doing some type of repair work in your basement, garage or even den, there is a good chance you need more insurance coverage.  Talk to a business broker and check with your state department of insurance. If you hire an employee, you may have to purchase worker’s compensation insurance.

The risk of not having appropriate coverage is formidable.  If you have started a small, part time business, contact a licensed commercial insurance broker.  Work with them to determine what insurance is needed.

Typically, you need some type of general liability coverage, business property insurance, and if you have employees, worker’s compensation.  Ask about a Business Owner’s Policy, or BOP as a possible solution.  A BOP will offer both liability and property coverage and possibly some other coverage all in one simple policy.

Don’t risk all you have worked for up until now by avoiding or neglecting this important component of being a business owner.  Your agent or broker will guide you to what coverage is needed today, and more important, how to protect the future as you grow your business.

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Review Your Business Insurance Annually

Have you set up your annual business insurance review?

The start of a new year is always an exciting time in business.  We set our revenue goals, establish the new budget, and target new customers and lots of new goals and aspirations.  All of the planning is exciting but let’s not forget to review and determine if your commercial business insurance needs changing as well.  All too often, we just plug it in as the same expense of last year without giving serious thought to risk exposure and the changes and growth seen by our business.

Whether you carry a Business Owner’s Policy, or separate policies covering your Liability and Property and Casualty insurance needs, the beginning of the first quarter is always a good time to do risk planning and assessment.  We suggest sitting down with your insurance agent early in 2014 for a formal business insurance review.

What should be looked at and discussed? Let’s start with your business property and casualty insurance.  Since purchasing the policy, has your inventory grown? Have you added new equipment?  Increased office space? Added new phone or computer systems?  As your business grows, it’s important to make sure your policy coverage grows with your business.

Starting out, many business owners carry minimum coverage to save on premiums and often are working on a shoe string budget with equipment and inventory. Have you changed coverage as your business has grown? Review your present coverage on your property and casualty insurance to make certain your business is protected in today’s dollars.  Make sure to review your vehicle coverage and include new employees that may be driving your company vehicles.

On the subject of employees, make sure to review your worker’s compensation coverage with your insurance agent as well.  This is the time to also review your employee benefits package with your agent.  Make sure you are up to date with all the new changes the affordable care act brings in 2014.

Finally, review your general liability coverage with your insurance agent.  Is your present coverage still enough?  If your income and revenue have grown substantially, it may be time to consider a larger coverage limit, a commercial umbrella, or perhaps even a professional liability policy to supplement your current policy.

As you can see, there are plenty of things to think about regarding your risk planning in 2014 in addition to the revenue planning for your business.  The easiest way to start is to give your commercial broker a call and schedule a review.

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The Basics for First Timer Buyers

First time buying business insurance? Here’s the basics:

First, when beginning to look for business insurance, you need to remember it is different than your personal insurance you have now.  You need to take some time and look at the different types of coverage that is available to your business.  These types include liability insurance, property insurance, casualty insurance, and commercial vehicle insurance.

You don’t need to be an expert on business insurance, but you need to understand that property insurance protects the location and contents, while liability protects against a claim against you, your employees, and the business.

Understanding what risks your particular business may be exposed to and what the future may look like as your business grows is very important.  If your business has an industry association, it is a great starting point.  In fact, don’t be afraid to call around and speak to members to see what they have in place and why.  Your state department of insurance can be a great resource to you as well.

Have a business plan and detailed description in place you can review with a commercial insurance agent when you begin to look for the insurance.  The more information you can provide the better coverage you can put into place.  Interviewing and choosing your insurance professional will be much easier and rewarding by doing this exercise.

It is also easier for your insurance professional to understand your business and the vision you have to make sure you cover as much exposure as possible.  Don’t be afraid to ask for commitments from your insurance professional such as 24 hour turn around on phone calls.  Get a standard billing date agreed on and make sure it’s the same every month.

Once you settle on the insurance package, don’t file it and forget it.  It is important to review it often and make you keep adequate coverage as your business grows.  Make your commercial insurance professional a trusted advisor and resource.

Get together at least at least annually and do a complete review either in person or on the phone.  Your commercial insurance isn’t buy once and done, it must grow right along with your business.

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How Can I Reduce Worker’s Compensation Premiums?

claims continue to decline.  Understand of course, certain industries still continue to have up ticks in claims and costs.  These may vary year to year and industry or even industry segments.

Implementing a risk management plan in your business if you have to pay workers compensation insurance premiums is a great starting point..  In the beginning, utilize the risk management staff at your carrier, the company that writes the workers compensation to help you set up your plan.

As you grow and get larger, it may make sense to assign this to staff and eventually, even hire someone to perform this function.  Implement safety procedures which make you a better risk for the carrier.  Keep a log and track days without incidents.  In addition, take a look at the following to see if it may help you reduce your premiums:

  • Start a program to allow workers to get back into the work place faster.  Establish a step program which would allow for limited capacity which would gradually increase. Remember that rising rates are a result of benefits paid.  The earlier an employee can get back to work, the better for everyone.
  • Check on how your payroll is reported.  Overtime and bonuses may not have to be factored in to payroll costs which help determine your premium.
  • Has your company had claims, is it a particular department or group? Investigate and address these as part of your risk management program and make sure to advise your carrier.
  • Check your job classification codes, sometimes they may be classified wrong and raise rates.
  • Keep your carrier informed of changes and improvements made to the workplace.
  • Schedule annual reviews with your carrier and invite them in to see improvements.
  • Challenge your carrier if you feel it necessary.  Use industry associations and your state department of insurance as a resource.

Don’t be afraid to review your workers compensation annually with all your other business insurance.  Work with your commercial insurance broker and the carrier to make sure your coverage, risk exposure, and premium is where they need to be.

Why Can’t I Just Go Without Insurance For My Business?

Simply put, without business insurance you are risking your home, savings, retirement and all your assets without insurance.  Paying a monthly premium helps eliminate or greatly reduce that risk.

Putting a business insurance package in place is a lot more than just a strategy to protect your company, and provide peace of mind.  It will allow you and your business to remain viable and competitive in the event of an accident or disaster.  Many business owners opt for the cheapest premium and minimum coverage while exposing themselves to some pretty high risks.  Others still, over pay and over insure their business and no one wants that either.

Avoiding these extremes is simple if you bring in a commercial insurance agent to review and advise you on your business insurance needs.

Paying insurance premiums seems like a burden with no real return at times.  The real question here is whether you can afford not to have the protection in place.  No one has a crystal ball where they can predict the next natural disaster or accident by you or one of your employees.

Preparation is far better than facing financial ruin form one event such as a hurricane or fire.  The overwhelming monetary expense of fighting a lawsuit from an accident or claim against your product or service as well as the mental anguish and stress produced.  Would your business be able to survive an event like Hurricane Katrina or the aftermath?  The serious and deadly Ice Storm of 1998 that wreaked havoc on northern states for up to 10 days, where many buildings were without power and had water mains and pipes burst. The recent tornadoes and devastation they produced?  What about a flood, a fire? Could your business move and reopen at a different location in a reasonable time?  Is you liability coverage sufficient to cover a significant claim and allow you to maintain focus on your business?  Does your policy have a rider to replace income lost during a rebuilding process?

Work with your commercial agent to find the proper coverage for your situation.  Then, at least annually, review the coverage in place and provide your agent with what is new and happening with your business.  Make sure to advise them of any expansion plans or new product or service offerings.  Give them the information needed to protect your business as it grows.

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Employee Benefits vs. Employee Insurance

Employee benefits are not the same as employee insurance or workers’ compensation insurance. Let’s look at the differences between the two.

While employee benefits differ from employee insurance, or workers compensation, many times your commercial insurance agent provides both insurance and employee benefits to your business.

Employee benefits generally start with health insurance and group term life insurance. With the ongoing changes of the Affordable Care Act — frequently called “Obamacare” — make sure you work with your agent to understand your responsibility.

As part of the health insurance package, an employer may opt to provide vision and dental insurance.  In addition to life insurance, an employer may also offer group disability insurance.

A retirement plan is generally offered as an employee benefit as well.  Unlike workers compensation insurance which is required by most states, employee benefit packages are provided at the discretion of the employer and may be funded with a variety of options.

Generally, employers can provide these additional benefits to just the employee or also opt to cover family of the employees as well.  Cost is almost always the determining factor in putting together an employee benefits package.  With the cost of health insurance, it is reasonable to ask the employee to pay a percentage of the coverage, and perhaps even all of the family coverage.

Workers compensation insurance is business insurance which will provide wage replacement and medical coverage for an employee injured on the job.  Once you hire an employee a prudent business owner will consider worker’s compensation insurance.  Varying by state, this coverage is mandatory depending on different variables.  Ask your commercial agent the requirements in your state.

As your business grows, an employee benefits package may be necessary to attract and retain good employees.  Work with your commercial broker to develop and implement an employee benefits package that makes sense for your business.

What’s The Right Deductible For My Commercial Insurance?

Your commercial insurance policy will pay a covered loss, minus any deductible written into the policy that it will not pay.  A deductible is a fixed amount or a percentage of an insurance claim which is to be paid by the carrier.

Deductible amounts can be voluntary, meaning, a business owner can choose a higher deductible to help reduce premiums, but there is generally a standard deductible.  Insurance carriers impose these standard deductions to avoid numerous small claims.

The claim process for the carrier is expensive, running through layers of employee and departments before a claim is ever paid.

An example of how a deductible works would be that your damage is estimated at $7500.00 and you have a deductible of $800.00 on this policy.  The check for claim you receive from your insurance company would subtract the deductible, in this case, $800.00 and you would receive a check for $6700.00 to settle the claim.  The additional $800.00 will be the responsibility of the business.

Normally, the higher the deductible, the lower the premium is on the policy and vice versa.  In deciding on a deductible, it pays to weigh the risk and the impact of a loss as well as the premium in your cash flow analysis.

While it may make sense for your monthly cash flow to pick the highest deductible and lowest premium, it may be exposing your business to a serious risk.  If your business would be crippled coming up with the money to cover a high deductible in the event of a loss, then it’s probably too high a deductible.

This is where the savvy small business owner works with their commercial insurance agent or broker to get the best value and coverage for their business.

While deciding on the deductible, another aspect to review is how you as the insured will recoup your loss.  A ‘cash value’ basis is a replacement of cost less any depreciation.  A replacement cost will repair or replace the insured property at its present cost without depreciation.  Naturally, replacement cost will have a higher premium than cash value.

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