Types of Insurance You Should Know About

What kind of insurance does your business need? What kind of insurance may be overlooked? What if you’re a home based business or working in a leased space?

There are plenty of questions and types of policies.  Certainly, a starting point for any business is a general liability policy and a property insurance policy.  Beyond that, let’s look at other coverage options you should be asking your agent about:

Cyber Theft of your Business Bank Account: Over1 billion dollars a year is stolen from business bank accounts and credit card processing, according to Bloomberg News. Of these, over 70% are stolen via fraud attacks. There’s a new product on the market that will cover your commercial business account against cyber theft or fraudulent wire transfers. Under the current banking laws, FDIC insurance doesn’t cover small business bank fraud; it only covers you against your bank becoming insolvent and folding.

Errors and Omissions Insurance:  Also known as professional liability insurance, this covers anyone who presents themselves as an expert and provides advice or consulting services for a fee. If a project goes poorly and the client sues, you will be covered for your legal fees and defense costs. Consider a million dollar coverage as a starting point in protecting your business.

Commercial Liability Umbrella Insurance: This is extra insurance if you exceed the limits on your general liability policy or commercial auto policy. It is typically bought in one million dollar increments.

Data Breach:  If the business stores sensitive or non-public information about employees or clients on their computers, servers or in paper files they are responsible for protecting that information.  If a breach occurs either electronically or from a paper file, this policy will provide protection against the loss and damages.

Directors and Officers Insurance: This insurance protects  the officers and board of a company against their actions that affect the profitability or operations of the company. If a director or officer of your company, as a direct result of their actions on the job, finds him or herself in a legal situation, this type of insurance can cover costs or damages lost as a result of a lawsuit.

Don’t be shy about asking your agent if these or other types of coverage are available or need to be considered.  The ultimate responsibility of protecting your business falls squarely on you as the business owner.

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Minimum Standards You Should Accept

What, you ask, are the minimum standards you should accept from your commercial insurance agent.

Partnership, value, and service are often bantered around in the commercial and personal insurance world.  What is value as it relates to your business with insurance? Partnership? Service? Don’t we expect a reasonable level of service from any vendor?

There is no vending machine to drop a dollar in that will produce the ideal agent or broker.  An engineer’s business insurance needs will differ from a convenience store’s insurance needs and a veterinary clinic’s insurance needs.  Let’s focus on what you feel you need to achieve value from your insurance provider and what is best for your business.

First, we suggest at least an annual review either face to face or by a dedicated phone call or webinar.  Any annual review is not a review of new rates and sign here and here. Instead, you should expect a review of your business, what’s changed, and what has changed with your agent and his business.

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 or less contact needs to be determined by you as the client. You want to know your agent or broker is genuinely interested in your business and not just the commission. Have they recently toured your facility and inspected the equipment they are providing coverage on?  Asked for a video update if necessary? Are you and your company relegated to a junior staffer expect at renewal time, or are you dealing with a senor level producer or partner?

Set your expectations of what you want from your commercial agent and then get agreement when moving forward.  Your commercial agent must be a trusted advisor who has some understanding of your business and the risk involved in running that business.

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Commercial Auto Insurance: Does Yours Fit Your Business?

Make sure your commercial auto insurance fits your small business considerations.

Most business owners know the risk involved with their product and service, but often assume their personal auto coverage is sufficient.  Any vehicle owned or operated by the business may put the business at serious risk financially in the event of an accident caused by that vehicle or the operator and that includes employees using their personal cars for business purposes.

First, commercial auto insurance needs to be take out anytime a vehicle is titled to the business.  It doesn’t matter the size, make or even if it is used strictly for pleasure.  The business name on the title brings the business into a lawsuit in the event of an accident or personal injury.  Even if the car is used by the business owner’s spouse or family member exclusively, the titleholder — the business — can be sued. Obviously, the type of vehicle classification, motor size, uses, must all be noted and will impact both premium and coverage.

It may make sense to opt for fleet insurance for your business if it uses several vehicles.  In addition, make sure to run driver’s license checks on your employees who may be driving the company vehicle.  Work with your insurance professional to determine the proper coverages and policies.

Your state probably has a minimum insurance amount you may be required to carry, but only carrying the minimum amount of insurance may expose your business to financial risk in the event of a lawsuit or judgment higher than the state minimum.  Work with your agent and perhaps your corporate attorney to review your coverage against your potential for risk.  Your state department of insurance can also be an invaluable resource.

A seasoned insurance professional will review other coverages available for commercial auto insurance for your business, and help you figure out what you need.  Comprehensive coverage, under insured motorist, medical payments and others may be available, and prudent for your risks and the type of business you have.  You need to design a policy and coverage that provides adequate protection and minimizes the exposure for your small business.

Don’t assume you have good coverage without having a conversation and review with your commercial insurance agent.

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Insurance Tips for the New Entrepreneur

Starting a new business is challenging to say the least.  Purchasing the proper business insurance can seem to be another challenge in itself.  It doesn’t have to be, consider these ideas when looking at business insurance.

Every business needs a general liability policy in place.  General liability coverage will pay for legal costs and damages resulting from claims of bodily injury and/or property damage for which your business and its employees may be held liable. Unlike property insurance, there is no set value for liability damage—you never know what the claim will be or how severe the damage. Because of this, always purchase the highest coverage affordable.  As you grow, you may want to increase the liability limits.

Increasing liability limits is not difficult and relatively inexpensive for the value offered. An increase of a few more dollars invested in premium, can increase your liability limits by thousands and thousands of dollars.

It’s essential that you understand that general liability insurance does not cover “professional liability” claims. These are claims for which your business is legally liable, but did not cause bodily injury or property damage to a third-party.  Realtors, engineers, accountants, attorneys, and consultants are just a few types of businesses which should have professional liability insurance.

Consider the standards of your type of business. There may be a professional liability policy tailored to your industry that is essential to your business insurance package.

Next is property insurance. Before buying property insurance for your new business, make a list of all of your property. Be sure to include property whether or not you think it requires insurance. Property is not just a physical location, but tools, equipment, vehicles, and supplies used to run your business.

Don’t forget your laptop and cell phone on this list. When you discuss the items on your list with your insurance company, they can help you best determine what needs to be insured and how much insurance you need.

It is not uncommon for businesses to have fluctuating property values. Building and personal property coverage limits must be reviewed frequently and updated as needed.  Make this part of your annual insurance review. If a business fails to do this—it’s an omission that can lead to a penalty for underinsurance, not an additional issue that your new business wants to address after a claim is filed.

You may consider a business owner’s policy (BOP) which combines essential business insurance coverage types under one policy. If eligible, your business will enjoy features through a BOP that are normally purchased individually and usually have higher premiums. Such features include replacement cost, business income and employee dishonesty coverage as well as higher limits of liability.

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Insuring Against Disaster

Frequently asked question: Is my business covered in case of a disaster?

Many business owners — and homeowners for that matter — think their property insurance is all inclusive and covers anything that could happen.  It may, it may not, depending on the policy specifics and exclusions it has written into it.  It’s up to you as a business owner to know where your business coverage and risk lie.  Make sure you understand your policy coverage and whether a disaster is covered.

The difference between disaster insurance and property insurance is that disaster insurance is specific and specialized and covers against immediate events where property insurance is covers against a variety of risks including theft and accidental incidents.

The insurance industry like many others has evolved and may offer coverage for a wide variety of risks included in your property insurance policy for your business.

With so many options available to the business owner, it is important to do a risk assessment for your business.   Don’t make the mistake of many and assume your business is covered for a flood only to find out when calling to make a claim it isn’t.

Don’t assume the protection isn’t in place and purchase a policy with lots of double coverage as well by failing to read the policy and reviewing questions with your agent. By saving premium dollars in elimination of double coverage, disaster insurance can be much more affordable.

What needs to be done is digging into the fine print, and coming up with a reasonable plan to cover risk.  In addition to natural disaster, do you need cover for an act of terrorism? Are you in a geographic area that may warrant such coverage? Flood, tornado, and hurricane the same rationale applies.

After Hurricane Katrina, disaster insurance is becoming harder to find and much more expensive.  Utilize the expertise of your commercial agent to guide you to minimize the exposure while keeping your coverage affordable.

Odd Jobs: Insurance for Contracting

Here’s a question we often hear: I lost my job and all the benefits and have picked up several contract projects, do I need insurance?

Many Americans have found themselves laid off or cut back in the last several years.  In addition to a regular paycheck, the biggest loss is often medical insurance.  This scaling back of the economy has allowed many people to freelance or do consulting.  While this helps in replacing the paycheck, benefits and insurance are a different story.

To answer the question above, the answer is yes.

First, any business whether home based or not needs to have a basic insurance package in place.  A business owner’s policy may fit the situation by including property insurance, general liability, and usually some form of business interruption insurance all in one policy.  This type of policy will be less than purchasing each type insurance separately with individual premiums for each.

The next critical piece is getting medical insurance in place.  Getting a group insurance policy in place for your business may be expensive.  During the initial start up, there may be other alternatives to look at when it comes to medical insurance.

First, was COBRA available? Consolidated Omnibus Budget Reconciliation Act (COBRA) health provisions passed in 1986 allows continued group health coverage that otherwise would be terminated.  Health insurance is critical to managing risk.

A devastating medical issue could bring financial ruin to anyone.  If COBRA isn’t available, can you go on a spouse’s group health plan? The Affordable Care Act now offers various plans/exchanges in every state.

Struggling to make ends meets while doing contract and freelance work and trying to manage risk is a difficult but not impossible undertaking.  Allowing your home and family’s assets to be at risk should be unacceptable to you.  Many folks that utilize a home office and/or work out of their homes make the unfortunate assumption that their homeowner’s or renter’s policy will cover any losses.  Those policies don’t cover businesses.

Personal auto policies generally do not cover your auto when being used primarily for business purposes.  In addition, many policies have exclusion provisions for ‘illegal’ acts which could include ‘business being conducted in a residential area’ so it’s important to check your town’s specific ordinances and business permitting.

By taking on contract work, you have gone into business for yourself.  Sit down with a licensed insurance professional and work together to manage the risk now facing you as a new small business.

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Business Insurance: Worst Case Scenario

Business insurance, what’s the worse that could happen…

We are often asked the if’s and why’s of having business insurance in place for our small business clients.  Instead of just talking about coverage, let’s look at a real life example.

For the purpose of this exercise, both Client A and Client B have started landscaping businesses out of there home.  In each scenario, they did paperwork and billing from a small home office and stored their equipment and supplies in the garage of the home.

While close to 16 months apart, in both cases a fire destroyed the free standing garage and all of the contents.  Client A had spoken with a commercial insurance agent and Owner B believed that since his business was in his home, all was covered in his homeowner’s policy.  Now let’s see what happened.

For Client A, the fire destroyed the garage, the tools, and also the power equipment used for the landscaping business.  A new trailer, two riding mowers, 2 weed whackers, a chainsaw, and various hand tools, gas cans, and equipment as well as two boxes of brochures and lawn signs were destroyed. Client A had taken out a business owner’s policy and added business interruption insurance as well as commercial vehicle insurance.  Once the deductible was satisfied, Client A received loss income, operating expenses, as well as the garage being rebuilt and a settlement check to replace the lost tools and equipment.  Client A never missed a loan payment or a paycheck because of the foresight to get business insurance.

Now comes the sad story for Owner B, which didn’t end well at all. Owner B was operating a commercial business out of his home and his homeowner’s policy excluded any business coverage.  Now, all of his losses were out of pocket.  In addition, he couldn’t service his existing clients and eventually fell into bankruptcy as a result of this loss.

Don’t take a risk with all of your hard earned assets.  If you own and operate a small business from your home, talk to a commercial insurance agent and make sure you are covered.

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Business Interruption Insurance

Business interruption insurance should be the foundation of your disaster plan.

Every month of every year, business owners face numerous natural disasters in every part of the country.  Blizzards and ice storms, tornadoes and hurricanes, fires and flooding put hundreds of thousands of small businesses at risk. Look at hurricane Katrina, tens of thousands of businesses destroyed and over 125,000 reported jobs lost.

Yet, nearly 70 percent of all business owners admit to having no disaster plan in place for their business.

Going through a disaster is bad enough, having your business survive and recover is greatly improved with a plan in place.  The time to create a disaster plan for your business is before, not after an incident. Taking the time to plan now can pay you back ten fold or more should disaster strike.

You must do a risk assessment for your business.  What potential types of emergencies could your business face?  Your insurance carrier, the American Red Cross, and your state department of insurance can all provide you with information.

Develop a contingency plan which includes operations, employee safety and notification, and what steps to take.  Identify the key areas for your business to survive and how you can perform those functions as quickly as possible.  Identify a remote location if necessary and supplier alternatives.  Set up a call plan or call tree for your employees.

Ensure you have remote access to your computer network and back up and store data daily.

Last, make sure you have business interruption insurance in place.  Typical coverage includes loss of revenue, profits, and fixed operating costs.  It should cover temporary operating location including expenses to set up the location.  It may offer additional temporary expense coverage that is reasonable and necessary while your business is being repaired or rebuilt.

Ask your agent for help in determining the proper policy and coverage for your business.

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Cyber Insurance

Cyber insurance is the new kid on the block, but one you need to know.

Small mom and pop to a Fortune 500 company: every business can be the target of a data breach. In fact, recent studies shows over 30% of incidents take place in companies with 100 or less employees. In this day of being a data driven universe, companies of all sizes are being targeted and attacked.

One hacker, a lost laptop, phone or notebook can expose your company to serious risk.  Let’s not forget a virus or worm getting into your system.  One serious incident can put your company’s reputation, financial well being, and face a huge liability with dire consequences.

Cyber insurance offers liability coverage as protection against a claim of damages as the direct result of a data breach.  This coverage may include all network and security liability, communication and media liability, as well as legal costs, settlements and damage awards up to the limits of the policy.  This coverage may also cover software and data loss, fund transfers, e-commerce interruption and business interruption.

With cyber attacks being reported as increasing nearly 43% over the prior year, can you business afford not to consider cyber insurance?  What would happen to your business if it was facing any of the incidents described earlier? On a national basis, it has been shown that the average cost to remedy a serious attack or breach runs over 5 million dollars.  Can your company handle even one half or one third that amount?

Most general liability policies in place for business do not cover these types of incidents.  Take the time to talk to your commercial agent about cyber coverage and if it is an option for your company to consider.

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Equipment Breakdown Insurance

Does your business need equipment breakdown insurance?

In this day and age, almost every business relies on computer and phone systems to for the daily operation of the business.  What happens if a power surge or brown out shuts down these systems or wipes them out?  What if your buildings boiler fails? Inventory control?

Many business owners believe their property insurance would cover such a claim only to find out it’s not covered.  Most property and casualty insurance covers damages from external causes such as fire, flood, or a tree falling into your building.  The policy doesn’t cover internal causes like mechanical failure, electric arcing or motor failure. This is where equipment breakdown insurance comes into play.

Equipment breakdown insurance or sometimes known as boiler and machinery insurance was once only available and affordable to large companies.

Now, it is an important of many small business insurance packages. It’s important to understand this coverage is ‘hardware’ and not software coverage for your computer/phone systems. A virus or bug which causes computer failure is not covered, but a power surge that damages a mother board would be.  The same holds true for your heating/cooling systems and other equipment which cause damage or a loss of business.  Many of these policies include a business interruption or loss of income component due to down time.

Talk to your commercial insurance agent about whether equipment breakdown insurance makes sense for your business.  Don’t wait until its too late and find out coverage is not in place when you thought it was.