Don’t Be Confused

Don’t be confused about business insurance, here’s what to consider.

Starting and running any business comes with any number of risks. It’s critical to protect both your business as well as your personal assets.  That protection comes various forms and can confusing.  From the type of corporation you choose to the insurance you put in place, you are working to protect those hard earned assets.

Certainly, one very important tool for protecting your business is insurance. With business insurance, comes a number of issues to consider: what type of coverage you need, the appropriate amount of coverage, and the deductible and the premium. Then there’s the matter of which insurance company offers the best products for your particular business. In the beginning, you may need to consult several professionals, including a lawyer, accountant, banker and insurance agent as well as the state department of insurance for assistance.

Here are various types of insurance you should consider, several of which may be packaged together in what’s known as a business owner’s insurance policy:

Liability insurance provides protection if you’re sued on a claim of damage or wrong doing covered by the insurance policy. The insurance carrier will pay for your company’s legal defense, settle or litigate the claim and pay any judgment within the policy limits. Types of claims commonly covered are damage to other people’s property and bodily injury to customers, bystanders or anyone else who may come into contact with your business or employees working for the business. Be sure the policy provides coverage if your business uses an automobile or truck. Also, if you make or sell a product, consider product liability insurance. Claims and litigation against business happen daily in our society and liability insurance must be a priority.

Property insurance covers losses from physical damage to your business property or loss of use and should cover most of the contents. Most policies cover losses such as fire, theft and vandalism. Depending on your location, you may also want flood and earthquake coverage. Replacement cost insurance will replace your property at current rates, which likely will be higher than what you originally paid. Even if you lease space, the lease agreement often requires the business to insure their property separately.

Business interruption insurance will pay your bills, payroll or loss of profits if your business is forced to stop for a period of time by one of the covered causes, such as a fire or other catastrophe covered in the policy.

Workers’ compensation insurance is usually required by law for small businesses with employees. This insurance provides benefits for employees who are injured or die from job-related causes. The legal requirements vary from state to state, but there’s generally a penalty for operating without such insurance.

Depending on your circumstances and finances, you may also want to consider other types of insurance, such as life insurance, key-employee insurance, fidelity insurance to cover employee theft and glass insurance. And if you’re working out of your home, you may need additional coverage since most homeowner’s policies exclude operating a home based business.  Talk to a licensed agent to determine what your specific needs should be covered.

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How Can I Reduce My Business Insurance Premiums?

Business insurance premiums are arrived at by looking at the risk which is assumed by the commercial insurance company for coverage.

The insurance carrier sends the policy to an expert called an underwriter so that the company can determine the risk which could be incurred by the commercial insurance company and how likely a loss would be, based on the physical location of the property, the laws in that location, and other risk factors.

Then the insurance company bases the premium rates on the analysis of that risk.

Anything the business owner can do to reduce the risk is helpful, both to your business which stands a better chance of staying up and running and to your premiums.

How, you might ask, might one reduce the risks?

Here are a few ways, in no particular order:

  • Install a sprinkler system as well as smoke detectors and fire alarms in your building.
  • Make it a company policy to keep the premises — including the stairs and elevator — and the electrical system in good working order and safe.
  • Use a safe and keep as little cash on hand or in the cash registers.
  • Always ensure that updated and proper safety equipment is required and used.
  • Make sure that you have and maintain adequate lighting throughout your building and premises, including parking lots.
  • Ensure that employees are trained as to safe and proper lifting techniques and about general employee safety.
  • Check employee driving records before hiring and re-check those records periodically.
  • Invite your commercial insurance agent in to tour your business so he or she can make recommendations as well as to be in a position to advocate for your business should the need arise.
  • Make it a company policy to take steps to ensure that updated and proper safety equipment is required and used at all appropriate times.

If you only do one of the things on this list, it should be this one: review your coverage annually and keep your licensed business insurance professional in the loop as to any changes in your business.

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What Is Needed for Small Businesses?

Just starting, growing and adding your first employees, or changing the operational structure of your business are just a few of the variables involved in what small business insurance your company needs.  Protecting the investment and minimizing risk of loss is crucial and necessary for your business.

There is no legal requirement to have small business insurance in place, however, landlords, financial institutions, and vendors may require proof be submitted.  While not required, it is the prudent and responsible way to operate your business.  It’s also a misconception to think being a corporation or LLC reduces or eliminates the need for insurance.

The first two types of small business insurance are general liability insurance and property insurance.  This type of insurance offers claims of damage and legal costs associated with claims of damage or negligence against your business. Property insurance covers a broad spectrum of loss to company property from fire, smoke, theft, and vandalism to name a few.

A word of caution if you are a home based business, it will still be necessary to add coverage as most home owner’s policies don’t cover business related losses.

If you are an employer, there are some other types of insurance which are required by law.  The first is workers compensation insurance. Coverage varies by state, as do the requirements, but a good rule of thumb is when you have your first employee, let your business insurance agent know.  Unemployment insurance is also required. Your state department of insurance can be a great resource.

A few states require disability insurance. Check with your state department of insurance and your agent to see if your state is one.

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There are many other types of business insurance available to you.  Talk to your agent to determine what options may cover your business needs.

Liability Insurance: What Does It Cover?

A general liability insurance policy is something all businesses need. Such policies reduce your risk of exposure by protecting the business from personal injury and from property damage which is caused by your business causes by either not doing or not doing properly.

General liability insurance is meant to cover personal injury, bodily injury, property damage, and unforeseen circumstances which affect your business or work product.

What general liability will not cover, however, are such things as failure to perform duties to your industry standard, professional negligence, or product liability.

Now, you may be saying to yourself, “I am an excellent worker in my craft. I go above and beyond all the time.” But accidents do happen. You may be distracted or clumsy one day, and that’s all you need in order to be wiped out if you have no coverage.

Aside from that, even if you are always perfect at your craft, it is not outside the realm of possibility that a client or customer says that your work or product caused them pain and suffering. That client or customer could be 100% wrong or just filing a claim in the hopes that you’ll settle, but that in itself is enough to cost you a pretty penny in lost time from work, lawyers’ fees, or court costs. And that could be enough to drive you to bankruptcy.

Realtors, doctors, accountants, soap and candle makers, and computer repair people are only a handful of the types of businesses which will likely need errors & omissions policies.

As we so often counsel you, talk to your licensed insurance professional for help in determining what coverages you need to protect yourself from risks.

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How Do I Lower My Workers Comp Premiums?

In the past few decades, workplace safety has become an issue, and one that all are aware of. As a result, overall workers compensation claims have gone down drastically in the past few decades.

That said, we must point out that there are some industries where they have gone down less than others

If you want to lower your workers compensation premiums, there are several paths you could go down.

First, initiate a risk management plan in your business. Start out using your insurance carrier’s risk management staff. They are the people who understand the industry from that side. Implementing safety procedures lower your risk factors for the carrier, and this step could save much money.

As you grow it is likely that you can delegate your own staff to take over the tasks involved with that risk management plan. You might even get to a point where you can hire someone specifically for that task.

Has your company had claims? If so, are those claims in a particular department? Find out why and address them as part of your risk management program. Then advise your carrier that you are working in that direction.

Find out how your payroll is reported. Is overtime factored into it? Are bonuses? This could be a driver of your premiums.

Additionally, you might look into starting a program to assist workers to get back into the workplace more quickly, which mitigates the losses your carrier is paying, and losses are what drive premiums.

Normally, a program where your workers can come back gradually and in a limited capacity which will increase step-by-step works best.

Check your job classification codes and insure that they are classified correctly. Sometimes the wrong classification can change your rates.

Keep your carrier informed of all changes and improvements made to the workplace.

Remember to review your workers compensation annually along with all of your other business insurance. Work closely with your licensed insurance professional and your carrier to make sure your risk exposure, coverage, and premium is where they need to be.

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