Just Starting Your Business? Part 1

If you really stopped to consider all that could go wrong with your start-up business, you may never start it at all, and therefore, one of the most common questions we hear is this: “What are the risks I need to consider when I start my business?”

Well, let’s take a look at a few scenarios which illustrate various types of coverage. We’ll try not to scare you too badly.

  • One of your elderly clients is at your place of business and is ready to go home, but she cannot reach her husband to get him to come get her and drive her the 2 miles to her home. You offer to drive her yourself. About halfway to her house, you run a breeze through a YIELD sign, and a delivery truck plows into you on the passenger side. Both you and your client end up in the hospital.
  • Business is booming! You have a steady stream of customers, and you no longer worry day and night about whether or not you will be able to pay the bills. Your bookkeeper, however, has been out sick for 4 days now, and she has no idea when she’ll be back. You have gotten three phone calls today from different vendors, each informing you that you have bounced checks and they want their money. You open the safe and see that the petty cash is empty and the checkbooks are all missing.
  • You have a wine-and-cheese grand opening which is wildly successful! Everyone is abuzz and socializing, and they are all spending money. As the crowd clears out, you get word that a woman — who judging by her grand opening purchases is on track to be a major customer — missed a stop sign on her way home from your fete and hit a child on a bicycle. Furthermore, you are told, she blew a breathalyzer score more than twice the legal limit.

These are just a few of the scenarios which might occur, and which your licensed insurance professional will take into consideration when the two of you decide what coverages you need.

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Filing a Business Liability Claim

One of the pitfalls you will always want to avoid is waiting too long to file a liability claim with your commercial insurance company.

Liability claims typically move quite slowly. Generally speaking, the time between the initial claim or complaint being filed and the end of the court proceedings frequently takes months, and it is not rare for it to take more than a year.

Because we are human, business owners will often ignore the whole thing and hope it will go away. Or they may retain an attorney to offer them advice as to how to make it go away. Or they may wait until months after the problem before they notify their commercial insurance agent or company.

Any one of these actions — or inactions — can ruin your coverage of the liability claim, whether the original incident is covered under the liability claim.

If you read your business liability policy, it is very likely that it states that the  policyholder must notify the insurance company if a situation which could result in a claim has occurred. The reason for this is that when you notify your insurance company immediately, they have time to investigate the incident as well as to prepare a defense if that is necessary.

When the business owner waits too long, the company may deny the business liability claim because of the lack of proper notice.

As a matter of course, you should have a lawyer with whom you work with issues which affect your business. It is possible to have your commercial insurance company compensate your attorney, but you must start the claims process early and not later.

Regarding your business liability claim, your insurance company and the policy will spell out the litigation process and the course of defense.

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Make sure that you understand your present liability coverage and check with your licensed insurance professional to make sure it’s what you need.

Equine Insurance

Your business is raising and selling show horses. You own quite a few of them, and they are all gorgeous. And expensive!

Mortality and Theft
You will want to look into mortality and theft insurance for your horses. Your foals, yearlings, mares, stallions, and geldings of all breeds should be covered by this insurance.

It will insure your horse against death from any cause, much like your life insurance covers you against death. It includes illness or accidental injury as well as humane destruction which is made necessary by illness or injury.

It will also cover your horse if it is stolen.

Colic Surgery
You should also look into colic surgery and aftercare, which will cover your horse as long as the horse does not have a history of colic problems.

Major Medical and Surgical
Major medical and surgical coverage helps surprise veterinary expenses for your horse. Such coverage is an endorsement and usually covers reasonable and customary veterinary, medical, and surgical care costs which are the result of illness, injury, or accident. Frequently, such policies include emergency transportation of the animal.

Full Loss of Use
Full loss of use is another coverage you want to consider. It insures you against your horse becoming permanently unable to perform due to illness, disease, injury, or accident.

Stallion Infertility AS&D
Heaven forbid your prize stallion suddenly becomes unable to impregnate a mare due to an accident or disease. This coverage pays you for that loss. Usually, this coverage is not available to stallions who are in their first breeding season, as they must be proven valuable in this area in order for a loss to occur.

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Do speak to a licensed insurance professional about what you need for coverage for your equine business.

Data Breach Insurance and Your Company

You cannot pick up a newspaper or turn on the television or radio without hearing the news that yet another large company which positively everyone uses has “suffered a breach.”

Last year alone, there were almost 200 hacks of payment systems which are used by hotels, restaurants, and retailers. In 2013, Target had 40 million debit and credit card numbers stolen from their computers.

And it’s not just retail shopping which has been affected. In the first few months of 2014, millions of consumers had their personal, banking, and/or credit information lifted from Apple, Kaiser Permanente, the California Department of Motor Vehicles,  national credit agency Experian,

and even Veterans of Foreign Wars of the United States.

If it can happen to these huge companies, you’d better believe it could happen to you!

It is important that you talk to your licensed insurance professional about data breach insurance, often called cyber liability insurance. Data breach insurance covers you in the event of such events as unauthorized access or use of data, loss of data, whether malicious or accidental, denial of service attacks, cyber extortion, or disclosure of confidential data.

Covered losses may include the investigation and forensic costs to figure out how the breach happened, and what was exposed. It can also cover damage to your company’s reputation, the costs of notifying those who are affected, the costs associated with monitoring credit going forward, lost business, and attorney fees, settlements or judgements, and court costs.

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Again, talk to your insurance professional to ensure that all of your data breach risks are covered.

What Is Insurance?

Many years ago, my son asked, “Dad, what do you do for a living?”

Hopeful that this was a sign that he was considering following in my footsteps, I tried to explain it as simply as possible:

I sell insurance.

Insurance is the transfer of risk. Insurance passes a risk that you are able to afford and willing to take on to an entity which is willing to take the risk you don’t want for a fee.

So the person who is buying insurance pays the fee — or, as we call it in the business, the premium — takes the risk of investing in something over and over with no guarantee that the investment will pay off.

If my house were to burn to the ground, it would cost me tens of thousands to rebuild it, replace all of our belongings, and find somewhere to live while it was being rebuilt. That is a risk I cannot afford.

But the insurance company is quite fine with that risk, because, hopefully, the majority of its clients do not have houses which catch fire.

If I write a check for, say, $100 a month for 20 years to insure my house against fire, and my house does not catch fire, I have invested $24,000 and have gotten nothing concrete in return. Of course, I have twenty years worth of security; twenty years of going to sleep easily, knowing that if my house were to burn down, I did not have to pay to rebuild it.

I don’t want to take the risk of paying a huge amount of money to rebuild after a fire; however, I am willing to take the risk that I am sending a check for $100 every month to someone who is willing to take that risk.

He looked at me earnestly and said, “Dad, would you please risk a dollar so I can buy an ice cream cone?”

Alas, my son, who was bored by my explanation and my business, grew up to be an IT consultant. But he does understand risk and has plenty of insurance.

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Haunted House Insurance

You have a business you love. No, really, you love it more than any business you could possibly think of: You own and run a haunted house and a Halloween maze!

But scarier than any ghost or zombie in your haunted house, is the idea that you have a seasonal niche business and one uncovered base could bring ruin to you.

So, you ask, what kind of insurance do you need in order to be secure in your seasonal haunted house business?

Right off the bat, you know you need general liability insurance, property insurance, and workers compensation. Additionally, you will need to get event insurance and event cancellation insurance and look into equipment insurance, automobile liability and physical damage.

You can reduce your risk, hence your premiums, if you do not use pyrotechnics or open flames, stunts, steeply inclined floors, moving floors, trapdoors, chutes, or people jumping out to startle customers. Your choice in props can also help reduce your premium, for instance, if you don’t have an empty hangman’s noose or knives, swords, or guillotines made of anything other than rubber or paper.

And strobe lights are always iffy as far as risk is concerned, for dual reasons: If used instead of regular lights, they do not illuminate well enough to allow patrons to see where they’re going, and they are known to induce seizures in those who are prone to them.

As always, you should plan to meet with your licensed insurance professional.

When you meet with that insurance professional, you will likely be asked questions such as the estimated attendance per day, number of tickets printed, estimated gross receipts, and the estimated total payroll. He or she will want to know whether the haunted house will be an indoor or outdoor event, and whether or not your employees are trained in first aid, and how far your venue is from the nearest hospital as well as an in-depth description of special effects.

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