Business Insurance 101

Shopping for business insurance doesn’t have to be a daunting task.  Sure, the terminology and general language can seem foreign to those never dealing with it before, or even having some experience.

One easy way to break it down to the basics is to remember all business insurance covers one of four things; liability, property, persons, or income.  It really is that basic.

First, let’s look at liability insurance.  Try as we might, not one of us is perfect.  It’s very possible to make a mistake, or be presumed to have made a mistake.

In fact, when dealing with the public and clients, it just a matter of when, not if a claim will be made against your business.  Liability insurance will protect your business and you as the owner in the event you are sued and taken to court.  Simply stated, liability insurance will cover the legal fees, court costs, and any awards up to the limit of coverage while allowing the owner to concentrate on running the business.

Property insurance is next.  Property insurance is for protecting the business property such as a building, tools, equipment.  In the event of an accident or disaster, your property insurance will cover the replacement or repair necessary to get your business back on track.

How does business insurance cover persons?  Simple, workers compensation, disability, life and health insurance are the major types of insurance for persons.  In most cases, workers compensation is required by any business with employees and some require disability insurance as well.

Finally, we have income insurance.  In the event of a major incident or catastrophe, business interruption insurance will provide revenue to the business for salaries and overhead while repairs or construction takes place and the business has no revenue stream.

So now you know the basics of business insurance.  It still takes meeting and reviewing your particular business needs with a licensed insurance professional.

Within the four basics covered above, are numerous types of coverage and insurances which combined can provide a good overall insurance package.   Work with your licensed professional to maximize protection and value of your small business insurance package.

Understanding Business Insurance, Part 2

Following up on our last entry, this is more of what you should understand about your business insurance. And you should understand it, as we pointed out, as well as you understand your own product or service.

Do not make this costly assumption and overlook business interruption insurance.  Sit down with a contractor and determine how long a renovation or rebuild would take.  You must also consider the time if multiple businesses may also be in need of renovation or repair as a result of an area wide disaster.  If you’re in an area prone to tornados, hurricanes, or earthquakes, check with your state department of insurance.  They may maintain records for how rebuilding or an area may take.

Another assumption by business owners is their equipment will operate without ever breaking down.  Some also mistakenly think this may be covered in their business property insurance.  Mechanical breakdown insurance, sometimes known as boiler and machinery insurance will cover these costly repairs or replacements.  In the event your business uses specialized equipment or often is held to deadlines, this insurance must be considered.

Many more assumptions are made by business owners every day that put their businesses at high levels of risk.  Assuming your general liability coverage may be enough is one.  Often professional liability insurance is needed to supplement that coverage, or perhaps even a commercial umbrella policy which would kick in after other limits are met.

You should never assume it won’t happen to you, it can and it will.  No one ever believes it when an event takes place, but they always breathe easier knowing the proper coverage is there when it does.

Understanding Business Insurance, Part 1

As a business owner, you need to understand your business insurance as well as your product or service.

One mistake we often see business owners make time and time again is not reading or understanding the coverage they have in place.  It’s critical to know the ins and outs — also often referred to as exclusions — of how your policies work and what is covered.

Your business insurance, also known as your commercial insurance is more expensive as a rule, and much more complicated than your personal insurance.  More important, is having an understanding how your business coverage works.

Not understanding your insurance and how it works in the event of a catastrophe can lead to financial ruin for a business.  Many business owners assume that if the building they own or lease floods, it is covered.  The same is true of a tornado or wind storm.

The fact is that  it is very possible none of these may be covered by the current property insurance you have in place.  Many policies will cover rebuilding, but what about debris removal.  In the event of a catastrophe, the debris removal could run into tens of thousands of dollars, even more.  You need to understand what is covered and what’s not long before the potential for a disaster is eminent.

A big mistake business owners make is not about the insurance, but the down time involved in the event of a disaster.  Especially if other locations may have the similar damage and issues, rebuilding could take months or even a year or more.

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.

Business Insurance Basics

Besides basic business insurance, what other coverage should I consider for my business?

Often, we discuss basic insurance needs for businesses.  These types of insurance include general liability insurance, property insurance, and workers compensation insurance. However, there are a variety of coverage options either available through a rider, or a separate insurance policy which a business owner may wish to consider for their specific business and needs.

Here are some available options in alphabetical order and not in order of any importance.

Business interruption insurance will provide income to cover costs if the business in closed or unable to operate for a period of time.

Crime insurance will protect against burglary, theft, and robbery from outside parties and employees.

Commercial umbrella policy will kick in if cover limits are exceeded for further protection of business assets.

Debris removal is generally not covered in business property insurance.

Directors and Officers Liability Insurance is for protecting the officers and directors from lawsuits.

Disaster insurance such as flood insurance which generally isn’t covered in the property insurance policy.

Employment practices insurance deals with hiring and employment issues such as wrongful termination, sexual or other discrimination, privacy issue and more.

Equipment breakdown insurance will protect from losses suffered if machinery or equipment vital to the business breaks.

Glass insurance for protection against broken store and plate glass windows repair and replacement.

Kidnap and Ransom insurance is designed to protect individual and companies working around the globe

Professional liability insurance should be considered if you recommend and advise or offer a service such as accounting or law.

There are many types of coverage options available. Ask your licensed insurance professional about options that may fit with your specific business and location. The department of insurance in your state can be a very good resource as well.