Business Insurance Basics

Whenever you think of business insurance and all the language which those in the insurance industry use, you will want to know these basics. When you begin your journey to acquire insurance and it all seems overwhelming, remember the basics we will discuss here.

Business insurance will essentially cover one of the following:

Property
In insurance-speak, property used in your business will include the building in which your business is located, whether it is leased or owned.

Property also includes equipment including business equipment such as computers and tools, furniture, and anything else which is used to conduct business, including vehicles. Property policies are created in order to protect these assets.

People
People in this case include you and anyone who works for you. As a business owner, your employees are one of your greatest assets. Hence, you might consider offering benefits such as health insurance and life insurance as well as short- and long-term disability insurance.

As of this writing, worker’s compensation is required in every state except for Texas. Though Texas law does not require worker’s compensation, many customers may require you to carry it.

Liability
Business liability insurance is created in order to protect your business from being held liable for error or injury. This includes damage to property, people, and implied damages. Liability insurance covers the cost of litigation for these claims.

Income
Your business cannot survive very long if your income stops. If disaster hits, business interruption insurance can provide a revenue stream while you  rebuild  or relocate to another location, either temporarily or permanently.

Use this basic information to work with your licensed insurance professional. Together, you can determine the coverages your business needs and how to maximize your coverage.

Just Starting Your Business? Part 2

In the first part of this discussion, we went over a few scenarios which illustrate various types of coverage you might need for your new business.

Let’s now go over a few more.

  • Unbeknownst to you, a local newspaper interviews one of your employees about the business climate in town. She is quoted in the article as having said that your competitor is “a man without scruples or ethics who offers shoddy products and overcharges his customers.” Upon reading the article, your competitor files a lawsuit against you and your business.
  • You pull into the parking lot of your office one morning and see that the window has been shattered, there is crime scene tape around the building, and there are four police cars parked there, each with lights still rotating.
  • You invite a client to take a seat in your office, and he does so, only to have the chair collapse, leaving him sprawled on the ground. As you finish calling 911, he tells you that he cannot move or feel his legs.
  • Your computer causes a short circuit overnight and you arrive at work to find that the building you leased has burned to the ground, destroying your office and its contents as well as those of four other businesses.

Now, reading through these scenarios, can you figure out which coverages are best for each situation? No? Well, worry not. Your licensed insurance professional most certainly can.

Your job is to remember that there are risks associated with any venture, and that your highest priority before you open is to make sure that you have the proper business insurances in place.

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.

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.

Insurance for Home-Based Businesses

Although many people believe that homeowner’s insurance will cover their home-based businesses, that sort of policy usually does not cover business losses.

Homeowner’s insurance policies are written specifically to protect the personal day-to-day running of your home, and most policies specifically exclude claims which pertain to the running of a business. They will frequently go a short way toward covering items which are related to your home-based business. For example, your homeowner’s insurance policy might cover your desk which is ruined in a fire or your computer which is stolen in a burglary, but anything more would likely be denied.

Other risks involved with operating a business whether home-based or not, need to be looked at. At the very least, a home based-business owner should consider purchasing a business liability insurance policy.  Such a policy will cover claims due to accident or negligence if another party claims bodily injury or damage to their property.

Depending on the type of business, it might be wise to explore the need for professional liability or E&O insurance.  Many home-based businesses starting out, including those belonging to accountants, consultants, or computer/web hosting companies should consider professional liability insurance. Professional liability insurance covers claims of malpractice, negligence, or improper advice given to a third party and will cover legal costs and awards which could cripple or put a small company out of business.

If your business is storing inventory, developing and manufacturing products, or has high end or expensive equipment or furnishings, you should definitely consider some form of commercial property insurance.  This property insurance covers a wide variety of losses and in the event of fire or other types of damage.  This type of insurance should be reviewed carefully with your licensed insurance professional.

As always, your licensed insurance professional will guide you in developing an insurance program for today and beyond.

Bed Bugs And General Liability Insurance

When growing up in a small, rural, Southern Plains town, my grandmother would come for a visit in the summer.  She had a strange saying to us when it was time for us to go to bed.  It was “sleep tight and don’t let the bed bugs bite” and she would chuckle.  I suppose because I did not know what that meant.  As I got older and putting my own children in bed I would always remember that phrase even though I never said it.  Today, however, because these critters are in the news, I now know what she really meant. 

 

Bed bugs were essentially extinct while I was growing up, but because of more extensive travel both in the U.S. and abroad, there is a resurgence of infestation even in the most exclusive locations.  Now the reason I am speaking of this is insurance companies are in a quandary as to how they should respond to the claims against the Commercial General Liability policy rising out of this hazard.   Regarding a 1st party (our insured ) claim, the policy specifically excludes damages to property from an infestation of insects or rodents.  However, the liability to a 3rd party is not so clear.  There is a duty to defend and maybe indemnify a 3rd party and there have been some very sizable awards from the courts. 

 

I recently watched a documentary about dogs being trained to sniff out these little creatures, and properly trained, are quite successful.  But this takes time, and training is expensive.  In the meantime, insurance companies are looking for ways to help insureds contain exposure.  If you have questions regarding your coverage, please talk with your agent or one of ours.

 

Commercial Insurance.Net, LLC Advisor is not an attorney, accountant or certified financial planner and makes no representations or warranties to that effect.  Always check with your chosen professional as to statements made in this blog for your particular situation.

 

Cyber Liability

There is a new risk in town.

 

And its’ name is Cyber Liability.  It goes along with identity theft of which we spoke a few days ago.  However, this is found in businesses.  The greatest threat is to smaller business operations. Cyber liability is when one breaches private information digitally. Not all commercial insurance policies cover this type of risk.  Most exclude coverage.  Cyber claims are generally before there is a specific loss, and mostly discovered by a third party reporting the breach to the company charged with the protection of private information.  Once the breach has been discovered is when costs began to incur, not necessarily when a client has suffered an actual loss.  We must ask how this happened.  What information has been compromised?  And how does this affect the client?  Are there any state or federal laws that must be considered?  Do we need to notify the client?  What remedies do we have available and at what cost? In addition, we must concentrate on stopping the breach and resolving that issue.

Will the General Liability policy have coverage for this?  Probably not.  General Liability coverage is designed to pay a third party after loss is suffered.  There may be some coverage under Professional Liability if not excluded.  Most technology and telecommunications companies have some coverage, but main street type, small business are not always covered.  Please contact your agent or one of ours to find out if you are protected.

 

Commercial Insurance.Net, LLC Advisor is not an attorney, accountant or certified financial planner and makes no representations or warranties to that effect.  Always check with your chosen professional as to statements made in this blog for your particular situation.