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.

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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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Home-Based Business Insurance

Tom Carver was always worried driving to shows and events.  As the owner and creative artist of Northwood’s Impressions, he often had thousands and thousands of dollars of merchandise and equipment set up and left unattended at exhibition halls and other venues. It wasn’t as much slow traffic and sales, as it was if someone stole the property of worse, got injured from a tool or display.

Tom didn’t have business insurance and knew he was risking a big loss or even a lawsuit.  “I have about 70% of my inventory with me and some very, very expensive tools which I used to create more products and as an attraction to my display, losing that would financially ruin my company.”

Tom is not alone, it’s estimated that 60-65% of all home based businesses lack adequate business insurance covered.  Tom’s worries finally made him contact a business insurance agent and get coverage in place.

One reason many businesses fail to get proper coverage is assuming their homeowner’s policy will cover a loss.

Unfortunately, most homeowner’s policies cover no, or minimal damages to business related property and claims.

So, how does a home based entrepreneur protect their assets?  First, depending on the size and type of business, check to see if you can add a rider to your existing homeowner’s policy. This type of rider can offer some protection to a solo business operator with minimal equipment and inventory.  If you need more coverage, look to add an In-Home Business Policy.

An in-home policy covers a broader spectrum of contingencies, including loss of critical documents or theft of funds being taken to the bank for deposit. An in-home policy, issued by a home insurer or a specialty firm, usually is a plan against injury or theft covering up to three employees with a higher limit than the rider discussed above.  It’s quite possible that your business needs more coverage than these options.  It’s time to look at a Business Owner’s policy.

Claims usually covered by this type of plan include damage to or loss of business equipment and other assets, liability for customer injuries, loss of critical records, malpractice or professional liability claims, and loss of income or a business interruption in the case of a power outage or a natural disaster. Such a policy might also protect you when driving a personal vehicle for business purposes.  A commercial insurance agent can provide this type of plan.

Getting the proper coverage for you home based business isn’t difficult.  Not having it can be a financial catastrophe.

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Insurance For Your Home Office

Many people assume that if they are working from home, their homeowner’s insurance covers everything. Wrong!  Your homeowner’s policy is just that, a homeowner’s policy.  Even if you operate a basket or craft business from you home, your homeowner’s will cover minimal if any losses to business assets.  In this economy, more people then are starting home businesses looking to generate additional income.

Once you have a small business in operation, even before making your first sale, you have greatly increased your risk.  Suppose you are starting a home based business and have inventory stored in basement, garage, or additional room in your home.

Most homeowner’s policies have limited if any coverage to protect those business assets.  What would happen to your start up business if you had to replace the entire inventory a second time before generating a penny in revenue?  What would the impact be financially on you and your family?

The same goes for your vehicles if using them for your new business.  What could happen if you were to injure a third party and their vehicle or other property?

Again, your personal coverage may offer limited or worse yet, no coverage.  Then, the injured party may go after your assets such as your home, which you claim is the office or address of your business and therefore, even though your homeowners doesn’t recognize liability, a judge in fact just might.

You need to understand the liability risk you assume in starting and operating a home office or business.  Do you have employees? Some home offices and home based businesses do.  Before hiring one single part-time employee, you must determine if worker’s compensation insurance is needed.

It is far simpler to contact a licensed insurance professional, and make business insurance a part of your initial start up cost.

Discuss with your insurance professional all aspects of your business model and follow the recommendations to protect not only your business assets, but your personal assets too.  You’re working from home, starting a new business venture, congratulations.  Let’s make sure you are covered all around.

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Does Homeowner’s Insurance Cover Home-Based Business?

Won’t my homeowner’s insurance cover my home based business?

Contrary to popular belief and what some feel should be included in homeowner’s policies, they generally do not cover business losses.  Homeowner’s insurance policies are written to protect the personal and day to day use of your home.  Many policies will specifically exclude coverage as it pertains to conducting business and will only go so far in covering anything related to a home based business.

It’s important to understand the risk involved with operating a business, regardless of home based or not.  If nothing else, a home based business owner should consider purchasing a business liability insurance policy.  This insurance will cover claims due to accident or negligence if another party claims injury either bodily or to their property.

Depending on the type of business, it may make sense to explore the need for professional liability or errors and omissions insurance.  A number of businesses which may be home based starting out like an accountant, consultant, or computer/web hosting company should consider professional liability insurance.  This insurance covers claims of malpractice, negligence, or improper advice given to a third party.  This insurance 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 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.

If your business has employees, then workers compensation insurance is probably required.  Again, your licensed insurance professional will guide you in developing an insurance program for today and beyond.

Home-Based Day Care Center and Insurance

Does a home based day care center need business insurance?

The economy is tough right now. Many two income families have found cut backs and job lay offs having a serious impact on their financial situation. As a result, many women (yes, this is a woman-dominated industry) have started a day care in their home.

They’ve done this for a variety of reasons but essentially it is to supplement earnings and reduce their expenses. A huge mistake made by many of these new entrepreneurs is assuming their homeowners insurance will cover any risks from the day care.

In states where day care businesses must be licensed, proof of insurance is generally required for the license. However, some states don’t require licensing, and others have a size requirement which allow many day care businesses to operate unlicensed.

Anyone operating a daycare business is exposing themselves to huge risk. An accident, no matter its unintentional, exposes you to great loss. If you are found guilty or negligent, you can be held personally responsible for all legal fees and judgments. Settling this type of judgment can put a huge burden on you, your business, and your family. In fact, it could cost the day care operator everything, including the family home and savings.

Many companies provide daycare (sometimes called child care) insurance. The biggest component is the Liability aspect of the coverage. This Liability coverage will protect your business even in the vent you are found negligent and responsible for damages or loss. Liability insurance will cover legal fees and defense costs as well as any settlements or awards up to the policy limit.

Many daycare policies offer an abuse and sexual molestation as optional coverage. The reality of today’s world makes this coverage option worth taking a hard look at.

The most important recommendation we can make if you operate a daycare in your home or elsewhere to review coverage and risk exposure with a licensed insurance professional. Don’t make the mistake of assuming your homeowner’s policy will cover you.

Don’t expose yourself, the family home, and peace of mind by ignoring the fact that you are running a business which needs its own insurance coverage.

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Day Care Insurance

Many households keep other people’s children in their care while others go off to work or run errands.  Often they do this in exchange for other services and do not charge a fee.  So is this a home business?  Many insurance companies and courts believe it is, therefore the average homeowner policy will not cover any loss involving injury or property damage to someone under this “business exposure”.

 

There are some “Home Business” endorsements available through some homeowner policies, for day care.  But one needs to have a good understanding of this limited endorsement to the homeowner policy.  Many caregivers do not have a business policy covering injuries to a child, or to a parent regarding home day care due to either the lack of understanding or the lack of money to cover the business exposure properly.  Commercial insurance policies cover day care facilities but want to know this truly is a full time business entity and not a part-time hobby.  Taking care of other’s children opens a new set of exposures a homeowner policy cannot provide coverage for.  Commercial day care coverage is available, but companies want to know this is a fully staffed and trained business.  Please contact your agent or one of ours to discover if your business has the coverage you expect.

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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.

Home Based Business Insurance

Do I need commercial insurance for my home business?

 

Many people operate a business from home and often ask this question.  My answer is yes.  But there may be several ways to do this.  How many hours you spend working at your business, or how much money you make does not necessarily make the difference in the need for business insurance.. 

Operations of a home based business create risk and exposures of several types.  There is the possibility of fire, or theft to your tools of the trade.  It may be a computer or literally tools to do the job.  If you depend on a homeowner policy to pay, you will find business tools to be limited and if something happens to them while you are away from home, they are limited further.  Generally away from home means limited to $250.  And there is no premise liability or medical coverage even on premise for your business operations.  This is insurance to help protect your business in negligence or “slip and falls” in which your business may become legally liable.  This insurance will also provide the cost of defense, should your business become sued.

Please check with your homeowner insurance agent to see if your business is eligible for an “Incidental Business Endorsement”.  This is an attachment applied to your homeowner policy and the least expensive but also difficult to qualify.  A few companies may offer an In-Home Business Owners Policy and there is the Business

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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.