The Fifth Grade Explanation Of Business Insurance

I had a college professor who always said; explain it so a fifth grader can understand.  In the world of insurance, everything sounds really complicated.  Then, along came Jeff Foxworthy’s game show, “So you think you’re smarter than a 5th grader” as icing on the cake.  So, instead of being really complicated and covering every nuance, let’s break down business insurance in its simplest forms so a fifth grader (and the rest of us) can understand.

How does my business insure:

Buildings and Property

Property and Casualty insurance covers building and property.  As simple as that seems, there are a number of losses that aren’t covered, such as flooding as one example.  Just because your business is in leased space and not owned also does not mean you can go without property and casualty insurance.

Vehicles

A commercial auto insurance policy will cover your business vehicles and their drivers.  Again, while seeming quite simple, many business owners assume a variety of risks by using their cars and assuming a personal auto policy will cover any risk.  Sometimes, the auto coverage can be combined with Property and Casualty in a Business Owner’s Policy.

Employees

Every business must have workers compensation in place to protect them if an employee is injured on the job.  Some states also require additional coverage be provided.  Meet with your licensed insurance professional to determine what coverage is mandatory.

There are a number of additional insurances available to business.  Ask your insurance agent/broker about options available for your business.  Have a frank discussion about what risks your company faces while conducting your day to day business.

Liability

Small business liability insurance will protect against lawsuits, property damage or personal injury to a third party.  It will pay for legal fees, settlements and judgments subject to the deductible.

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Commercial Insurance 101

The success of any business depends on a vision, work ethic, and building a dream; commercial insurance makes sure that all the effort and money you have invested in your business is covered in case a natural or financial disaster strikes. Most businesses need to purchase at least the following four types of insurance:

Property Insurance covers you if the property you use in your business is lost or damaged by common perils such as fire or theft. Property insurance covers not just a building or structure, but also what insurers call business personal property, like furnishings.

Liability Insurance covers you in the event that someone claims your business caused them harm. Your liability insurance pays damages to third parties resulting from bodily injury or property damage for which your business is legally liable, up to the policy limits, as well as legal fees associated with the claim. It also covers any medical bills for any people injured by your business.

Commercial Vehicle Insurance provides coverage for autos owned by the business. This insurance pays any costs to third parties resulting from bodily injury or property damage for which your business or employees are found legally liable, up to the policy limits. Depending on what kind of coverage you buy, the insurance may pay to repair or replace your vehicle because of damage resulting from accidents, theft, flooding, and other events.

Workers Compensation Insurance or workers comp, as this coverage is commonly known, pays for medical care and replaces a portion of lost wages for an employee who is injured in the course of employment, regardless of who was at fault for the injury. It also helps protect the business from a lawsuit from the injured employee.

There is additional coverage to be considered in addition to the basics highlighted above, there are various other policies needed by some businesses, including the following:

Business Catastrophe Liability or Umbrella policies provide coverage over and above your other liability coverage limits. They are designed to protect against unusually high losses. For the typical business, the umbrella policy would provide protection over and above general liability and auto liability policies.

Professional Liability Insurance policies are designed to meet specific needs of individual businesses specialized for liability policies needed by some businesses. They include Errors and Omissions Insurance (E&O)/Professional Liability Insurance, Employment Practices Liability Insurance (EPLI) and Directors and Officers Liability Insurance (D&O).

Terrorism Insurance is offered to owners of commercial property as mandated by the Terrorism Risk Insurance Act, enacted by Congress in 2002. Insurance losses attributed to terrorist acts under these commercial policies are insured by private insurers and reinsured by the federal government.

Navigating the world of commercial insurance and determining your businesses’s needs can be tricky. Be sure that you engage a reliable insurance professional when the time comes to purchase or re-evaluate your commercial insurance policies.

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The Facts: Liability Insurance

I’m confused about my liability insurance, doesn’t it cover everything?

As a rule of thumb, a general liability policy will go a long way in reducing the risk exposure of your business. General liability insurance is needed by any prudent business owner working with customers and the general public.  This insurance is put in place to protect the company in the event someone claims they were injured or their property damaged due to the fault of your business.  General liability insurance will generally cover bodily injury, property damage, personal injury and even advertising injury. This usually includes claims of copyright infringement, slander, and defamation of character.  Often it will also cover claims of invasion of privacy.

Because of this coverage, it is easy to see why most business owners believe a general liability policy is the only insurance needed for liability protection.  However, let’s look at what is not covered in most general liability policies.  Claims of professional negligence and failure to perform the duties standard to your profession are not covered by general liability insurance.  In other words, if a client or customer claims the work you performed caused them pain and suffering, this would not be covered by your general liability insurance policy.

Mistakes happen; sometimes expectations are muddled, no matter what, you as the business owner may find yourself wrapped up in a serious lawsuit brought by a client unhappy with your business.

Lawsuits of this type have crippled or actually closed many businesses.  For many professional services such as accountants, lawyers, realtors, and medical practices, the liability exposure to errors and omissions can be far greater than general liability risks.  For many businesses, professional liability insurance is an important piece of the total business insurance package.

Professional liability insurance will cover legal costs and any settlement or award up to the limit of the policy. This allows the business to focus on business and not just on litigation which may be taking place.

Speak with your licensed insurance professional and determine if professional liability insurance needs to be part of business insurance package.  Take the time to understand the different liability risks associated with your business and general business risks and design the right coverage to reduce those risks.  Your state department of insurance can also be a valuable resource in understanding professional liability insurance.

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Liability Insurance for Medical Professionals

Professional liability insurance or E & O insurance is probably best known for doctors, dentists and medical practitioners.  Most people recognize it as ‘malpractice’ insurance.

In this economy, even medical practitioners and office managers will often ask if they can reduce or eliminate their E & O insurance.  The answer is always a resounding ‘NO!’

Almost all states require health care providers to have liability insurance.  However, even in states that don’t, providers need to provide proof of coverage to see patients in a hospital or participate in many networks.  Very few physicians and providers choose to go ‘bare’ in this day and litigious climate.  The risk is just too high.  Medical malpractice suits generally have far greater legal costs, settlements, and awards.

In today’s world, any time, for any situation, a patient or family member can file a complaint.  No matter the finding, these cases can take years to litigate and court costs and attorney fees can be a staggering amount.  So can the awards of damages if the doctor is actually found to be negligent.  Professional liability insurance will relieve the financial pressure and strain from a malpractice lawsuit.

Professional liability insurance will cover costs and fees associated with defending the charges as well as awards subject to deductibles and limits.  More important, the physician and the practice can focus on patient care and caseload and not the legal issue at hand.

Owning and carrying professional liability insurance for the healthcare professional and practice doesn’t make it more or less likely to be sued, but it does allow you to be prepared should someone sue. In addition, should you contract out professional services charged by your practice, require your sub-contractors provide proof of insurance.

Get in touch with your licensed insurance professional and review your professional liability insurance policy.  Make sure to ask questions and understand the coverage and specifics of the policy in place.  Insure you review this coverage at least annually or if anything changes within your current practice.

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Business Insurance Isn’t Complicated

Business insurance isn’t complicated; break it down by these categories.

Often, we hear things like “business insurance is complicated and difficult to understand” or that it seems like many policies may do the same things in terms of coverage. Let’s break down business insurance in its simplest forms.

Buildings and Property

Property and Casualty insurance covers building and property. As simple as that seems, there are a number of losses that aren’t covered, such as flooding as one example. Just because your business is in leased space and not owned also does not mean you can go without property and casualty insurance. So, in addition, it’s possible you need to consider certain types of disaster insurance, like flood insurance. Ask your licensed insurance professional their recommendations and why.

Employees

Every business must have workers compensation in place to protect them if an employee is injured on the job. Some states also require disability coverage be provided. Meet with your licensed insurance professional to determine what coverage is mandatory.

There are a number of additional insurances available to business. Ask your insurance agent/broker about options available for your business. Have a frank discussion about what risks your company faces while conducting your day to day business.

Benefits like health and life insurance are not mandatory, but are put into place to attract and keep qualified employees.

Liability Insurance

Your general liability coverage will include legal fees and damages in a covered claim and/or lawsuit. Bodily injury, property damage, personal injury, and general damages are normally covered. Professional liability however, is written under a separate policy and is often referred to as Errors and Omissions insurance.

Vehicles

A commercial auto insurance policy will cover your business vehicles and their drivers. Again, while seeming quite simple, many business owners assume a variety of risks by using their cars and assuming a personal auto policy will cover any risk. Sometimes, the auto coverage can be combined with Property and Casualty in a Business Owner’s Policy.

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Use this as a guideline in reviewing options with your licensed insurance professional.

Starting A New Business

 

Do you want to start your own business?  Most of us dream of being our own boss and setting our own pay scale, but a limited number follow through with a plan.  For those of you who do however, I want to talk about your insurance needs to consider into that plan.  Whether you are starting out in your home, or an office location, the first need of protection is liability for your business.  Liability is made up of “bodily injury” claims and “property damage” claims.   

These are claims brought about by a 3rd party, not you, the business owner.  The claim is alleged to have been caused by your business as to injuries or damages to property of others. 

 

The next insurance coverage you want to consider is for your business personal property.  In other words, what equipment does your business own for operational and office purposes.  How much coverage would you need in case of specific perils, such as fire, wind, theft, vandalism, etc?  And how much of a deductible you can afford if these items were lost due to a covered peril?  Talk with your agent or one of ours to help in your decisions.

Next would be the vehicles used in your business.  There is a wide range of coverage available for both required and optional insurance.  Please talk with your agent regarding both liability and physical damage options for the type of business you are in.

Then consider protecting yourself.  Management is the key to success, so please look at not only life and health insurance, but disability income insurance.  This can help your business keep running if you can’t.  Finally, consider Workers Compensation.  This is a requirement in most states, but as an owner, it may be possible to opt out of the plan. Please consult your agent or call one of ours to discuss your particular insurance need.

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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.

 

 

 

 

Heavy Construction Risk Management

The government issued Stimulus Package appears to have been beneficial for infrastructure construction companies.  More heavy equipment contractors have been bidding on jobs which have, for the most part, gone to a traditionally, smaller contractor.  With the increased competition, comes broader exposures and increased specialty underwriting.  Many commercial insurance agencies have turned to hiring risk management teams to help their clients, and companies recognized, underwrite and rate risks.  By working together, contractors and insurance companies have been able to reduce the number and severity of claims, especially in a down economy.

 

Safety has and always is the number one goal in evaluating risk, but equipment maintenance is also a priority in reducing workers compensation claims.  While larger construction companies can afford to hire a risk manager, smaller ones cannot, therefore a commercial agency experienced in the construction industry is a must.  Call one of ours to learn how we can help.

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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.