How Liability Insurance Will Protect Your Business

Liability insurance will cover losses and damages to third parties as a result of a claim against your business.  For example, if a suit is brought against your business for personal injuries or property damages, the cost of defending and resolution would be covered by your business’s Liability insurance.  Normally, a general Liability policy will cover you and your business for most common risks, such as a customer or vendor being hurt on your premises, on a jobsite, or even in transit.

There are also other types of liability coverage available for business that is generally not covered in the standard general liability insurance policy. These include:

Errors and Omissions Insurance also known as “E & O Insurance” covers unintentional mistakes or failures which result in an injury to another party.  The error must be unintentional and not malicious.  For example, a realtor misdates a form or fills it out wrong causing an injury would normally be covered.  Another example may be an insurance agent who files an application late.

Malpractice Insurance or Professional Liability Insurance will cover an injury to a third party when it is found that performance falls below the level of professional standard in a particular industry or profession.  Malpractice Insurance will pay to defense costs and judgments.  Malpractice insurance is available to Doctors, Dentists, Accountants, Architects and other professionals.

Automobile Insurance covers cars, trucks, vans and trailers used by your business.  The coverage will reimburse damage to your vehicles subject to a deductible and also cover your drivers should they cause damage to another party.

Directors’ and Officers Liability Insurance is generally purchased by non-profit and corporations to cover its directors and officers against law suits brought against the company.

Finally, we are left with Workers’ Compensation insurance. This does contain liability coverage within the scope being protected against claims.

Workers’ Compensation insurance covers you and your business for the on the job injury to an employee.   Most states require a business to carry workers’ compensation insurance.  This policy also generally protects your company having a negligence suit against your company as a result of an on the job injury.

Obviously, careful review of your business and industry as well as a commercial insurance agent will help you in determining what liability coverage choices are right for your business.

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Insurance Every Business Owner Should Consider

General Liability Insurance: Every business, even if home-based, needs to have  liability insurance.

The policy provides both defense and damages if you, your employees or your products or services cause or claimed to have caused property damage or bodily injury to a third party.  Corporate structure does not protect your business, only personal assets. In some cases, the corporate structure can be pierced.

Property Insurance:  If you own the building or have business, personal property, including office equipment, computers, inventory or tools you should consider purchasing a policy that will protect you if you have a fire, vandalism, theft, etc. If you lease or rent space, you will still need this protection as most leases don’t cover your losses in the event of damage. You may also want to consider business interruption insurance added to the policy to protect your income if the business is unable to operate.

Worker’s Compensation: This type of insurance provides wage replacement and medical benefits to those who are injured while working. In exchange for these benefits, the employee gives up his rights to sue the employer. As a business owner, it is very important to have worker’s compensation insurance because it protects yourself and your company from legal complications. State laws vary, but most require you to have workers compensation if you have W2 employees.  Penalties for non-compliance can be extremely high.

Professional Liability Insurance: this type of insurance is also known as Errors and Omissions Insurance. The insurance provides defense and damages for failure to or claims of improperly performing professional services.  General liability insurance does not provide this protection, so it is important to understand the difference.   Professional liability insurance is applicable for any professional firm including lawyers, accountants, consultants, notaries, real estate agents, insurance agents, hair salons and tech firms to name a few.

Cyber insurance or Data Breach:  Should a business store sensitive or non-public information about employees or clients on their computers, servers or even in paper files they are responsible for protecting that information.  If a breach occurs either electronically or from a paper file this type policy will provide protection against the loss or claims of damages.

In addition, every business owner should protect their personal assets with homeowner’s or renter’s insurance, personal auto insurance, life insurance, health insurance, and disability insurance. It makes sense to have an umbrella policy in place as well to further protect your assets.

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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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Explaining Commercial Insurance As Simply As Possible

Insurance can be overwhelming to say the least.  Commercial insurance covers a wide range of issues, coverage options, and exclusions.  Let’s look at trying to keep it simple to look how your commercial insurance works.

How does my business insure:

Property and Buildings

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.  Don’t assume homeowner’s insurance will protect a home based or part time home business.

Auto and Truck

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.  Check with your commercial insurance broker to determine your needs.

Workers Compensation

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.  Work with your commercial insurance broker to determine what coverage is mandatory.

Ask your insurance agent/broker about other options available for your business.  There are a great number of coverage options available to protect your business.  Discuss with your agent about what risks your company faces while conducting your day to day business.

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Keep Your Commercial Insurance Up To Date!

As your business grows, make sure your commercial insurance coverage is up to date.

You went into business knowing you had a good thing going.  You’ve worked hard and things are really starting to fall into place. Business is good, growing, and you continue to exceed expectations and your plan. Your banker is ecstatic, your employees are excited, and it’s a fun time to be in business.  Have you let your commercial insurance broker know how well your business is doing?

When a business first opens, a somewhat standard business insurance package is put into place.  Depending on the business, some type of general liability insurance and business property insurance is put into place.  Many times, the coverage is adequate, and sometimes lean to help keep premiums down.  Now, back to the business description noted above, the first key is new employees.

As soon as an employee is hired, with rare exception, you are required to have workers compensation insurance.  Besides the employee benefit, with workers compensation coverage, the employee cannot sue the business for being injured on the job in most cases.  Imagine what could happen if it wasn’t in place!

As your business grows, your business insurance needs change.  The business insurance package you put into place is not static any more than the any other changes in your business.  There is nothing worse than growing your business, seeing great success, and having one incident cause financial crisis by being under insured, or, worse yet, have no coverage for that event.  Let’s look at how to avoid that happening in your business.

Again, with the quick example above, business is thriving.  It’s probably time to up the coverage limits, perhaps even write new insurance.  As your business grows, it may be time to look at business interruption insurance which may also be known as loss of income.  It’s quite possible you need mechanical breakdown insurance, or now should add some additional disaster insurance such as flood insurance if your area warrants it.

Talk with your commercial insurance broker to determine if product liability insurance may be needed.  Do you need to add professional liability insurance?  What coverage may fit now that didn’t early on? Do you need to raise your general liability limits?  Is it time for commercial vehicle coverage?

The rewards of growing a business are numerous.  Don’t risk it by not growing and evaluating your risk exposure along the way.  Make time to speak with your commercial insurance agent at length at least once a year, perhaps more if needed while growing your business.

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Confused About Worker’s Compensation?

Simple explanation of worker’s compensation insurance:

We will review worker’s compensation insurance and how it works in a simple fashion.
Every state except Texas requires you to carry worker’s compensation insurance in some form.  Even though it is not required in Texas, it is possible that your customers or vendors will require your business carry it as a requirement to do business with them.  That policy has become quite common in Texas.

There are two reasons an employer has to carry worker’s compensation insurance, also known as worker’s comp.

The first is to insure workers that are hurt while working will be taken of financially.  Worker’s compensation insurance will pay the medical costs and a portion of their wages while recovering from the injury.

The second reason is to protect the employer (the business) from being sued by the injured employee.  It is important to have a good understanding of worker’s compensation in your state as requirements and coverage differs in every state. Generally, there is a waiting period in each state which can vary depending on the state.  This is to reduce frivolous claims.

Worker’s compensation insurance and the laws governing it utilize a no fault concept.  It doesn’t matter who is at fault, the employer or employee.  There are some instances where fault could come into play, such as being under the influence of illegal drugs or alcohol.  It also is possible for suits to be filed even though a claim is submitted through worker’s compensation.

Make sure to discuss and review coverage and options with your commercial insurance broker.

It should be pointed out; if you work as an independent contractor you also should carry worker’s compensation insurance for your protection.   Review with your agent to determine what is needed for worker’s compensation insurance in your business, even if you are an independent contractor.

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Business Insurance Should Be Simple

Any new entrepreneur considering starting a business needs to look at business insurance. Commercial business insurance covers a broad spectrum of protection that includes your property, you and your employees, and your liability. It’s normal to have questions regarding the type of coverage your business requires. The ultimate goal is to make sure you are never under-insured or exposed in the event of an incident or disaster while not having double coverage or unnecessary insurance.

Business property insurance will cover losses to your building, and the property inside of it. Computers and phone systems, furniture, finished goods, as well as carpeting, lighting fixtures and supplies will be covered. There are two options, either actual cash value, which is purchase price less depreciation, or the replacement cost of the item. Discuss these differences in more detail with your agent to determine what is best in your situation.

Almost all businesses are required to have workers compensation insurance. This covers the employee from lost wages while protecting the business against being sued by the employee. More specific information is available from the insurance department of your state government and your commercial insurance agent.

General business liability insurance must also be in place to protect the business and the owner against lawsuits. A general liability policy will cover most situations that may arise. There are specific types of liability coverage for risks not covered within the general liability policy. An example would be realtor liability insurance which is a separate coverage generally taken out by real estate brokers and agents. Ask your commercial insurance agent what else you should be looking at for specialized coverage.

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