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BUSINESS BASICS CHANNELS 
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Choosing Insurance Coverage Good insurance coverage is an important part of planning your business' success. When you take out insurance, you're insuring against things that can go wrong. The insurance company that accepts your policy is betting that things will go right. The reason that it works is that for most businesses, most of the time, things do go right.. If you have a casualty, though, your choices of insurance coverage and carrier can make the difference between losing the business, just scraping by or being able to do business as usual. Minimum Insurance Needs Your personal insurance needs are different from your business insurance needs, but in a small business your personal coverage will be linked to the business' survival. At a minimum, you need health insurance and disability insurance. Additional personal insurance needs may also include vehicle insurance, life insurance and homeowner's insurance, especially if your business is located in your home. However, these need to be coordinated with your business coverage because there may be overlaps between your personal use of your property and your business use of it. What are the basic insurance needs of all businesses? Business Property Insurance and Business Liabiltiy Insurance! Business property has two types of policies: building coverage and contents coverage. Business building coverage covers the structure of your place of business and includes the building, permanently installed equipment and fixtures. Contents coverage includes all property located in the building and used in your business. It may include property that you use at other locations if you are doing work there. If you lease your property, it will include coverage on improvements that you have made to the property but it will not insure the building itself. Pay special attention to whether your computers are covered. You may wish to buy a policy that covers not only the value of the computers but also covers getting data and software replaced in case of loss. How much coverage do you need? You should have enough insurance to replace the property so that you can get back into business. General liability coverage will pay for damage and injuries to your customers, tenants, delivery people and any others who might be hurt or have their property damaged while at your business. These could include injury, accident, defective products and other claims such as libel and false advertising. Make sure that you have at least a million dollars worth of liability coverage and make certain that your legal defense costs are included in the policy. Auto liability insurance covers damages suffered when your vehicle is involved in injury or property damage. Commercial coverage, which may cost significantly more than your personal vehicle insurance, is needed when vehicles are used in company business. Without it, your insurance company may refuse to cover incidents and leave you without any coverage. You'll want to consider adding the very affordable coverage for hired and non-owned autos which can cover your use of rental cars or employees running errands in their own vehicle. Your business is usually legally required to carry workers compensation insurance to cover your employees. To find out when you must do so, either check with your state or discuss it with your insurance salesperson. You will be charged per worker based on your payroll for them and also on the risk in your industry. You are required to carry part one of Worker's Compensation. The insurance will pay the worker when they are due benefits required by your state's workers compensation law. The law also bars your employees from seeking damages from you for the types of injuries that are covered, which provides them with income and protects you from lawsuits. You may wish to consider Employers Liability insurance. It will supplement your business' protection against claims that are not covered by Workers' Compensation. Additional Insurance For Your Business While a number of events that can cause property damage are included in your standard business property coverage, some are not. If you are in a flood plain, you will want to consider buying flood insurance. You will also want to consider the chances that your business will experience an earthquake when making a decision on that coverage. You may wish to consider business interruption insurance. Most businesses do not have it but it will cover the expenses involved after your property has been damaged and until it is repaired and you can reopen for business. Even with other coverage, a number of businesses that suffer damage are not able to reopen. This will cover rent, payroll, taxes and some policies will keep your income going as well while you rebuild. If you do buy business interruption insurance, look into buying an "extra expense" rider which will compensate you for decreased income after you reopen. If you're closed down for any significant amount of time, it will take time to build your business back to the level it was at originally. Professional liability insurance protects you if a client gets bad results from following your advice and sues for damages. It's inexpensive and covers professional negligence or errors and omissions. Perhaps the most important coverage here is the payment for your legal counsel--if you buy this policy, make sure that legal costs are covered. Because even if a case has no merit, you lose both time and money in defending yourself. Directors and Officers coverage protects your board members and company officers in lawsuits where misrepresentation or mismanagement is alleged. It also covers errors or omissions (but not negligence) in disclosing financial information. Employment practices liability covers your defense and damages up to the policy limit when you are challenged for ending employment, sexual harassment, discrimination for age, sex, ethnicity, religion, pregnancy or disabilities. These claims are usually not covered under general liability and may or may not be covered under workers compensation. You may wish to consider "umbrella" coverage which provide much higher protection against verdicts in a lawsuit. Umbrellas provide additional coverage once your basic insurance policy's limits have been reached. It is affordable because insurers rarely have to make payments but, particularly if you are involved in consumer products where juries may make large awards, it can protect your assets. Key Partner insurance is worth considering if it would be a hardship on your business to pay off a partner's heirs should your partner die. This is life insurance that gets paid into the business and it can also be used for the expenses involved in replacing a major player in your company. It's A Wrap Insurance agents are paid on commission, so that if you spend more they'll make more. However, a good agent will look at establishing a long term relationship with you and understands that there are tradeoffs between insurance coverage and your ability to pay for other business essentials. You may wish to consider joining an association of businesses to get a better break on group purchasing power. One thing to bear in mind about filing claims is that the more claims you file, the riskier your business is rated by your insurance carrier. So if you file a number of claims, your insurance carrier will raise your rates. It's often wise to cover minor problems yourself and only submit when you need major coverage. -Cynthia Nemeth-Johannes |
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