If you own your own business or are a partner in one, you’re probably already familiar with risk. After all, few things in life are riskier than launching and running your own small business. Part of the risk of any small business is the loss of critical tools and property or liability to others—either of which can cause loss of income or even force you to close your doors.
Large companies employ full-time risk managers to keep their risk-taking to a minimum. But chances are that as a small-business operator, you are your company’s risk manager, along with its personnel director, office manager and possibly the entire staff all rolled into one.
While juggling all the jobs that need to get done to make your firm profitable operation, you may already be asking yourself, “Who has time to think about Business Insurance?” You do! Keeping risks and losses to a minimum is a cornerstone of business success, especially for small businesses.
I’m just getting my business started. Do I need insurance right away?
Yes, because the chance that you could suffer a loss begins with the first day of business. You can’t get help after the fact. If you suffer a loss and have no insurance or have improper or insufficient coverage, there is very little, if anything, your insurance agent can do to help you. You must be prepared for the risks that are inherent in any business and the losses, sometimes catastrophic, that they can cause. Also, many states and local jurisdictions require that businesses be insured to begin operating. And if you rent space for your business, your landlord probably requires that you be adequately insured as well.
I don’t have any major business assets. Why do I need Business Insurance?
Every business has some property. And, in essence, your business is your property. Just like your home and your car, your business needs to be protected from loss, damage and liability. In addition, your business is your source of income, so you need protection from the potential loss of that income. Generally, there are two types of insurance—property and liability. Property insurance covers damage to or loss of the policyholder’s property. And if somebody sued for damages caused by you or your possessions (other than a vehicle covered by your insurance policy), the cost of the suit—both defending it and settling it if necessary—would be covered by your liability insurance.
Is Business Insurance coverage different for different businesses?
It can be. Many small businesses are now insured under package policies that cover the major property and liability exposures as well as loss of income. A common package policy used by many small businesses is called the Businessowners Policy (BOP). Generally, these package policies provide the small-business owner more complete coverage at a lower price than separate policies for each type of insurance needed. Your Trusted Choice® insurance professional can help you decide which policy or policies are right for your business. Additional coverage for property, liability or perils or conditions otherwise excluded (e.g., flood protection) can be purchased as endorsements to a standard policy or as separate policies. Because businesses vary, it is impossible to have a standard policy to cover all contingencies. Also, some businesses, regardless of their size, do not fit the profile of a standard businessowners policy. For example, restaurants, wholesalers and garages have special exposures that are not met in the standard businessowners policy. Your insurance agent can advise you of the best policy (or policies) to protect you and your business.
What types of property insurance should I consider buying?
The best thing to do is to take a complete inventory of all your business property, determine its value and decide if each item is worth insuring. Then check to see that the items on the inventory list are included in the basic business property policy and covered for the correct amount. If not, ask your agent about the cost of purchasing additional coverage to meet your needs. You also need to consider your business situation. Are you planning a major expansion? Does your inventory have a decidedly peak season (like a toy store in December)? Or does it fluctuate throughout the year (like a clothing store)? Is your liability limit high enough in light of the new job contract you just signed? Business policies are designed to be added to fluctuate to meet your needs. Be sure to discuss changes to your business with your agent so that he or she can be sure your policy still provides adequate coverage.
Everybody seems to be suing everybody else these days. What if someone sues my business?
No business can afford to be unprepared for a lawsuit. Liability insurance protects your business assets when the business is sued for something the business did (or failed to do) that contributed to injury or property damage to someone else. Liability coverage extends not only to paying damages but also to the attorneys’ fees and other costs involved in defending against the lawsuit—whether valid or not. The standard businessowners policy provides liability coverage, as does a separate policy known as a commercial general liability (CGL) insurance policy. Generally, commercial liability insurance, whether purchased in a separate policy or as part of a standard businessowners policy, will cover bodily injury, property damage, personal injury or advertising injury. The medical expenses of a person or persons (other than employees) injured at the business or as a direct result of the operations of the business are also typically covered.Usually excluded from both types of liability insurance policies are suits by customers against a business for nonperformance of a contract and by employees charging wrongful termination or racial or gender discrimination or harassment. Many other exclusions, from use of autos to pollution liability, are included, so it is important to carefully review the policy. Check with your Trusted Choice® insurance professional about the best liability protection covering all types of situations that may arise in your business.
What about the cars and truck that I have in my business? Is the coverage like what I have on my personal car?
Yes, the coverages are similar and can be purchased to insure vehicles owned or leased by your business. In addition, your business can be protected against claims arising from the use of vehicles owned by your employees. Be sure to review your auto exposures with your Trusted Choice® insurance professional.
Will I need to protect my employees in the event they are injured on the job?
Yes, and in most states there are legal requirements that must be met, and for which you may be responsible. State laws vary, but most states require that you carry some form of workers’ compensation insurance. This protects the employee and also offers you the business owner a degree of immunity from lawsuit by an injured employee.
I work out of my home. Will my Home Insurance cover my business?
It will only offer protection on a very limited basis. Loss of business property is usually reimbursed only for very small limits. Even if your business is a sideline such as a craft studio, these limits may be too low to cover all the equipment and materials you have accumulated. It’s also important to know that no business liability coverage is included in a standard homeowners policy. Your insurance agent can help you ascertain what, if any, additional coverage you need. This additional coverage may be added to your homeowners policy or found in a separate commercial policy.
Can I do anything to lower my Business Insurance premiums?
Remember that all insurance premiums are based on the risks involved. The insurance company evaluates the situation to determine the risks—or potential for losses—and bases its rates on the results. Therefore, deliberate steps you take to lower your risks not only can help safeguard your business but also may make you eligible for lower insurance rates. Consider these steps:
Maintain adequate lighting throughout your business premises.
Keep electrical wiring, stairways, carpeting, flooring, elevators and escalators in good repair.
Install a sprinkler system, smoke and fire alarms and adequate security devices.
Keep only a small amount of cash in the cash register.
Keep good records of inventory, accounts receivable, equipment purchases and the like. Consider keeping a second set of records off-site, such as with your accountant, insurance agent or at home.
Make sure your employees have good driving records.
Make sure your employees know how to lift properly and use all necessary safety equipment, such as goggles, gloves and respirators.
Consider using the services of a risk manager. An outside consultant can advise you of any safety or environmental regulations you may have over looked or not been aware of and talk to your employees about safety practices.
You may also wish to raise your deductible where appropriate to lower your insurance premiums. How high to raise the deductible should be governed by how much you can afford to pay out of pocket. Be careful not to raise it so high that you cannot cover it should a loss occur.
Finally, make sure your agent is familiar with your business and the risks inherent in it. He or she should be able to advise you on risk management techniques and their benefits to both you and the insurer.
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