Business Insurance

Business insurers make use of some pretty arcane terms that only they (and some lawyers like me) understand. What business owner thinks of "personal and advertising injury" coverage when they want protection from trademark infringement claims? When you want to insure the business against any liability from rogue employees, you don't think of "employment practices liability" coverage. So, I have written this FAQ list to assist you in finding how to insure the most common elements in business using lay person terms. Here we ask the question: How do I Insure my Business'...

Answer:

AUTOMOBILES?

Automobiles and cars used in business must be covered by a commercial auto policy. Sometimes the commercial auto coverage can by combined in a business owner's policy or comprehensive commercial general liability policy. Before you purchase coverage or talk to your agent consider some points and gather some information. Finally, if you run a small business or use your personal automobile, you will still need the coverage and cannot rely on personal auto insurance.

BUILDINGS AND PROPERTY?

Buildings and property are covered by property and casualty insurance. Seems simple enough? These coverages are well named, but deceiving because there are many exceptions to what is a covered loss and what is not. Flooding is one example of a type of property damage to a building that is not covered without an endorsement or additional policy.

PRODUCT?

Product liability insurance covers your business for damages caused by a product manufactured, supplied or designed by the business. If your product is alcohol, then a liquor liability policy will protect your business from claims related to alcohol consumption by customers.

EMPLOYEES?

Employers must participate in state workers' compensation programs to cover employees if they are injured at work. Health insurance, health savings accounts, and Section 125 plans can offer health benefits to your employees.

Employees can be subjected to discriminatory or sexist acts by other employees or managers and you business can face liability from such claims. Employment practices liability coverage can protect the business from such claims.

OPERATIONS AND CASH FLOW?

Disasters can stop business operations. Business interruption coverage can pay for lost cash flow and return you to operational capacity.

CUSTOMERS AND OTHERS?

Protection from the claims of customers and others can be provided by a commercial general liability policy. This is the insurance most business owners think of when purchasing business insurance. Think of it as insurance against lawsuits.

OWNERS AND KEY PEOPLE?

Life and disability insurance can protect the owners and key people of a business. It can also be used to insure business continuity. If a partner is temporarily removed from practicing their profession, professional overhead expense coverage can assist the business until the partner returns.

TYPES OF BUSINESS INSURANCE

Business insurance is a broad description that can be broken down into a list of nine types of insurance policies and here I will briefly explain the coverage and expand on these as individual topics. For now, these are general descriptions so that we are talking about the same thing when I use these terms in later articles.

Property Insurance

Property insurance insures against loss or damage to the location of the business and its contents. It can also insure the property of others in your control when the loss occurs. Property insurance can be for a specific risk. For example, a fire insurance policy insures only against a fire loss to the location. A tornado is not a fire and, therefore, that loss would not be covered. The insured location can be owned, leased or rented.

Casualty Insurance

Some insurers will lump property and casualty insurance together and refer to the coverage as property and casualty insurance. In fact, packaged policies of property and casualty are often the best purchase a business owner can make. However, to have an understanding of the difference between the coverage, I will discuss this as a separate type of insurance. Casualty insurance insures against loss or damage to the business.

Liability Insurance

Liability insurance insures against liability legally imposed upon your business because of the negligence of the business or its employees. Put another way, it protects your business when the business is sued for negligence.

Commercial Auto

Your personal automobile policy does NOT cover vehicles used by your business. If your business uses vehicles or anything that is required to be titled by your state, then you need a commercial auto policy. Commercial auto coverage insures against property damage to vehicles and damage caused to others by those vehicles.

Workers Compensation

You will need to insure your employees against on-the-job injuries. Every state is different. But, most states have put into place some form of workers' compensation system. Workers' compensation is a system where the employee is not allowed, by statute, to sue their employer for on-the-job injuries; but, in return, the employer must participate in a system that provides nearly automatic payment to the employee in case of injury for medical bills and damages. There are many options for workers' compensation coverage. Some states allow an employer to opt-out of the system if the employer is self insured, some run the system through private insurers while others use state agencies.

Business Interruption

Business interruption insurance insures against loss or damage to the cash flow and profit of a business caused by the business being unable to operate because of interruption. The easiest example is to think about a critical piece of machinery being struck by lightning. The repairs to the machine may be covered by other coverage such as property or casualty insurance. But, if you can not make widgets for three months, than there is no replacement of that income without this coverage.

Health Insurance

To be competitive, most businesses need to offer their workers health insurance. This insurance offers a health coverage benefit to your employees (and you).

Life and Disability Insurance

Life and disability insurance protects the business against the death or disability of key employees. For example, one partner carries a life insurance policy naming the partnership as a beneficiary. If that partner dies, and the business has planned properly, the proceeds of the policy can be used by the business to buy out the share of the decedent's partnership interest from the estate.

 

Managing the risk your company faces is a constant effort. But, the first step is preparing to purchase insurance. The following is an outline of that process that will prove helpful.

1.     Learn About Different Types of Coverage
Take time to develop an understanding of the types of coverage available in order to discuss them with your insurance professional. You may not need to know the intricacies of any particular coverage; but, understanding, for example, that property insurance is necessary to protect a business location is a basic concept that goes a long way to making you an informed business owner.

2.     Analyze Your Business
Analyze your business to make an assessment of what coverage you will need now and make some educated guesses at what your business will need in the future. Sometimes the easiest way to do this is to speak with others in your industry. Prepare a  description of your business that you have written out so you can quickly interview different insurance professionals in seeking quotes for coverage.

3.     Choose an Insurance Professional
Much like an accountant or lawyer, your insurance professional should be someone with whom you plan to develop an ongoing relationship. Choosing an insurance professional and working with that professional is made easier when you have a clear understanding of your business and its direction as well as a general idea of what types of policies are available.Review Your Initial Business Insurance Plan Regularly
At the initial purchase, set a calendared date to review your business insurance plan with your insurance professional regularly. Things change in business. Commit yourself to monitor that change and review the need for more or less coverage on a regular and continuing basis. I would suggest this is done once every twelve months.

This site will provide you with information relevant to each one of these steps. These four steps are the building blocks to a successful business insurance plan.