Small BusinessThe Importance, Need and Why

Business InsurancePresented by:

Terina Lancaster – The Shults Insurance Agency

Business Insurance: An Overview

If you own a business then you should have business insurance. The importance of business insurance is to protect your business from any losses that may occur.

You first want to look at an insurance plan that best fits your needs, by looking at the risks involved in your business and how the coverage could help you in case of an unfortunate incident should take place. The purpose of business insurance is to safeguard you from burning a hole in your pocket and put you back to whole. There are several types of insurance which come under this category.

Business insurance provides a safety net for your company (large or small). When you think about growing, keep in mind that new types of insurance will be required, but they will all increase your safety net. It may seem like a lot of additional time and effort, at first, but mental knowledge of your safety net will allow you to make more sound, responsible decisions for growing your company.

General Liability Insurance

Every business, including a home-based business, should have liability insurance. General Liability provides for both defense and damages if you, your employee(s), your products or services cause or are alleged to have caused Bodily Injury or Property Damage to a third party.

General Liability Insurance

The Purpose of General Liability insurance (also known as Commercial General Business Liability) protects a company’s assets and pays for obligations – medical costs,

for example –if someone gets hurt on your property or when there are property damages or injuries caused by you or your employees. Liability insurance covers the cost of your legal defense and any settlement or award should you be successfully sued. Typically these include compensatory damages, nonmonetary losses suffered by the injured party, and punitive damages.

General liability insurance can also protect you against any liability as a tenant if you cause damage to a property that you rent, such as by fire or other covered loss.

It can also cover claims of false or misleading advertising, including libel, slander, and copyright infringement.

Property Insurance

Every business which has a standard building, needs to have a property insurance coverage. This type of business insurance covers damage or loss to the company’s property, which resulted due to fire, vandalism, wind, hail or even theft. The building, documents, money, lost income and equipment fall under the category of company property. In case the business is home-based, a similar plan can be customized to meet the needs of the business, instead of opting for a home owner’s insurance which wouldn’t cover particular losses like business interruptions or lost income.

Business owner’s policy (BOP)

A business owner policy package all required coverage a business owner would need. Often, BOP’s will include business interruption insurance, property insurance, vehicle coverage, liability insurance, and crime insurance . Based on your company’s specific needs, you can alter what is included in a BOP. Typically, a business owner will save money by choosing a BOP because the bundle of services often costs less than the total cost of all the individual coverage’s.

Commercial Auto Insurance

Commercial auto insurance protects a company’s vehicles. You can protect vehicles that carry employees, products or equipment. With commercial auto insurance you can insure your work cars, SUVs, vans and trucks from damage and collisions. If you do not have company vehicles, but employees drive their own cars on company business you should have non-owned auto liability to protect the company in case the employee does not have insurance or has inadequate coverage. Many times the non-owned can be added to the BOP policy.

Work Comp

The purpose of Work Comp is to provide insurance to employees who are injured while on the job. This type of insurance will provide wage replacement and medical benefits to those who are injured while working. In exchange for these benefits, the employee gives up his/her right to sue his/her employer for the incident. 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 will vary, but all require you to have workers compensation if you have W2 employees. Penalties for non-compliance can be very stiff.

Disability Insurance

New York is one of a handful of states that require employers to provide disability benefits coverage to employees for an off-the-job injury or illness. Coverage for disability benefits can be obtained through a disability benefits insurance carrier who is authorized by the New York State Workers' Compensation Board to write such policies.

Disability benefits are temporary cash benefits paid to an eligible wage earner, when he/she is disabled by an off the job injury or illness. The Disability Benefits Law (Article 9 of the WCL) provides weekly cash benefits to replace, in part, wages lost due to injuries or illnesses that do not arise out of or in the course of employment.

Professional Liability Insurance

Professional Liability insurance is also known as Errors and Omissions Insurance. The policy provides defense and damages for failure to or improperly rendering professional services. Your general liability policy 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 technology providers to name a few..

Directors and Officers Insurance

Directors and Officers insurance protects the directors and officers of a company against their actions that affect the profitability or operations of the company. If a director or officer of your company, as a direct result of their actions on the job, finds him or herself in a legal situation, this type of insurance can cover costs or damages lost as a result of a lawsuit.

Mistakes to Avoid While Purchasing Business Insurance Every business, whether small, medium or large, is exposed to risks. You can rule out these risks by purchasing business insurance which covers for the loss of revenue. You should, however, choose the right insurance which is suitable for your business.

Right insurance protects your finances:

• Irrespective of the size and type, every business has the possibility of facing risks; they can either be man-made or natural. Natural risks include floods, heavy rains, violent winds (storm, gales, hurricanes and the like), lightning and the manmade risks include vandalism, theft, accidents at workplace resulting in casualty, loss of business data, inadvertent leakage of data and so on.

• To choose the most suitable insurance for your business, taking into account the nature of your business is very important. While purchasing business insurance, you need to consider things like products/services you offer, the customer base, availability of raw materials, whether the product needs new design/method, or any other issue that may potentially be a risk factor for your business.

Avoid the following mistakes while purchasing the insurance.

Underestimating the importance of business insurance:

Every business has its own risks. You should not underestimate the risks your business may face. However small the risk is, you should purchase the right type of insurance for your business. Purchase the insurance even if your company finances are good enough to withstand the risk.

Getting attracted to low priced policies:

Don’t mistake low priced policies for cost effective policies. The low premium might be because the risk it covers is low. If this is the case, it might be troublesome to you in the event the expenses of compensation exceed your policy coverage. You need to take an insurance coverage that is, sufficiently more than the probable claim for compensation.

Under or over insuring:

Avoid under insurance, it may lead to considerable loss to your business. This is because under-insurance cannot cover all the expenses that you have to bear in the event of claim. Purchase an insurance coverage that is adequate for you and your business.

Over insurance will also not help you. It leads to more expenses. At times you might be tempted to buy business insurance that seems less expensive. But, in reality the insurance coverage that is less expensive may not cover the type of risk that your business may face.

Buying insurance from brokers/agents with no/less knowledge:

Purchasing insurance is not an easy task. It requires great deal of research. Choose a broker/agent who specialize in business insurance. Ensure you choose the one that has a good track-record in claims settlement and servicing the users.

Consider purchasing insurance from a broker. Look for an insurance broker that has the experience, knowledge, a good reputation, and who will provide you the best service at optimal costs. You should avoid brokers/agents with lower credibility.