Business insurance is a vital necessity for all businesses to protect the assets of the company against loss from liability judgments and loss to physical property caused by weather related, accident or criminal activity.  Business insurance can be highly complex and this information is intended only as an overview to allow the reader to achieve a very basic knowledge of insurance components.

Policies

Polices are a collections of forms which cover the terms and conditions, define the coverage and limits and indicate the costs and payment terms.  The primary policy used is the Small Business Owners Policy often referred to as a BOP.  For a larger or more specialized business, the agent may assemble a Package Policy where the various forms required may be provided by a number of insurers and in some cases the limits may be shared.  There also are special policies that are limited to a specified business type such as barbers and other professionals or a variety of contractors.

Coverage

[pullquote]Insurance is a vital necessity for all businesses.[/pullquote]The type, structure and size of each individual business will determine the coverage necessary to protect the business assets and meet requirements required by statute or contract.

Liability (non automobile)

General Liability

The primary coverage around which most policies are written.  General Liability Insurance provides coverage for injury you cause to another person’s body or property for which you are determined to be legally liable.

Professional Liability

[pullquote]Liability Coverage (non auto)

• General Liability
• Professional Liability
• Tenant Liability
• Employers Liability
• Other[/pullquote]

Professional liability is normally required in addition to general liability where the insured is in an occupation that provides services that require a special license, state certification or other educational requirements.  Examples would be doctors, nurses, pharmacists, barbers, accountants and lawyers.  The liability forms will vary by profession but may include special types such as:  Medical Malpractice or Errors and Omissions Coverage.  It is also common for these kinds of liability coverage to be purchased as a separate policy.  Frequently this type of coverage is offered through a trade association.

Tenant Liability

Liability for injuries caused through the ownership of property is normally the responsibility of the owner.  Some of the responsibility for the maintenance and upkeep of the property may be transferred to the lessee under the terms of the lease.  In that event, coverage for liability as a tenant will be required.

Employers Liability

Many policies exclude from General Liability, coverage for damages incurred in the course of managing employees.  Employers Liability coverage include such acts as discrimination and/or harassment.  Your agent can help determine if you or your company should have this coverage.

Other Liability Coverage

There are many other liability issues that may occur during the operation of your business.  Your agent can advise you on the business insurance need for this coverage including but not limited to:  Product Liability, Advertising (Slander or Liable), and Copyright Infringement.

Property Insurance

Building:  Coverage is necessary to protect the investment of the company and will be required if the property is mortgaged.  The structure is insured for damage caused by fire, wind, hail, vandalism and most other usual causes of loss.  Coverage for flood and earthquake are typically purchased separately.  Most policies have a number of maintenance requirements and exclusions, so be sure to review these with your agent.  The amount of coverage should be adequate to cover the estimated current replacement cost of the building, not what the original cost was or what it can be sold for.[pullquote]

Property Insurance

• Building
• Building Contents
• Property of Others
• Business Interruption
• Other[/pullquote]

Building Contents:  Coverage is for those items normally found within the building including machinery and equipment, furniture and fixtures, inventory and finished goods.  The amount of insurance should be determined by the cost to replace the items regardless of what they initially cost.

Property of Others:  Insurance is normally limited to property owned by the insured named in the contract.  Coverage can be written on non owned property that is in the custody, care and control of the insured at the time of loss as the result of a peril named in the contract.  An example would be clothing left at a dry cleaning establishment.  The limits would be determined based on the average replacement value on hand at a point in time.

Business Interruption:  When a covered loss occurs, the insurance company will pay up to the limits for the damaged property and work promptly to restore the business to operation.  In many cases, however, a business is forced to close until repairs are completed.  Unfortunately, even though there is no revenue, many expenses continue including the salaries of key employees.  Coverage may be purchased to offset these costs based on an estimate of what expenses would be expected to be ongoing.  This coverage comes into effect only when the original loss is covered by the policy.

Other Property:  There is coverage available for other types of property including computer media, and property stored offsite of the insured premises.  You should review these needs with your agent.

Automobile

Personal automobile policies normally provide coverage for cars or trucks used in the course of business by the owner of the vehicle.  Typically vehicles up to and including ¾ ton vans or trucks fall into this category.  When a business provides company owned vehicles driven by employees then a Commercial Auto Policy is required.  The coverage is the same as that carried on a personal policy including bodily injury, property damage and physical damage to the owned vehicle.  In addition, specific coverage required by the state such as Personal Injury Protection and Uninsured/Under Insured Motorist coverage will be included.  It is important to know that the insurers underwrite the commercial drivers named on these policies.  Thus, it is very important to be aware of and watch driving records for those employees using company vehicles.

Insurance for Employees

Workers Compensation

Coverage for injury/death of employees is universally required by all states.  In most states this is purchased from a Property and Casualty Company along with the other coverage for the business.  In a few instances, Workers Compensation is controlled by the state, as is the case in the state of Washington.  This coverage must be purchased directly from the state.  In some states both private and state workers compensation insurance are available.  Your agent can provide the necessary guidance.[pullquote]Employee Insurance

• Workers Comp
• Health & Accident [/pullquote]

Health and Accident

Employers can provide health and accident policies as a full paid benefit, a cost shared benefit or one where the employee covers the complete costs and the employer provides the administration of the plan.  As health costs have increased, it has become exceedingly difficult for small businesses to obtain health coverage at an affordable price.  Some organizations have set up Health Coverage Options where they bring together large numbers of small businesses and combine them into a large group for underwriting purposes.  This allows the risk to the insurance company to be spread over greater numbers and provides the economies of scale for administrative purposes.  These policies are offered by some trade associations and one of the major membership warehouse stores has been very successful in offering lower cost health policies to small business.  Business might also consider examining the Affordable Care Act (ACA also often known as Obamacare).  While companies with under 50 employees are not required to provide health insurance, the new law offers a number of options for companies and employees that may be worth considering.

Purchasing Insurance

Purchasing business insurance for your small business may sometimes appear intimidating but a professional insurance agent can help you determine exactly what coverage you require to protect your assets and help you determine what the limits should be so the protection is adequate to cover the cost of loss.  Look for agents who specialize in small business insurance and don’t be hesitant to “shop around” as premiums for business insurance vary significantly from company to company.  Ask for recommendations from other small business owners or your trade association may have a list of qualified agents that specialize in your industry.