Every person setting up a business will work with several key partners-a CPA, a corporate counsel and a lending institution. What is missing is an important partner-an insurance professional who can help protect a business from financial risks.
When you write or review your business plan, include your insurance partner from the beginning, as your other partners will expect you to mitigate your financial risks with appropriate insurance. They base their decisions and assistance on this protection.
Coverage to Consider
Remember, the lowest cost is not always the right cost; not all policies are the same, so getting the coverage you need should be your first priority. Listed below are some general categories of coverage to consider for your business:
1. Property Insurance: This covers your buildings, furniture, fixtures, computers and other equipment necessary to operate your office, plant or facility.
There are many endorsements available to tailor the coverage to your unique needs, including business income and extra expense, ordinance and law, flood, earthquake, extra debris removal and mechanical breakdown.
2. General Liability: This coverage provides protection for bodily injury or property damage claims arising from your business activities. There are many endorsements (the addition, expansion or deletion of coverage) available depending on your specific business needs.
3. Commercial Automobile: This provides coverage for bodily injury and property damage to others as well as comprehensive and collision for your own vehicles. In every state except NH, coverage is mandatory.
4. Workers' Compensation: This coverage protects your employees who suffer workplace injuries by providing wage and medical coverage. Coverage is mandatory in all states where you conduct business. Workers' Compensation carriers and the IRS are on the lookout for 1099 fraud-companies that incorrectly identify employees as independent contractors. Your insurance partner can offer advice to keep the boundaries clear.
5. Commercial Umbrella Liability: This coverage provides additional limits of liability to protect your company that are beyond the coverage provided through commercial auto and general liability.
6. Professional Liability: This is an area of specialty coverage that protects businesses such as CPAs, doctors, lawyers, architects, engineers, design/build, computer specialists, and insurance agents by providing errors and omission protection.
7. Life Insurance: Coverage to protect your family as well as your business in the event of your death or the death of an important employee. It is common for bonding companies or lending institutions to require Key Man Life Insurance that provides funding to replace a key position when there is a death to ensure business continuity.
8. Personal Coverage: Each business person(s) needs to review his or her own coverage to make sure they have adequate coverage on their home, personal liability, auto liability and umbrella liability. You need to make sure there are no gaps between your commercial insurances and personal insurances, especially in cases where commercial vehicles or property are being used for personal purposes or vice versa.
9. Inland or Ocean Marine: Refers to how an item moves from place to place-either on land or water. Do you own or operate heavy equipment? Use common carriers such as trucks, railway or air to move your products? Do you have care, custody or control over goods of others? Do you own boats, yachts or barges? Do you have a new building under construction? There are many policies available to protect against these types of exposures.
10. Aircraft Liability: If you own, lease, rent or share any type of aircraft that is used for your company or at your disposal for business, and it is not a common carrier, you need to have the right policy.
11. Health, Life, Disability: These should be carried for yourself and your employees.
12. Specialty Coverage, including:
Directors & Officers Liability: Provides protection from claims brought by shareholders, competitors or others.
Cyber-Liability: Companies using the Internet to conduct business, especially accepting credit cards and holding confidential records, face increased risk. This insurance protects against claims brought as a result of breaches and hacking.
Employment Practices Liability: Protects against claims related to employment practices, including harassment, discrimination, wrongful termination, or retaliation claims by your employees or third parties.
Fiduciary Liability: Protection for the fiduciary and anyone acting in a similar capacity when choosing your benefits.
Crime Coverage: Allows companies to recover financial losses that are the result of employee dishonesty, computer fraud, forgery, or third party crime.
Pollution Liability: Provides coverage specific to your business to protect your potential exposure from environmental issues.
Product Recall: This is important coverage for manufacturing or distribution businesses, as it covers the potential expenses involved in a product recall due to defects.
13. Bonding: Many businesses, besides contractors, have needs for bonding, including construction bonds, payment, probate, court, sales tax or ERISA bonds, to name a few. An insurance professional can discuss other coverage options that might be appropriate. As your business changes, review your insurance program with your insurance partner. You may need to make adjustments to your insurance program, which might affect the cost of the coverage.
If your business is expanding to other states or countries, your insurance carrier might not be licensed to cover you in other locations. Or such a move may require new forms of coverage. For example, if you're setting up an operation in Florida, you will need insurance that covers the cost of damages from hurricanes. It is important to make sure your insurance program evolves with your business, so keep lines of communication open with your insurance partner.
Susan Siegel, CPCU, is an account executive with The Rowley Agency Inc. in Concord. She can be reached at 800-238-3840, 603-224-2562, or ssiegel@rowleyagency.com.
Current Issue - April 2024