Here are some of the risks that should be protected by insurance:
Business Property Insurance
Property insurance should include a broad form of coverage to protect you from a wide variety of losses. Your insurance should include:
- Buildings: Coverage would be required here if you own the building your business occupies. In the event you lease premises, your landlord should provide this coverage.
- Business personal property includes your tables, desks, chairs and equipment. Also, you will want to include the tenant's improvements you might make to leased premises. An example would be a room divider you add, or a display case, or a custom built counter that forms part of reception area for your clients.
- Loss of Income
- Earthquake
- Flood (which may or may not be available)
Keep in mind that an all-risk policy can be structured to cover all of your equipment, including computer hardware and software, plus your valuable records. A properly written policy will include loss of income that might result from breakdowns, as well as loss of income from other hazards that would temporarily close down your business.
Liability Insurance
A Comprehensive General Liability (CGL) policy is designed to provide coverage to third parties for the following:
- Personal and Advertising Injury
- Fire Legal Liability, which is often mandatory if you lease your premises. This protects you in the event your negligence results in damage or loss to your landlord's property. For example: you mistakenly leave a small electric space heater running and go home for the evening. During the night, the heater shorts and starts a fire, resulting in fire and smoke damage to your landlord's building. In this case, the negligent act of leaving the space heater on caused the loss. This is where Fire Legal Liability protects your investment.
- Products and Completed Operations
- Medical Expense or Medical Payments
- General Liability for your premises. The best illustration is the common "tripping over the torn carpet, resulting in an injury" loss.
Worker's Compensation Insurance
If your business has employees, Worker's Compensation insurance will be mandatory. Startup operations typically find that the State Compensation Fund can accommodate their needs. As the business grows, you can then "shop" for better prices for the coverage. In addition, some worker's compensation insurers provide additional services such as risk management and loss control services that may be beneficial to your business operation. These services are typically helpful in holding down claim costs over the long term. Do not confuse risk management with your taking part of the risk. The insurance company should assume 100% of the worker's compensation insurance risks.
Other Insurance
Auto coverage for company vehicles. (Liability, Comprehensive, Collision and Uninsured/Underinsured Motorists.)
Health insurance plans tailored to fit the size of your business. This coverage will help give you an edge when recruiting good employees.
Here's a type of insurance you might not think about: when you're not there-and when only your answers will do, it is good idea to have a guide prepared for your employees to know what-to-do, who-to-call and where-to-find-it information so as to maintain the momentum of your business.
Excess Liability Coverage
These are liability limits available over and above the maximum limit your carrier of choice may write. They can be accomplished in two ways:
Excess limits can typically be added at extra cost to the underlying package policy in "chunks" of $500,000 or $1 million dollar layers sometimes up to $5 million.
Purchasing what is called a "commercial umbrella." This can typically provide excess coverage over and above most underlying package policies, including the business policy, business auto, and worker's compensation.
Life Insurance
As mentioned earlier, if you have a partner, your buy-sell agreement can be funded by life insurance in the event of the death of a partner. As your business grows this insurance can be increased.
