Accidents, illnesses, lawsuits… If you’re in business, you’re exposed. While the number of risks you’re exposed to is almost unlimited, you might only need a few basic coverages to start out.
Most small businesses insurance needs quickly extend beyond basic liability and commercial auto insurance. Certain jobs require specific coverages, employees need protection, and a number of risks fall outside the protection of basic liability coverage.
What is General Liability Insurance?
This insurance provides protection arising out of the legal liability a company has with regard to events that occur on their premises, during operations, and completed products. The three core coverage areas in a General Liability policy include:
Bodily Injury and Property DamageThis involves injury to people and/or their property caused by event related to your businessPersonal Injury and Advertising InjuryAffords protection against false arrest, imprisonment, malicious prosecution, wrongful eviction, and advertising programs that cause slander or libel, rights of privacy, or infringement of copyrightsMedical PaymentsBodily injury accidents regardless of fault that occur on the business premises or due to your business operations
Defense costs are paid by the insurance company and do not reduce the limit of your insurance coverage included in the policy.
What coverage amount should I consider for my company?
More and more companies are requiring vendors, sub contactors and leasees to carry a minimum of $1,000,000 in liability coverage per occurrence with $2,000,000 in General Aggregate. While, lower amounts are available the minimal cost savings and external requirements usually have companies selecting $1,000,000/$2,000,000 in liability coverage. Carriers usually limit the amount of liability coverage in a base policy to $2,000,000/$4,000,000. To get higher liability limits necessitates getting an Excess or Commercial Umbrella policy.
What Premium should I expect to pay for a Liability policy?
Most carriers now charge a minimum of $500 for a Commercial Liability policy. The rate you pay depends on a number of factors: 1) the class designation of your business, 2) total annual payroll and number of employees, 3) use of sub-contractors, 4) gross annual sales, and 5) premises type and location of business.
I’ve heard that my policy could be subject to annual audits that could impact my premium?
Yes, carriers often require companies to complete an annual audit questionnaire to determine if significant changes have occurred at a company that warrant changes to the premium charged. This could increase or decrease the amount of premium charge by the carrier. Thus, it is important to provide accurate information in the original policy to guard against very expensive increases. Most increases are due to strong growth in sales or hiring at a company. If this occurs, it is probably wise to contact your agent and make adjustments to the policy. Similarly, if major layoffs have happened or are anticipated you can lower your insurance costs by making adjustment to your policy.
My company hires a number of subcontractors throughout the year, does this impact my premium?
Yes, having sub-contractors usually increases the liability and the thus cost of your liability insurance. One way to minimize this cost is to require ALL of your subcontractors to provide you with a Certificate of Liability that they carry their own liability insurance. If they don’t have their own coverage you will have to assume the liability cost and increase your premiums accordingly.
Is it best to consider obtaining a Business Owner Policy (BOP) instead of just a General Liability policy?
Many times the answer to this is yes, if your business needs not only liability protect but coverage for business personal property and inventory. The BOP policy is a “package policy” that includes not only liability and property protection but also business interruption, inland marine, crime, limited business auto coverage and other industry specific coverage options. They usually have discounted rates because the coverages are bundled into one policy. One of the strong advantages of a BOP policy is the ability to “tailor” the coverages to fit the business insurance needs. BOPs, however, do not cover Professional Liability, complete commercial auto protection, worker’s compensation or health and disability insurance.
I just started my business will I be able to obtain insurance coverage?
Yes, but there might be a slight “experience penalty” charge. If you have three years of experience in the field of your business carriers usually will remove this penalty. What is important is you get coverage. Many states and jurisdictions require you have insurance coverage to start an operation. The same is usually mandated by a commercial landlord. Plus, if a fledgling company is without coverage and a major loss occurs that is a strong likelihood the business could not withstand the monetary and legal consequences.
Should I get Equipment Breakdown coverage for my company?
It is strongly recommended that companies include this coverage in their BOP policy and review if the amount of coverage provided in the base policy is sufficient for their company. This insurance provides protection against sudden and accidental breakdown of machinery or equipment, including computer systems and telephone/communication systems. Coverage usually includes reimbursement for property damage, expediting expenses and business interruption losses.
What is Commercial Crime coverage and what does it cover?
This critical coverage provides protection for money and securities, stock and fixtures against theft, burglary and robbery both on and off premises and from both employees and outsiders.
How do I determine how much my business property is worth?
Businesses have three options on how to determine the value of their property in determining the amount and cost of coverage. They are:
Actual Cash Value – The actual value of your property at the time of the loss, i.e., the Replacement cost of the item less depreciation. Thus, if you paid $1,000 for an item and it depreciated 70% you would get $300 in the settlement.Replacement Coverage – The cost of replacing a “like-item” without any depreciation. Thus, if it costs $1000 to replace an item that cost you $500 you would get $1000 in the settlement. Likewise, if it costs $1000 to replace an item with the same features that cost you $5000 five years ago you would get $1000 to purchase a like item.Agreed Amount – Art objects, antiques and very unique items are insured at an agreed amount between the policyholder and the carrier. An appraiser is usually used to determine the value of the item.
Should I consider getting Professional Liability Insurance?
When you operate a business where your expertise is paramount in why a customer/client would choose working with your company it probably wise to have Professional Liability Insurance. This specialty insurance coverage is a stand- alone policy not found in a BOP or General Liability policy that protects against potential lawsuits directed at a business owner. Professionals like lawyers, accountants, financial planners, insurance agents and real estate agents are expected have extensive knowledge or training in a particular area that could lead to “Errors & Omissions” in executing the duties they were hired to perform. If they fail to use the skills expected of them, they can be held responsible for any harm they cause to a person or business. An E&O policy protects against acts they could be held responsible for.
Do I need to have a commercial auto policy for my business?
If you have vehicles that are used mainly for the business you own, these vehicles should be titled in the company name and covered by a commercial auto policy. This policy will help protect the company and allows the company to include all the employees using a particular vehicle. A commercial policy also allow for coverage for different classification of vehicles not allowed on a personal auto policy. You should consult your insurance agent to determine if a commercial auto policy is right for your business or if an endorsement can be added to a personal auto policy.
Is business interruption insurance worthwhile?
Absolutely. Often times business owners do not take into account what happens in the event of a fire or other major disaster that closes down a business for an extended period of time. Damages to the business premises for all intents and purposes shut down the ability to earn income for the business. Without having business interruption insurance a business loses the ability to generate revenue and income.
Business interruption insurance compensates you for lost income because of having to vacate the premises for an extended period of time. This insurance covers the profits you would have earned based on historical records if the disaster had not occurred. It also covers operating expenses even though business activities cannot be performed by your company. It is important to provide coverage for an extended period of time to protect against the lengthy time to get up and running again.
When is it necessary to have Workers Compensation Insurance?
In most states, Workers Compensation insurance is required when you have one or more employees. Workers Compensation insurance pays for the rehabilitation, recovery and medical bills of employee work-related injuries. It also pays for lost time wages when the employee is unable to work because of the injury. The cost of Workers Compensation is based on these factors – the employee payroll, the number of employees, job classification of the employee, part-time versus full-time, classification of the business and the past loss experience of the company. There are some ways to lessen the cost of workers compensation insurance your insurance agent can assist you with.
What is Employment Practices Liability insurance?
Employment practices liability insurance (EPL) is coverage to protect against employee claims of sexual harassment, discrimination, wrongful termination, invasion of privacy, workplace grievances and other litigated issues. This is an ever increasing issue and one that every business should have included in their BOP policy or as a stand-alone policy. The cost to defend these claims is approaching $200,000 per claim with awards averaging over $250,000. Premiums for this coverage is low in comparison to the high cost of a successful claim made against a company.
Is special coverage for liquor liability necessary in today’s strict DUI environment?
There are many civil and legal responsibilities for any person or business that sells or furnishes alcohol to an individual. Any business that makes money selling alcoholic beverages (including beer and wine) requires specific insurance coverage for liquor liability. This can be added as an endorsement to an existing BOP policy or as a stand-alone policy. Three areas where liability coverage is provided where alcohol is served are:
Personally hosted parities – The liability here is provided as part of a homeowners, Condo or Tenant policy up to the liability limit of the policy.
Business (Office) Parties – The business and you personally would be covered under a General Liability or endorsement found in a BOP policy to the liability limit of the policy.
Special Events Liability – If you are hosting an event off-site you should have coverage in you General Liability or BOP policy. You will need to add the location as an Additional Insured to extend liability coverage to them. Check your policy to see if any restrictions apply.
Is my business a candidate for Cyber or Data Breach Liability Insurance?
Identity theft is becoming an ever-increasing problem for the business community. No matter the size of your company federal law require you to immediately notify every person affected by a data breach of information from your company records. You also need to pay for computer forensic services to identify the extent of the breach and make the necessary changes to repair and prevent another breach. You will also need to pay for all individual and class action lawsuits. In addition, public relations expenses to repair your company image will be incurred for a period of time.
Current General Liability and BOP policies do not cover the economic damages caused from the failure to protect personal information held by an insured. To fill this void carriers have recently introduced Cyber Protection policies and endorsements to BOPs to protect companies from the severe penalties and costs associated with a data breach. If your company keeps any sensitive records of clients or processes credit card payments it is a MUST to have Cyber/Data Breach Insurance.
This coverage protects against hacking, employee theft, computer hardware theft, employee deception and misrepresentation, improper disposal of date, software malware and many other computer related activities.