The necessity of insurance cannot be overstated, nor can the risk of paying for insurance you do not need. It is highly advised that you seek the opinion of an independent business insurance agent. Remember to SHOP! Compare notes and pricing with three or four separate agents. An insurance agent will provide you with many options you may not need. Your circumstance will be unique, and you must carefully analyze each insurance component to ensure complete coverage.
Whatever your ultimate insurance package is, it should be reviewed every six months. Your company might evolve quickly, particularly in the initial several years, and so can your insurance requirements. Keep your program current by contacting your agent and examining your coverage. Make any required modifications.
INSURANCE FOR LIABILITY
This is the most significant aspect of your insurance plan. Liability insurance protects you against possible lawsuits.
Losses incurred due to harm or damage to individuals or their property. Remember some of the significant monetary wins you've heard about as a consequence of litigation involving the liability of some type or another, and you'll appreciate the value of this insurance. Your insurance agent can explain the many forms of liability insurance coverage available. If you have complete general insurance, ensure it does not cover stuff you do not need. Pay for just the coverage you need. For example, your company may not need product liability insurance.
Refrain from mixing company liability coverage with personal liability coverage, which you need. A business-generated obligation will not be covered by your private insurance. To be sure, double-check.
Compare the prices of various levels of coverage. In certain instances, a $2 million coverage may cost slightly more than a $1 million policy. Most types of insurance coverage benefit from economies of scale. That is, at a certain amount, more insurance becomes highly cost-effective.
KEY PERSON COVERAGE
This insurance is especially vital for sole proprietorships and partnerships because losing one person due to sickness, accident, or death may leave the firm inoperable or severely restrict its operations. This insurance, although not cheap, may give protection in this scenario. Others associated with your firm may also need critical person insurance.
SGC was a tiny company with three partners: a software developer, a marketer, and a general manager. Their offering was sophisticated computer software utilized by aerospace companies. Al, the programmer, was injured in a severe car accident and became utterly incapacitated, causing SGC to lose its programming capabilities. The issue was that Al's computer software was the company's primary product. Modifications to meet the client proved unfeasible, and the time required to train a new programmer was exorbitant. Due to this issue, SGC lost a significant amount of business. Critical person insurance might have compensated for these losses.
DISABILITY COVERAGE
Whether or not you choose critical person insurance, you should have disability insurance as a company owner. This insurance, coupled with the business interruption insurance outlined below, can assist in guaranteeing that your company can continue to run if you cannot work. Your disability insurance policy must give enough coverage. Particular attention should be paid to the definition of "disability," the time delay before benefits begin, when coverage ends, and inflation adjustments.
INSURANCE AGAINST FIRE
Fire insurance is complex, as is any insurance, and you should understand what is and is not covered. A standard fire insurance policy, for example, covers the loss of items but not your losses from being out of business for two months while your facility is rebuilt. Fire insurance is required whether you operate from home or have a separate building. It would help if you talked to your agent about complete coverage. Take the time to learn the specifics. Will the contents, for example, be insured for their replacement value or their actual worth at the time of loss?
Consider a co-insurance provision, which will significantly lower the policy cost. This implies that the insurance company will require you to have insurance covering a certain proportion of the value of your property. (This is usually about 85%.) With this provision, you must assess coverage regularly to ensure you always reach the minimum percentage. No loss will be compensated, regardless of its worth if this minimum is not fulfilled.
Your current homeowner's coverage may not cover the commercial property if you work from home. In this scenario, request that your insurance agent add a home-office rider to your policy.
VEHICLE INSURANCE
You most likely already have car insurance, but it may not cover the commercial usage of your vehicle. Please make sure that it does.
INSURANCE FOR WORKERS' COMPENSATION
If you decide to recruit workers, you will be required by most states to provide worker's compensation coverage. The cost of this insurance varies greatly and is determined by the kind of service performed and your accident history. It would help to correctly categorize your personnel to get the lowest insurance premiums. Cooperate with your insurance agent.
INSURANCE AGAINST BUSINESS INTERRUPTION
This protects against income loss as a consequence of property damage. For example, this insurance might be utilized if you could not run your company while repairs were performed because of a fire or lost a significant supplier. The insurance may cover wages, taxes, and lost earnings.
CREDIT INSURED
This compensates for extraordinary losses caused by nonpayment of accounts receivables beyond a specific level. As with any policy, you must completely grasp the terms, so speak with your insurance agent. American Credit Indemnity, Baltimore, MD (800) 879 1224, is one of the leading suppliers of this coverage.
INSURANCE FOR BURGLARY/ROBBERY/THEFT
Comprehensive insurance is available to protect against damage caused by various hazards, including loss caused by your own personnel. Make sure you understand what needs to be covered.
RENTAL PROTECTION
This coverage covers the expense of renting additional premises if your property is damaged to the point that activities cannot continue at your usual location.
DISABILITY COVERAGE
If you become disabled and cannot work, this insurance will give you a monthly sum somewhat less than your present wage. The cost of this coverage varies considerably based on your career, pay level when benefits begin, and when they stop. Benefits are tax-free only if you pay the premiums, not your employer.
This list could continue since insurance can be purchased for almost every risk you can think of... assuming you can afford the cost! Use the following checklist when evaluating your insurance coverage:
CHECKLIST FOR INSURANCE COVERAGE:
- Can you afford to lose money?
- Does federal, state, or local legislation demand coverage?
- Which EXACT goods are covered by the policy?
- Should objects be insured for replacement cost or original value?
- What EXACT products are EXCLUDED from the policy?
- Do you have appropriate coverage if there is a co-insurance clause?
- Have you selected deductibles carefully to save costs?
- Are any of the policies you're considering duplicating or overlapping?
- Do you need insurance, such as flood or earthquake insurance, depending on your area?
- To examine your insurance policies, use the checklist below:
CHECKLIST FOR INSURANCE PLANS:
Instead of going to individual insurance companies, use an independent insurance agent. Make sure that the agent shops for your insurance.
Speak with and get quotes from at least THREE agents before selecting the best one for you.
- If feasible, choose money-saving comprehensive insurance.
- Conduct regular (every six months) assessments of your insurance program.
- Professionally analyze company assets to establish coverage requirements.
- Ensure that existing personal insurance coverage includes business-related activities, and add riders or obtain additional coverage as needed.
