Business Insurance Basics
To help ensure the health of your business, you will likely need
to secure insurance coverage to protect you against numerous potential
losses. Examples of such losses include the following:
• Injury that your employees sustain on the job
• Bodily injury or property damage that you or your employees
inflict on others or their property
• Professional judgement errors made by you or your employees
that result in damage to others
• Business-related, automobile accidents occurring on the job
• Vandalism to or theft of your business property
• Fire, wind, or water damage to your building or other business
property
• Claims against you for wrongful termination, sexual harassment,
or discrimination
• Untimely death of a key employee
• Loss of income due to temporary business shut downs
If you have additional questions about these or other potential
business losses or available coverage, feel free to call us for
more information.
Coverage Considerations
Information regarding several common business coverage considerations
follows:
• What is employment practices liability insurance? 
• What does a "business owner’s policy" cover?
• Do I need workers compensation insurance?
• Do I need commercial auto insurance?
• Do I need professional liability insurance?
• Do I need business interruption insurance?
• Can I insure the life of a key employee?
If the information that you need is not available here, feel free
to call us regarding your particular concerns.
What is employment practices liability insurance (EPLI)?
EPLI covers businesses against claims by workers that their legal
rights as employees of the company have been violated.
The number of lawsuits filed by employees against their employers
has been rising. While most suits are filed against large corporations,
no company is immune to such lawsuits. Recognizing that smaller
companies now need this kind of protection, some insurers provide
this coverage as an endorsement to their Businessowners Policy (BOP).
An endorsement changes the terms and conditions of the policy. Other
companies offer EPLI as a stand-alone coverage.
EPLI provides protection against many kinds of employee lawsuits,
including claims of:
• Sexual harassment
• Discrimination
• Wrongful termination
• Breach of employment contract
• Negligent evaluation
• Failure to employ or promote
• Wrongful discipline
• Deprivation of career opportunity
• Wrongful infliction of emotional distress
• Mismanagement of employee benefit plans
The cost of EPLI coverage depends on your type of business, the
number of employees you have and various risk factors such as whether
your company has been sued over employment practices in the past.
The policies will reimburse your company against the costs of defending
a lawsuit in court and for judgments and settlements. The policy
covers legal costs, whether your company wins or loses the suit.
Policies also typically do not pay for punitive damages or civil
and criminal penalties. Liabilities covered by other insurance policies
such as workers compensation are excluded from EPLI policies.
To prevent employee lawsuits, educate your managers and employees
so that you minimize problems in the first place:
• Create effective hiring and screening programs to avoid
discrimination in hiring.
• Post corporate policies throughout the workplace and place
them in employee handbooks so policies are clear to everyone.
• Show employees what steps to take if they are the object
of sexual harassment or discrimination by a supervisor. Make sure
supervisors know where the company stands on what behaviors are
not permissible.
• Document everything that occurs and the steps your company
is taking to prevent and solve employee disputes.
To locate an insurance company that specializes in EPLI, go to http://www.roughnotes.com
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What does a businessowners policy cover?
Insurance companies selling business insurance offer policies that
combine protection from all major property and liability risks in
one package. (They also sell coverages separately.) One package
purchased by small and mid-sized businesses is the businessowners
policy (BOP). Package policies are created for businesses that generally
face the same kind and degree of risk. Larger companies might purchase
a commercial package policy or customize their policies to meet
the special risks they face.
BOPs include:
1. Property insurance for buildings and contents owned by the company
-- there are two different forms, standard and special, which provides
more comprehensive coverage.
2. Business interruption insurance, which covers the loss of income
resulting from a fire or other catastrophe that disrupts the operation
of the business. It can also include the extra expense of operating
out of a temporary location.
3. Liability protection, which covers your company's legal responsibility
for the harm it may cause to others. This harm is a result of things
that you and your employees do or fail to do in your business operations
that may cause bodily injury or property damage due to defective
products, faulty installations and errors in services provided.
BOPs do NOT cover professional liability, auto insurance, worker's
compensation or health and disability insurance. You'll need separate
insurance policies to cover professional services, vehicles and
your employees.
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Do I need workers compensation insurance?
Employers have a legal responsibility to their employees to make
the workplace safe. However, accidents happen even when every reasonable
safety measure has been taken.
To protect employers from lawsuits resulting from workplace accidents
and to provide medical care and compensation for lost income to
employees hurt in workplace accidents, in almost every state, businesses
are required to buy workers compensation insurance. Workers compensation
insurance covers workers injured on the job, whether they're hurt
on the workplace premises or elsewhere, or in auto accidents while
on business. It also covers work-related illnesses.
Workers compensation provides payments to injured workers, without
regard to who was at fault in the accident, for time lost from work
and for medical and rehabilitiation services. It also provides death
benefits to surviving spouses and dependents.
Each state has different laws governing the amount and duration
of lost income benefits, the provision of medical and rehabilitation
services and how the system is administered. For example, in most
states there are regulations that cover whether the worker or employer
can choose the doctor who treats the injuries and how disputes about
benefits are resolved.
Workers compensation insurance must be bought as a separate policy.
Although in-home business and businessowners policies (BOPs) are
sold as package policies, they don't include coverage for workers'
injuries.
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Do I need a commercial auto insurance policy?
As a businessowner, you need the same kinds of insurance coverages
for the car you use in your business as you do for a car used for
personal travel -- liability, collision and comprehensive, medical
payments (known as personal injury protection in some states) and
coverage for uninsured motorists. In fact, many business people
use the same vehicle for both business and pleasure. If the vehicle
is owned by the business, make sure the name of the business appears
on the policy as the "principal insured" rather than your
name. This will avoid possible confusion in the event that you need
to file a claim or a claim is filed against you.
Whether you need to buy a business auto insurance policy will depend
on the kind of driving you do. A good insurance agent will ask you
many details about how you use vehicles in your business, who will
be driving them and whether employees, if you have them, are likely
to be driving their own cars for your business.
While the major coverages are the same, a business auto policy differs
from a personal auto policy in many technical respects. Ask your
insurance agent to explain all the differences and options.
If you have a personal umbrella liability policy, there's generally
an exclusion for business-related liability. Make sure you have
sufficient auto liability coverage.
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Do I need professional liability insurance?
Professionals that operate their own businesses need professional
liability insurance in addition to an in-home business or businessowners
policy. This protects them against financial losses from lawsuits
filed against them by their clients.
Professionals are expected to have extensive technical knowledge
or training in their particular area of expertise. They are also
expected to perform the services for which they were hired, according
to the standards of conduct in their profession. If they fail to
use the degree of skill expected of them, they can be held responsible
in a court of law for any harm they cause to another person or business.
When liability is limited to acts of negligence, professional liability
insurance may be called "errors and omissions" liability.
Professional liability insurance is a specialty coverage. Professional
liability coverage is not provided under homeowners endorsements,
in-home business policies or businessowners policies (BOPs).
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Do I need business interruption insurance?
Business interruption insurance can be as vital to your survival
as a business as fire insurance. Most people would never consider
opening a business without buying insurance to cover damage due
to fire and windstorms. But too many small businessowners fail to
think about how they would manage if a fire or other disaster damaged
their business premises so that they were temporarily unusable.
Business interruption coverage is not sold separately. It is added
to a property insurance policy or included in a package policy.
A business that has to close down completely while the premises
are being repaired may lose out to competitors. A quick resumption
of business after a disaster is essential.
1. Business interruption insurance compensates you for lost income
if your company has to vacate the premises due to disaster-related
damage that is covered under your property insurance policy, such
as a fire. Business interruption insurance covers the profits you
would have earned, based on your financial records, had the disaster
not occurred. The policy also covers operating expenses like electricity,
that continue even though business activities have come to a temporary
halt.
2. Make sure the policy limits are sufficient to cover your company
for more than a few days. After a major disaster, it can take more
time than many people anticipate to get the business back on track.
There is generally a 48-hour waiting period before business interruption
coverage kicks in.
3. The price of the policy is related to the risk of a fire or other
disaster damaging your premises. All other things being equal, the
price would probably be higher for a restaurant than a real estate
agency, for example, because of the greater risk of fire. Also,
a real estate agency can easily operate out of another location.
Extra Expenses Insurance
Extra expense insurance reimburses your company for a reasonable
sum of money that it spends, over and above normal operating expenses,
to avoid having to shut down during the restoration period. Usually
extra expenses will be paid if they help to decrease business interruption
costs. In some instances, extra expense insurance alone may provide
sufficient coverage, without the purchase of business interruption
insurance.
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Can I insure the life of a key employee?
The loss of a key person can be a major blow to a small business
if that person is the key contact for customers and suppliers and
the management of the business. Loss of the key person may also
make the running of the business less efficient and result in a
loss of capital.
Losses caused by the death of a key employee are insurable. Such
policies will compensate the business against significant losses
that result from that person's death or disability. The amount and
cost of insurance needed for a particular business depends on the
situation and the age, health and role of the key employee.
Key employee life insurance pays a death benefit to the company
when the key employee dies. The policy is normally owned by the
company, which pays the premiums and is the beneficary. Contact
an insurance agent or broker whose specializes in key employee insurance
for more on how much it may cost for your company.
To locate an insurance company that specializes in key employee
life insurance, go to http://www.roughnotes.com/
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Call Hartley Insurance for help with this important insurance coverage.
(208) 322-3473
Keeping Costs Down
Below you will find several suggestions for keeping your insurance
costs down.
Shop around
Shopping your insurance may save you significant numbers of
premium dollars. Why? because many companies specialize in specific
types of business owner’s coverage, and, therefore, offer lower
premiums for those particular coverage options than you would pay
for the same coverage with a different company. Shopping your insurance
gives you the opportunity to locate such companies.
As you shop, consider saving yourself both time and money by calling
an independent agent, like those at Hartley Insurance, who can often
obtain multiple business insurance quotes for you from a variety
of reputable companies. In addition, use care when comparing policy
premiums to make sure that you are comparing like premiums for like
coverage and coverage limits.
Finally, keep in mind that there is a down side to shopping your
insurance. Changing your insurance frequently may cost you the loyalty
of your agent; like your time, your agent’s time is limited.
So, he or she is most likely to devote his or her best efforts to
loyal clients. In addition, changing insurance companies frequently
will likely cause you to forfeit discounts and perks that many companies
offer to their long-term clients only.
Obtain available discounts or credit
Ask your agent for applicable discounts, such as policies that
allow you to combine many types of coverage into one "package
policy". Ask about the availability of credits to businesses
that have a long history of quality management and minimal losses.
Additionally, consider paying your business insurance annually to
save the cost of billing fees or finance charges.Increase your deductibles.
Increasing your deductibles from $250 to $1000, or even $5000, can
save you a substantial number of premium dollars. Of course, higher
deductibles also mean higher out-of-pocket expenses at claim time,
too. So, consider whether or not you are financially positioned
to absorb higher up front costs before raising your deductibles.
Drop some coverage
Most business owners are natural gamblers. While dropping some
insurance coverage may help your cash flow it could literally destroy
your business if you experience a serious loss without the proper
insurance in place.
Listen to the insurance company and your agent
Because both your agent and your insurance company have a vested
interest in helping you prevent losses, they may be prepared to
offer you practical suggestion for reducing your exposure to certain
risks. Following their advice can save you not only significant
frustration, but premium dollars as well.
Safety Tips
Implementing the safety advice below may well save you both money
and frustration.
How can I disaster-proof my business?
Businesses that recover quickly are those that plan in advance.
This involves not only purchasing the right insurance, but also
developing and maintaining an adequate recovery plan.
Minimize the risk of damage in advance of an emergency by:
• Training employees in fire safety, particularly those responsible
for storage areas, housekeeping, maintenance and operations where
open flames or flammable substances are used.
• Modernizing the electrical system since faulty wiring causes
a large percentage of nonresidential fires.
• Situating your business in a fire-resistant building - a
structure made of non-combustible materials with firewalls that
create barriers to the spread of fires - and in a building with
a fire alarm system connected to the local fire department. It is
also a good idea to have a sprinkler system to douse fires.
• Limiting storm-related damage by making sure the building
conforms to damage-resistant building codes.
Develop a disaster recovery plan by:
• Keeping up-to-date duplicate records of both computerized
and written records. Under federal law, if companies fail to maintain
and safeguard accurate business records, the company may still be
held liable.
• Identifying the critical business activities and the resources
needed to support them in order to maintain customer service while
your business is closed for repairs.
• Planning for the worst possible scenario. Do research before
a disaster strikes by finding alternative facilities, equipment
and supplies, and locating qualified contractors to repair your
facility.
• Setting up an emergency response plan and training employees
how to execute it.
• Considering the resources you may need to activate during
an emergency such as back-up sources of power and communications
systems. Also, stockpiling the supplies you may need such as first-aid
kits and flashlights.
• Compiling a list of important phone numbers (including cell
phone numbers) and addresses including, local and state emergency
management agencies, major clients, contractors, suppliers, realtors,
financial institutions, insurance agents and claims representatives.
The list should also include employees and company officials. Keep
copies off the premises in case the disaster is widespread.
• Deciding on a communications strategy to prevent loss of
your customers. Clients must know how to contact your company at
its new location. Among the possibilities to explore, depending
on the circumstances, are posting notices outside the original premises;
contacting clients by phone, e-mail or regular mail; placing a notice
or advertisement in local newspapers; and asking friends and acquaintances
in the local business community to help disseminate the information.
• Review your plan on a regular basis and communicate changes
to key employees.
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Frequently Asked Questions
Below you will find a listing of frequently asked questions with
answers provided. If you have questions or concerns that are not
addressed here, please feel free to contact us for more information.
• How do I insure my home based business?
• How do I file a business insurance claim?
• How will the events of September 11th effect my insurance
plan? 
The following .pdf (Acrobat Reader File) courtesy of J. Alan Johnson.
All rights reserved
How do I insure my home business?
If you're running a business from your home, you may not have enough
insurance to protect your business equipment. A typical homeowners
policy provides only $2,500 coverage for business equipment, which
is usually not enough to cover all of your business property. You
may also need coverage for liability and lost income. Insurance
companies differ considerably in the types of business operations
they will cover under the various options they offer. So it's wise
to shop around for coverage options as well as price.
Regardless of the type of policy you choose, if you're a professional
working out of your home, you probably need professional liability
insurance. Some types of in-home businesses, such as those that
make or sell food products or sell home-made personal care products,
may have to buy special policies.
To insure your business, you have three basic choices, depending
on the nature of your business and the insurance company you buy
it from. They are:
1. Homeowners Policy Endorsement.
You may be able to add a simple endorsement to your existing homeowners
policy to double your standard coverage for business equipment such
as computers. For as little as $25 you can raise the policy limits
from $2,500 to $5,000. Some insurance companies will allow you to
increase your coverage up to $10,000 in increments of $2,500.
You can also buy a homeowners liability endorsement. You need liability
coverage in case clients or delivery people get hurt on your premises.
They may trip and fall down your front steps, for example, and sue
you for failure to keep the steps in a safe condition.
The homeowners liability endorsement is typically available only
to businesses that have few business-related visitors, such as writers.
But some insurers will provide this kind of endorsement to piano
teachers, for example, depending on the number of students. These
endorsements are available in most states.
2. In-Home Business Policy/Program.
An in-home business policy provides more comprehensive coverage
for business equipment and liability than a homeowners policy endorsement.
These policies, which may also be called in-home business endorsements,
vary significantly depending on the insurer.
In addition to protection for your business property, most policies
reimburse you for the loss of important papers and records, accounts
receivable and off-site business property. Some will pay for the
income you lose (business interruption) in the event your home is
so badly damaged by a fire or other disaster that it can't be used
for a while. They'll also pay for the extra expense of operating
out of a temporary location.
Some in-home business policies allow a certain number of full-time
employees, generally up to three.
In-home business policies generally include broader liability insurance
for higher amounts of coverage. They may offer protection against
lawsuits for injuries caused by the products or services you offer,
for example.
In-home business policies are available from homeowners insurance
companies and specialty insurers that sell stand-alone in-home business
policies. This means that you don't have to purchase your homeowners
insurance from them.
3. Businessowners Policy (BOP).
Created specifically for small-to-mid-size businesses, this policy
is an excellent solution if your home-based business operates in
more than one location. A BOP, like the in-home business policy,
covers business property and equipment, loss of income, extra expense
and liability. However, these coverages are on a much broader scale
than the in-home business policy.
A BOP doesn't include workers compensation, health or disability
insurance. If you have employees, you'll need separate policies
for these coverages.
• Automobile Coverage.
If you are using your car for business activities -- transporting
supplies or products or visiting customers -- you need to make certain
that your automobile insurance will protect you from accidents that
may occur while you're on business. Contact your home or auto insurer.
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How do I file a business insurance claim?
When a fire, accident or theft occurs at your business:
• Contact your insurance agent and company right away. Any
burglaries or theft should also be reported to the police immediately.
• Read your insurance policy so that you know what your responsibilities
are to your insurance company after a loss.
• After a disaster, take steps to protect your property from
further damage by making temporary repairs. If immediate repairs
to equipment are necessary, save the damaged parts in case the claims
adjuster is interested in examining them.
• Get at least two bids on the cost to repair or replace damaged
property.
When filing a business interruption claim, be able to show the income
the business was generating both before and after the loss. Keep
detailed records of business activity and the extra expenses of
keeping your business operating in a temporary location during the
interruption period. If you are forced to close down, include expenses
that continue during the time that the business is closed, such
as advertising and the cost of utilities.
If you are unhappy with how your claim was handled:
• Talk to your insurance agent or claims manager to explain
your point of view.
• Call the consumer affairs or complaint department of your
insurance company and tell them your story and why you think you
deserve a larger settlement.
• Contact your state's department of insurance about your problem.
• If you've tried all other options, consult an attorney who
specializes in insurance matters to see if he thinks you have a
valid claim that is worth a lawsuit. Provide the lawyer with all
relevant documents and a copy of your insurance policy. Tell your
attorney about any settlements offered by your insurance company
and the attorney will judge whether you have a legitimate case that
might result in a much larger settlement if brought to trial. Attorneys
work on an hourly basis or on a contingency basis in which case
they receive a portion of whatever settlement you ultimately receive.
Get your lawyerís fee structure in writing before you pursue
your case, and make sure you are kept current on the status of the
case as it progresses. You must agree to any settlement reached
between your attorney and the insurance company before it is made
final.
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