A Field Guide to Business Insurance

Dealing with Dinosaurs: Battling Giant Reptile-Like Risk

Entrepreneurs, sole proprietors, small business owners and employers are some of the most determined, hard-working, savvy, intrepid members of our community. Moreover, in recent years, it’s been in the face of some overwhelming odds.

It gets better. Recent SBA statistics are in: “Since the end of the recession (from mid-2009 to mid-2013), small firms accounted for 60 percent of the net new jobs.” That’s big. Moreover, it’s an indication that you are positioned for growth.

(Giant reptile enters stage right, brandishing an impressive grouping of incisors.)

Here's a tool you might want to keep handy—for when we grow, risk grows correspondingly. So we present to you our Field Guide to Business Insurance. Easy knowledge, right at your fingertips. While this is no replacement for the expertise of a trusted insurance agent, this overview will do well to familiarize you with the defenses available to fend off the Jurassic giants of our era.

Contents

1. Umbrella Policy
2. Business Owner Insurance
3. Worker's Compensation Insurance
4. General Liability Insurance
5. Product Liability Insurance
6. Professional Liability Insurance
7. Employment Practices Liability Insurance
8. Commercial Auto Insurance
9. Commercial Property Insurance
10. Home Business Insurance

1. Umbrella

   Obviously, you’re already insurance savvy—you realize that each action carries risk, and that risk requires protection. For this and other reasons, you carry an umbrella policy. So if an accident becomes a lawsuit, you can fend off collateral damage. Think twice though if your umbrella policy is a fallback plan to cover business losses. Business insurance is a different animal.

2. Business Owner

   With the myriad possibilities available to business insurance seekers, the likelihood of independently choosing the correct coverage isn’t too high. A baseline option that brings peace of mind: Business Owner Policy (BOP). While it is a “package deal,” a BOP is also very customizable by way of riders that cover a wide array of circumstances. If your business fits within your provider’s criteria, a BOP could serve as a first step toward comprehensive coverage. Obviously, an honest look at your needs is in order. But keep in mind: while a business owner policy is an affordable combination of property, business interruption and liability insurances, it is not a catchall.

3. Worker’s Compensation

   Beyond insuring your business, as an employer, additional legal considerations come into play. While some guidelines differ from state to state, according to the SBA, certain types of coverage are non-negotiable:

   “Businesses with employees are required by law to pay for certain types of insurance: workers' compensation insurance, unemployment insurance, and, depending on where the business is located, disability insurance.”

   No, this isn’t a revelation, but it may be a back-burner issue that needs to be brought to the fore. As an employer, it pays to build on a solid, responsible foundation. Not only are you legally bound to protect employees, but it’s also in everyone’s best interest. When employees sense they are valued, they will likely share that value with you.

   Here’s some advice to chew on: When it comes to compensation and unemployment, view yourself as an employee. Especially is this true if you’re a one-(wo)man show. In fact, in some states, it’s law. Just think: As a sole proprietor, your family’s financial stability rests on your shoulders. If you were to experience a setback that renders you unable to carry on business—whether temporary or sustained—you need a viable recourse.

4. General Liability

   With quite the portfolio, the liability arm of business insurance approaches the matter of protection from nearly every conceivable angle.

   General liability insurance provides entrepreneurs and business owners protection from the overwhelming expense of legal proceedings due to accident, injuries, or claims of negligence. Regardless of where blame lies, a general liability insurance policy works to fund repairs to property, payments to the injured, and medical expenses, along with continued or appealed legal cases. In the unfortunate case that an incident precipitates a negative effect on an individual’s or company’s reputation—think libel, slander—general liability insurance is a must.

   And no, your business’ corporate classification is not an ironclad defense. In the case that corporate procedures aren’t followed, your limited liability coverage legally cannot be applied. Liability then falls directly on the business owner, seriously jeopardizing personal assets. And the smaller the business, the more likely that the owner bears the burden. In the case of a sole proprietor, you and your business are one in the same: damage to the business is directly damaging to you. In light of the risk, you’ll likely find that general liability insurance is a protection you can’t live without.

5. Product Liability

   A self-explanatory coverage option, product liability insurance can provide you a fallback option in the event that your company’s product malfunctions. Recent news from the auto industry demonstrates that even a well-established company producing tested products can encounter unexpected and potentially disastrous problems. If you need a look at some raw data that’s closer to home, why not investigate the Consumer Product Safety Commission’s injury statistics and take a realistic view of possible unintended consequences of your company’s product(s).

   Product liability insurance especially comes into play if injury results. Taking into account the type of product(s) your company produces can determine your risk. Obviously a company that fabricates replacement car parts carries an exponentially greater risk than would a textiles manufacturer. However, regardless of the product, things can go awry. Accurately identifying risk and seeking proportionate coverage is a must.

6. Professional Liability

   Peel back one layer, find ten more. “General” liability coverage is exactly as the name suggests. Hence the more specific professional liability insurance, or errors and omissions (E&O). Also known as “malpractice insurance” in the healthcare field, E&O protects your reputation and your business “in the event that a client holds you responsible for a service you provided, or failed to provide, that did not have the expected or promised results.” According to Insurance Journal, any business that provides a service for a fee should candidly evaluate the potential consequences of not delivering on said service in the manner or timeframe expected, especially if such an occurrence could potentially damage the client’s business or reputation.

   Obviously, we’re talking accidents, mistakes, unintentional happenings, not purposeful disregard. And let’s be real: everyone makes mistakes. What’s more, depending on your state and profession, professional liability, malpractice insurance, or errors and omissions may be mandatory. Clearly, careful scrutiny is in order.

7. Employment Practices Liability

   Just when you think you know it all, employment practices liability insurance (EPLI) rears its head. Put pretty succinctly, EPLI protects you and your company against employee claims that legal rights have been violated. Whether wrongful termination, discrimination or any other rights-based claim, employment practices liability insurance is the coverage of choice—especially in today’s litigious society.

   Regardless of size, no company is safe from a slighted employee, and regardless of a claim’s legitimacy, legal fees alone can break a company. And no, this isn’t old news. A very recent tabloid-esque lawsuit brought against a co-creator of a hugely popular dating app claims both gender and age discrimination, and even cries sexual harassment. It’s the classic case of office romance gone wrong. While the company admits something fishy was going on, they aren’t committing to much. Unfortunately, right or wrong, what the company says in cases like these usually falls on deaf ears—the claimant’s whispers are screams in the ears of the press.

   While employees are generally an employer’s primary asset, relationships can break down, and mishaps can spiral out of control. Should you find yourself in such a circumstance, employment practices liability insurance can be a significant safeguard to your business, your personal assets, and your reputation.

8. Commercial Auto

   Just as vital as personal auto insurance, its commercial cousin protects you against loss involving a company vehicle. Myth-buster alert: if your personal vehicle is often used for business purposes, your traditional auto insurance more than likely will not cover loss or damage suffered while engaging in commercial endeavors. Reading the fine print is a surefire way to know if you’re covered. If not, commercial auto insurance fits the bill—and covers it too.

9. Commercial Property

   If you own a brick-and-mortar establishment, then you’re investing monthly simply to use the space. Now think of the myriad of investments you’ve made in order to have a smooth, functioning business: office equipment, furnishings, inventory, machinery, etc. If your business is suspended due to fire, smoke or water damage, vandalism or theft, what's your plan? The intangible factors of business interruption and subsequent lost revenue could make it impossible for you to pay employees, vendors, or fulfill your leasing agreement. If your area is particularly prone to specific perils, or if the threat of business interruption due to property damage weakens your knees, take a closer look at commercial property insurance.

10. Home Business

    So your home also serves as your place of business, or at least where you handle the books and stock inventory. You’re in good company. SBA statistics show that home-based businesses account for 52% of all small businesses. Unfortunately, of the 3 in 10 homeowners who operate a business at home, estimates indicate that over half are underinsured.

    But in-home businesses are covered by a homeowner’s policy, right? Scour the fine print as you may, it’s unlikely that business-related losses will be covered. However, depending on the risk your business carries, add-ons to your current policy may be a quick but suitable fix. If not, then home business insurance—which often includes general liability insurance—is your answer. If your home merely serves as a hub for your business—typical in the construction field—your best bet is to contact your local municipality and your trusted Zinc agent. Requirements, specifications, business insurance ins and outs: We are happy to help.

Business-Minded

Huge amounts of information exist regarding the various forms and degrees of coverage within the business insurance domain. While what has been discussed here will likely be adequate for most entrepreneurs and business owners, there are always exceptions. For these folks, perhaps business interruption coverage, directors and officers liability insurance (D&O), or even professional liability insurance tops the list of must-haves. And of course if your business relies on technology to any degree, cyber security should be a priority. Whatever the case, you don't have to take on these dinosaurs alone. Explain your concerns to our team, and receive sound, well-informed advice. An annual assessment of current and projected needs vs. current coverage isn’t a bad idea either. Make it your aim to dig in deep on this one, and talk to an agent who knows your “business” as well as you.