The Ins and Outs of Business Insurance

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As a small business owner, you know that you’ve got a lot of expenses to worry about, from renting a space for your bakery to purchasing raw materials for your crafts. Depending on the type of business you own (like a cupcake shop compared to a fine crafts store), you may have more costs some months than others. It can definitely be difficult to budget.

However, one cost that is essential is business insurance. Despite misconceptions, this form of insurance is very useful and can be well worth the expense. Besides, if you shop around, you could still find a good rate.

Let’s take a look at some of the basics of business insurance.

Who Needs It?

Like many small business owners, you may feel that you don’t really need this kind of insurance. After all, will you really encounter a situation in which it would be useful? The truth is, yes, you probably will. At some point during your company’s lifespan, you may have to deal with a natural disaster, a break-in, theft or even someone suing you. Business insurance can cover all of these incidents.

What if I Have Other Insurance?

You might be wondering if you need business insurance if you have renters’ insurance. While renters’ insurance can cover some physical property, such as an expensive camera or laptop that you use for your business, it doesn’t cover everything. In fact, many renters’ insurance limit what can be covered under “business pursuits”, which means the entirety of your small business may not be covered.

What if Something Really Bad Happens?

If, say, your work laptop gets stolen, some business insurance policies will reimburse you for the total amount you paid for that computer. This is a recent change in insurance. Usually, you would get what it was worth at the time it got stolen from you. However, be aware that not all policies offer this perk, and that policies that do offer it are generally more expensive.

What Does “Liability” Mean?

This can be confusing for people to understand, because the insurance definition of “liability” differs a little from the layperson’s definition. In insurance terms, liability essentially means that if you are negligent and someone gets hurt because of it, that person can sue you.

This is different from “errors and omissions.” This term means that there was a professional mistake, or error. For example, if you are a photographer taking photos for a big charity event, and your hard drive fails or you miss an important shot of the CEO, that would fall under this category. If your business insurance policy includes professional liability, which does not usually occur, that is what would cover you if an error or omission happened.

Get Covered Today

Remember, not every business insurance policy is the same. One may be better for you than another, and you also have to factor in comparing costs and benefits. At ABCO Insurance Agency, Inc., we offer you the chance to compare rates from 25 different insurance companies. That way, you can find which would be best for you. Contact us today to get started.

Commercial Insurance 101: What Coverage Comes with General Liability Insurance?

Liability Insurance

Small business insurance is critical.

Even if you do not have employees, you have liabilities as a business owner; therefore, you need adequate coverage.

The most basic form of commercial insurance, and one that every business should have is general liability insurance.

The coverage for general liability is typically the same for most insurers, but it is important that you review your existing policy and make sure you have adequate coverage and getting the most out of your coverage.

Items Covered by Your General Liability Commercial Insurance

  1. Lawsuits and Settlements

Your general liability insurance covers you in the event your business is sued and a judgment is awarded. It also covers medical expenses in case of a bodily injury lawsuit.

  1. Injury Damages

If there is a claim against your small business for bodily injury or property damage, you should have coverage through general liability to cover these losses.

  1. Advertising Injuries

Your general liability insurance should protect you in the event your advertising violates a copyright for someone’s advertising or branding.

  1. Electronic Data Liability

Your general liability should have some coverage for electronic data. This includes breaches or data that is lost during a hacking or natural disaster, computer malfunction and more.

Items Not Covered by General Liability Commercial Insurance

  1. Employee Injuries

Employee injuries do not fall under general liability; instead, you would need workers’ compensation coverage to help employees if they are injured while performing job duties.

  1. Professional Errors

If you offer a professional service to customers, you may not have adequate coverage with just general liability. Professional mistakes are not covered under general liability policies; therefore, you need professional liability coverage. This is especially true if you are at risk for a lawsuit for your solutions, services or opinions shared with customers.

  1. Punitive Damages

While lawsuit costs are covered through general liability insurance, punitive damages are not. Punitive damages are those designed to punish a defendant in a civil liability case. So, they would require gross negligence or malicious acts. Rarely would general liability cover these types of damages.

  1. Warranty of Work

General liability does not include your company’s warranty on your work. It is known as the workmanship exclusion, and most general liability insurance policies will have clauses that explicitly state the warranty is not covered by the plan itself.

  1. Auto Coverage

You need a business auto insurance policy if you have company vehicles or have employees that drive company-owned vehicles. Your general liability insurance will not cover any auto-related accidents or damage.

Speak with an Insurance Agent About Adequate Commercial Insurance

Every business is unique, and every business has a different set of commercial insurance requirements. Depending on your net worth, company operations and the number of employees, you may need more coverage or less coverage. So, it is best to speak with an insurance broker that can perform a risk assessment and help you find the right mixture of policies to protect your assets.

Why $1 Million in Umbrella Insurance Coverage is Not Enough for Many Businesses

Umbrella Insurance

As a business owner, you know the importance of insurance coverage to protect your assets.

You have general liability, and you might even have an umbrella policy. However, the amounts of your coverage could significantly impact how your company recovers. Homeowners are encouraged to have a minimum of $1 million in umbrella insurance, but this may not be enough for a small-business owner.

When your company lacks proper insurance coverage, you may be forced to pay the judgment from business assets and possibly future earnings. In this case, it is unlikely your company would survive the storm.

Why Umbrella Insurance is Necessary for Every Company

Even if you have general liability coverage, you may face a settlement or repair that exceeds your liability coverage limits. Without umbrella coverage, also known as excess liability insurance, you would have to pay the expenses out-of-pocket.

For a small premium, you can protect your company, employees and business assets. Your umbrella insurance policy adds a layer of protection along with the numerous other policies you could hold, such as employer’s liability, general liability and more.

Also, the SBA recommends getting umbrella insurance, as most contracts will require a company to have general liability as well as umbrella insurance before doing work on their behalf.

Personal Injury Settlements Exceed Most Policy Limits

Forbes points out that 13 percent of personal injury liability lawsuits and settlements exceed $1 million. Also, this does not account for the lawyer’s fees that you would have on your end to defend your company, costs of repair inside your building, or having to shut down and miss sales opportunities during a lawsuit or investigation.

With a higher umbrella policy, you could cover these costs as well as the chance of a higher settlement.

Forbes also recommends having coverage that is equal to your small business net worth as a minimum. If you have limited coverage, you could be forced to liquidate your company to pay for the judgment, so having coverage that equates to your present value of income is also important.

Umbrella Insurance Coverage is Not as Expensive as You Think

Considering the protections and coverage that comes with umbrella insurance, the cost is more than reasonable.

An umbrella policy averages $150 to $300 per year for a $1 million limit, says the Insurance Information Institute. The more you add to your policy, the higher the policy costs increase. For example, the next million you add to a $1 million policy will most likely cost about $75 per year in extra premiums, while each million after that is just $50 per year.

When deciding how much umbrella insurance your small business needs, consider your existing policy limits, and risks your business carries. Then, speak with an insurance agent to have your business insurance needs assessed based on your net worth, company assets and potential liabilities.