- How can I save money on my business insurance?
Here are three ways to save money on business insurance:
- Choose a higher deductible.
Deductibles represent the amount of money you pay before your insurance policy kicks in. The higher the deductible, the less you will pay for the policy.
- Buy a package policy.
It can sometimes be cheaper to purchase a package policy, such as a Business Owners Policy (BOP) or Commercial Package (CPP), rather than individual coverages such as Liability or Property only coverage. A package policy provides standard coverages and limits of liability that are appropriate for typical small-to-medium-sized businesses.
- Ask about ways to prevent losses.
You may be able to reduce your premium for certain coverages by following your insurer's recommendations. These can include workplace safety, disaster preparation, and human resource intervention.
- What does Business Owners 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 Business Owners 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:
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Property insurance for buildings and contents owned by the company -- there are two different forms, standard and special, which provides more comprehensive coverage.
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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.
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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.
- 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 business owners 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.
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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.
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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.
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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 more easily operate out of another location.
Extra Expense 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.
- 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 rehabilitation 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 Business Owners Policies (BOPs) are sold as package policies, they don't include coverage for workers' injuries.
- 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:
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Training employees in fire safety, particularly those responsible for storage areas, housekeeping, maintenance and operations where open flames or flammable substances are used.
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Modernizing the electrical system since faulty wiring causes a large percentage of nonresidential fires
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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.
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Limiting storm-related damage by making sure the building conforms to damage-resistant building codes.
Develop a disaster recovery plan by:
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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.
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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.
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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.
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Setting up an emergency response plan and training employees how to execute it.
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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.
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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.
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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.
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Review your plan on a regular basis and communicate changes to key employees.
- How do I file a business insurance claim?
When a fire, accident or theft occurs at your business:
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Contact your insurance agent and company right away. Any burglaries or theft should also be reported to the police immediately.
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Read your insurance policy so that you know what your responsibilities are to your insurance company after a loss.
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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.
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Get at least two bids on the cost to repair or replace damaged property.
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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:
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Talk to your insurance agent or claims manager to explain your point of view.
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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.
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Contact your state's department of insurance about your problem.
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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 lawyer¡¯s 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.
- Are there any disasters my property insurance won't cover?
Yes. Floods, earthquakes and acts of terrorism are generally not covered.
Protection against flood damage
Property insurance policies usually exclude coverage for flood damage. Find out from your local government office or your commercial bank whether your business is located in a flood zone. Also ask around to find out whether your location has been flooded in the past. Government projects to map flood zones may be slow to keep up with new developments.
If you need to buy a flood insurance policy, contact your insurance agent or the National Flood Insurance Program. For more information about this program call 888-CALL-FLOOD or look at its web site http://www.fema.gov/nfip/. The federal government requires buildings in flood zones that don't conform to flood plain building codes to be torn down if damage exceeds 50 percent of the market value. Consider purchasing "ordinance or law" coverage to help pay for the extra costs of tearing down the structure and rebuilding it. If your policy contains a coinsurance clause, make sure your property is sufficiently insured to comply with the clause.
Protection against earthquake damage.
Coverage for earthquake damage is excluded in most property insurance policies, including homeowners and business owners package policies. If you live in an earthquake-prone area, you'll need a special earthquake insurance policy or commercial property earthquake endorsement.
Earthquake policies have a different kind of deductible -- a percentage of coverage rather than a straight dollar amount. If the building is insured for $100,000, with a 5% deductible, for example, in the event of an earthquake, your business would be responsible for the first $5,000 in damage.
Remember that business interruption insurance, which reimburses you for lost income during a shutdown, applies only to causes of damage covered under your business property insurance policy. If your business premises are shut down due to earthquake damage, you'll need to have earthquake coverage to make a claim under a business interruption policy.
Protection against terrorist attack losses.
Under the Terrorism Risk Insurance Act of 2002, only businesses that purchase optional terrorism coverage are covered for losses arising from terrorist acts. The exception is workers compensation, which covers injuries and deaths due to acts of terrorism.
