Insure Your Business, Ensure Your Success

June 9, 2008


asdamd/photos/stylus/29210-insurance-for-business-250x.jpg

Photo by iStockphotos

When you watch your business' back, you protect its bottom line. Here are four kinds of insurance your company needs, and a few extra that it might want.

By: MATT ALDERTON

Small businesses have plenty of items on their to-do lists. Accounting. Marketing. Management. Sales. It's a lot to keep up with. One item that far too many entrepreneurs leave unchecked, however, is insurance.

"For many start-ups, insurance is an afterthought," says Scott Simmonds, a Saco, Maine-based insurance consultant. Indeed, even among more established companies, insurance is a problem. That's because oftentimes when a company has it, Simmonds says, it doesn't have the right amount or the right kind.

Ignorance may be bliss, but when it comes to insurance, it's no excuse. Your company, like your home, your car and your life, needs some just-in-case financial protection. In particular, according to Simmonds, it needs four types of it: workers' compensation insurance, property insurance, liability insurance and commercial automobile insurance. Here's a fast, down-and-dirty guide to each.

Workers' Compensation Insurance: Workers' compensation, which pays employees' medical bills and missed salary in the event of a work-related injury, is required by law in most states for businesses with as few as one employee, according to Simmonds. "If you have employees," he says, "you need it." How much coverage you need and for what types of employees depends on where you live and do business. For more information, consult the U.S. Department of Labor's Office of Workers' Compensation Programs.

Property Insurance: Property insurance protects your stuff, according to Simmonds. Specifically, it protects it from physical damage or loss in case of fire, theft or vandalism. Depending on where you live, special policies might also be needed to cover damage from earthquakes or floods. And finally, if you work from a home office, you'll need a separate policy, as insurance for your home typically excludes property for your business. "I've got an office in my home," Simmonds says. "I've got a couple of computers, a couple of printers, four or five filing cabinets, a fax machine, a copy machine and a pretty good collection of books. If I look at all that stuff, it would probably be worth $40,000 to $50,000. If my house burns, that $40,000 is going to hurt if I don’t have insurance to pay for it."

Liability Insurance: While property insurance protects you from disaster, liability insurance protects you from people, according to Simmonds. That is, if another person is injured on your property, or if another person's property is damaged on it, liability insurance will kick in to cover legal fees and settlements in the event that you're sued because of it. If you sell products that could harm your customers—food, for instance, which could cause illness—you might also consider product liability coverage.

Commercial Automobile Insurance: If you have a company car, or a delivery vehicle, you'll need commercial auto coverage. In fact, you might consider it even if your company doesn't have a fleet of vehicles. After all, if you send an employee to the office supply store in his own car, and he's in an accident, you're still liable for damages; hired and nonowned auto liability coverage will protect your drivers no matter whose car they're driving—yours, their own or even a rental.

Beyond the basics, your company might wish to invest in the following extras:

Professional Liability Insurance: Professional liability coverage protects you from providing bad advice. If you're a consultant, a doctor, a lawyer, an engineer or anyone who advises clients on important decisions, professional liability will protect you from lawsuits if that advice proves poor.

Employment Related Practices Insurance: If your business has high turnover, employment related practices insurance will protect you from accusations made by disgruntled employees. "There's a risk that a job applicant can come back to you and say, 'You discriminated against me, you harassed me, you didn't hire me and you should have, or you fired me and you shouldn't have,'" Simmonds says. Employment related practices insurance gives you resources with which to answer those claims.

Business Interruption Insurance: While property insurance policies cover your building and your equipment in case of disaster, business interruption insurance is designed to cover your income. "The way I explain business interruption coverage to folks is with a goofy story," Simmonds says. "You own a goose; that's your business. The goose lays golden eggs; that's your profit. If your goose gets killed, you're not going to have any golden eggs for a while until you get a new goose. Business interruption coverage provides you with the value of the eggs that your goose would have laid while you're getting a new goose."

Disability Insurance: If you're in an accident, or experience illness, you're toast, right? Not with disability insurance. Available in short- and long-term policies, disability insurance provides you with a fixed income—usually 60 percent of your average earnings—while you're recuperating. Business overhead insurance is also a good idea and will help you pay your rent and your bills while you're being treated.

Internet Business Insurance: As more and more businesses go online, more and more companies are making themselves vulnerable to Internet criminals. Internet business insurance will protect your company from damage done by hackers, identity thieves and viruses.

Criminal Insurance: If you're in retail, criminal insurance is a good idea. Part of any store's loss prevention plan, it will protect you from theft by customers and employees alike.


No matter your coverage, you'll need a qualified, reliable, trustworthy insurance agent to help you choose it and use it, according to Simmonds. "In my opinion, the most important part of the insurance transaction is the insurance buyer's relationship with their insurance agent," he says. "It's just like the relationship that the business owner has with his attorney or his accountant. There has to be trust and there has to be respect; you have to believe that the guy has your best interests in mind when you're taking his advice."

To find an insurance agent, ask your peers, your local Chamber of Commerce and your trade association for referrals.

"Make sure your agent is working for you," Simmonds concludes. "He should be able to help you prioritize the insurance that you're buying. You can spend a lot of money on insurance, but you've got to figure out what makes the most sense for your business."

Insure Your Business, Ensure Your Success

June 9, 2008


asdamd/photos/stylus/29210-insurance-for-business-250x.jpg

When you watch your business' back, you protect its bottom line. Here are four kinds of insurance your company needs, and a few extra that it might want.

By: MATT ALDERTON

Small businesses have plenty of items on their to-do lists. Accounting. Marketing. Management. Sales. It's a lot to keep up with. One item that far too many entrepreneurs leave unchecked, however, is insurance.

"For many start-ups, insurance is an afterthought," says Scott Simmonds, a Saco, Maine-based insurance consultant. Indeed, even among more established companies, insurance is a problem. That's because oftentimes when a company has it, Simmonds says, it doesn't have the right amount or the right kind.

Ignorance may be bliss, but when it comes to insurance, it's no excuse. Your company, like your home, your car and your life, needs some just-in-case financial protection. In particular, according to Simmonds, it needs four types of it: workers' compensation insurance, property insurance, liability insurance and commercial automobile insurance. Here's a fast, down-and-dirty guide to each.

Workers' Compensation Insurance: Workers' compensation, which pays employees' medical bills and missed salary in the event of a work-related injury, is required by law in most states for businesses with as few as one employee, according to Simmonds. "If you have employees," he says, "you need it." How much coverage you need and for what types of employees depends on where you live and do business. For more information, consult the U.S. Department of Labor's Office of Workers' Compensation Programs.

Property Insurance: Property insurance protects your stuff, according to Simmonds. Specifically, it protects it from physical damage or loss in case of fire, theft or vandalism. Depending on where you live, special policies might also be needed to cover damage from earthquakes or floods. And finally, if you work from a home office, you'll need a separate policy, as insurance for your home typically excludes property for your business. "I've got an office in my home," Simmonds says. "I've got a couple of computers, a couple of printers, four or five filing cabinets, a fax machine, a copy machine and a pretty good collection of books. If I look at all that stuff, it would probably be worth $40,000 to $50,000. If my house burns, that $40,000 is going to hurt if I don’t have insurance to pay for it."

Liability Insurance: While property insurance protects you from disaster, liability insurance protects you from people, according to Simmonds. That is, if another person is injured on your property, or if another person's property is damaged on it, liability insurance will kick in to cover legal fees and settlements in the event that you're sued because of it. If you sell products that could harm your customers—food, for instance, which could cause illness—you might also consider product liability coverage.

Commercial Automobile Insurance: If you have a company car, or a delivery vehicle, you'll need commercial auto coverage. In fact, you might consider it even if your company doesn't have a fleet of vehicles. After all, if you send an employee to the office supply store in his own car, and he's in an accident, you're still liable for damages; hired and nonowned auto liability coverage will protect your drivers no matter whose car they're driving—yours, their own or even a rental.

Beyond the basics, your company might wish to invest in the following extras:

Professional Liability Insurance: Professional liability coverage protects you from providing bad advice. If you're a consultant, a doctor, a lawyer, an engineer or anyone who advises clients on important decisions, professional liability will protect you from lawsuits if that advice proves poor.

Employment Related Practices Insurance: If your business has high turnover, employment related practices insurance will protect you from accusations made by disgruntled employees. "There's a risk that a job applicant can come back to you and say, 'You discriminated against me, you harassed me, you didn't hire me and you should have, or you fired me and you shouldn't have,'" Simmonds says. Employment related practices insurance gives you resources with which to answer those claims.

Business Interruption Insurance: While property insurance policies cover your building and your equipment in case of disaster, business interruption insurance is designed to cover your income. "The way I explain business interruption coverage to folks is with a goofy story," Simmonds says. "You own a goose; that's your business. The goose lays golden eggs; that's your profit. If your goose gets killed, you're not going to have any golden eggs for a while until you get a new goose. Business interruption coverage provides you with the value of the eggs that your goose would have laid while you're getting a new goose."

Disability Insurance: If you're in an accident, or experience illness, you're toast, right? Not with disability insurance. Available in short- and long-term policies, disability insurance provides you with a fixed income—usually 60 percent of your average earnings—while you're recuperating. Business overhead insurance is also a good idea and will help you pay your rent and your bills while you're being treated.

Internet Business Insurance: As more and more businesses go online, more and more companies are making themselves vulnerable to Internet criminals. Internet business insurance will protect your company from damage done by hackers, identity thieves and viruses.

Criminal Insurance: If you're in retail, criminal insurance is a good idea. Part of any store's loss prevention plan, it will protect you from theft by customers and employees alike.


No matter your coverage, you'll need a qualified, reliable, trustworthy insurance agent to help you choose it and use it, according to Simmonds. "In my opinion, the most important part of the insurance transaction is the insurance buyer's relationship with their insurance agent," he says. "It's just like the relationship that the business owner has with his attorney or his accountant. There has to be trust and there has to be respect; you have to believe that the guy has your best interests in mind when you're taking his advice."

To find an insurance agent, ask your peers, your local Chamber of Commerce and your trade association for referrals.

"Make sure your agent is working for you," Simmonds concludes. "He should be able to help you prioritize the insurance that you're buying. You can spend a lot of money on insurance, but you've got to figure out what makes the most sense for your business."