How to Properly Insure Your Business and Employees
How to Properly Insure Your Business and Employees: Special Cases
Some business owners will find that they need specialty insurance because of the nature of their service. It's always safe to check and see if your business requires coverage above and beyond what is usually necessary. As an example, dry cleaners fall into this group. Worters says owners of dry cleaners have liability needs that are unique and are not met in the standard businessowners' policy. Policies available for dry cleaners can also include:
• Bailee insurance pertains to the loss of garments or linen as a result of fire, water damage, loss or theft. There is also coverage for loss or damage to customers' property accepted for laundering, dry cleaning, pressing, dyeing, alteration, repairing or other similar work.
• Contamination/Pollutant cleanup and removal insurance. This provides coverage for cleanup and removal of pollutants often used in the cleaning process.
• Contents coverage. With most policies, property insurance for business contents covers furniture, fixtures, inventory, office equipment and other supplies stored at your facility or off-premises. You may insure those items for Replacement Cost or for Actual Cash Value, which pays only for the depreciated value of the property. Replacement Cost policies have higher premiums; however, they can help your business recover from a loss faster, since you can replace all of the lost or damaged property with new items. If you lease some of the equipment at your business, the leasing company may require that you insure the property at replacement value.
Another common example of businesses that would require additional and unusual insurance are any food service companies. Worters and Young both acknowledge that any business that serves food carries the risk that its product could cause food poisoning or transmit a communicable disease. Adding the Food Contamination Endorsement to your policy gives you protection for this risk. With most policies, the insurer will pay for lost income if the restaurant is closed down by a government authority and will also pay for clean up expenses, food replacement, and medical tests for infected employees and additional advertising expenses to restore your reputation. Other useful property policies for food service businesses are:
• Spoilage covers the value of property spoiled as a result of a breakdown of your temperature control system due to conditions beyond your control.
• Mechanical breakdown covers mechanical or electrical breakdown to your boilers, pressure vessels, refrigeration systems, piping and mechanical and electrical machines or apparatus that generate, transmit or simply use mechanical or electrical power.
• Outdoor signs covers an outdoor sign not attached to the building.
• Burglary and robbery covers the risk of theft by outsiders.
• Employee dishonesty covers some risks of theft by your own employees.
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How to Properly Insure Your Business and Employees: Hiring Help
If you're overwhelmed by the process, don't worry. You don't have to suffer through mounds of paperwork yourself. You can navigate the process with the help of an insurance broker, or independent agent, who is a licensed individual representing a small business owner and works on commission or a for a service fee. The broker tries to find the buyer the best policy by comparison shopping. An insurance agent, also known as a captive agent, is an individual licensed by a state to sell insurance for one or more specific insurance companies.
Contact business trade associations to see if they sponsor an insurance program designed specifically for your business. Tap your personal and professional network for recommendations and referrals. You can also go to the National Association of Insurance Commissioners website to find licensing information, insurance complaints, and key financial data. Young recommends seeking an adviser with at least five years or more experience. Young says the average broker service fee can be anywhere from 10 to 15 percent or more of the total premium, depending on the number of services the broker or agent provides. Commission-based fees can range from 7.5 to 20 percent of the premium, she says.
Here are some other factors to consider:
• Is the insurer a specialist in this area of insurance coverage?
• Will you be able to speak with a "live" person?
• Will you have an agent assigned to you that you'll be working with all the time?
• What is the claim paying process?
• Does the insurer give discounts on premiums for multiple policies?
• What is the carrier's financial strength, assets, paying ability?
Young advises small business owners to "make sure they're providing the same information to all parties to get the most accurate analysis." She says a small biz owner should get a minimum of two quotes, but she generally gets five or more.
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Determining the proper insurance for your business is one of the most critical decisions you will make. It's important to consult an expert in this matter but also you'll have to do your own homework. Knowing the above types of insurance is a good start. The next step is determining if you need any specialty insurance. The last step is hiring a professional that will not only craft the right mix of deductibles and premiums, but also do some price comparisons. The process may be tedious, but if calamity strikes you'll be happy that you're properly insured.
