Having spent many years as a commercial insurance agent, proper coverage for the small business owners are issues I’ve worked on for years. Much of what you will read here is dry, boring insurance agent “stuff” that just isn’t fun. But please read on because it will be easier and less costly to protect your business and all that you have worked for than you think.
It is true we live in a lawsuit happy country. Anyone can sue anyone for anything these days, no matter how silly it may seem.
What having the correct liability insurance will do for you is PAY for your legal defense so you don’t have to pay for lawyers. This is a huge boon for your business; the lawyers will run with most of the red tape so YOU can keep working your business. Without this liability insurance, you will have to pay not only your lawyer’s fees but the other party’s legal fees as well if you lose the case. That will be in addition to the actual damages suffered by the other party that you will have to pay as well. But even if you win the case, the legal fees and time spent away from your business will be a burden.
Naturally, any type of third party liability insurance is important because it can be a catastrophic amount, particularly if personal injury is involved. But business personal property insurance should not be overlooked, though the amount of loss is limited to the value of the property itself.
If you have expensive tools or equipment you use for your business, this should have its own equipment policy. At the time of loss, should your belongings be determined to be business personal property, the normal homeowner’s or tenant’s policy will NOT pay for it.
In its own way, a business personal property loss can be just as devastating to a small sole proprietor as a liability loss. If the tools and equipment you use to generate your income are stolen or damaged beyond repair, how will you earn income to replace that equipment? If you cannot replace that equipment quickly or have the funds to rent such equipment until yours is replaced, how will you keep your business going?
Now, for another iron on this fire, let’s say you have a small catering business. When you cater an event, you hire three additional people to help prepare and serve. If one of those persons is injured in auto accident on the way to the event or while picking up supplies for you, they will be deemed an employee who should be protected by Workers Compensation insurance. Here again, the cost of the legal defense in such a situation could easily be larger than the amount of the claim itself and an Insurance policy would pay for that defense plus the claim and any related lost wages. If he was driving the other two workers you hired for this event, they will be considered employees as well.
Now, let’s move on to business auto liability, let’s say the employee above was driving his own vehicle when this accident occurs. Upon investigation, it’s found that this employee caused the accident and doesn’t have auto insurance in place. Since he was on company business (your company), you are responsible for this accident, including injuries and property damages to third parties. Even if he does have insurance in place, if the damages exceed the amount of his policy, you can still be called upon to pay as well.
I do hope you have read this far, now that I have scared you to death! These instances I have mentioned are not unusual, they are happening as we speak. But fortunately the cost to insure these properly will not break your bank.
A small commercial package policy can provide both the property and general liability coverage your business needs. How much will cost depends on several things: what your business does, annual revenue, value of the property, and location for starters.
A business auto liability policy can be purchased and an extension added to it to cover Non-Owned Auto Liability, satisfying part of the accident I described above.
Workers Compensation can be purchased very reasonably for a small business. Premium is based on annual payroll and you can include yourself as well. I will grant you that most small business owners will wince at the premium. But the premium would be considered a pittance, even a blessing, if you were involved in the auto accident scenario described above.
Some insurance companies still provide endorsements to homeowners policies that will cover small business liability and property. That is something for you and your agent to work out.
Business Auto policies typically require at least one auto to be on the policy. This might necessitate re-titling your vehicle so that it is in a business name. Business auto policies are often slightly more expensive than personal auto policies but the difference is not usually excessive.
These are the three basic property and casualty policies every business has (or needs), no matter what size they are. Often proof of these coverages is required before you can work for other businesses.
My recommendation is that you go to an agent who is very familiar with commercial insurance coverages. Many agents specialize in personal lines: individual homeowners and personal auto insurance and are not as familiar with commercial insurance. An agent who specializes in commercial coverage will usually be able to get comparison quotations from several companies who underwrite small commercial insurance and be very able to advise you about additional endorsements your business might need. Get the premium quotations and then decide what you will do. Typically, all these types of policies can be put on a monthly payment plan, which makes it much easier for the small business to handle.
