Yes, because the chance
that you could suffer a loss begins with the first day of business.
You can't get help after the fact. If you suffer a loss and have
no insurance or have improper or insufficient coverage, there is
very little, if anything, your insurance agent can do to help you.
You must be prepared for the risks that are inherent in any business
and the losses, sometimes catastrophic, that they can cause.
Also, many states and local jurisdictions require that businesses
be insured to begin operating. And if you rent space for your business,
your landlord probably requires that you be adequately insured as
well.
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Every business has some
property. And, when you think about it, your business is your property.
Just like your home and your car, your business needs to be protected
from loss, damage and liability. In addition, your business is your
source of income, so you need protection from the potential loss
of that income.
Generally, there are two types of insurance - property and liability.
Property insurance covers damage to or loss of the policyholder's
property. And if somebody sued for damages caused by you or your
possessions (other than a vehicle covered by your insurance policy),
the cost of the suit - both defending it and settling it if necessary
- would be covered by your liability insurance.
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It can be. Many small
businesses are now insured under package policies that cover the
major property and liability exposures as well as loss of income.
A common package policy used by many small businesses is called
the Businessowners Policy (BOP).
Generally, these package policies provide the small-business owner
more complete coverage at a lower price than separate policies for
each type of insurance needed. Your agent can help you decide which
policy or policies are right for your business. Additional coverage
for property, liability or perils or conditions otherwise excluded
(e.g., flood protection) can be purchased as endorsements to a standard
policy or as a separate, second policy called a difference-in-conditions
(DIC) policy.
Because businesses vary, it is impossible to have a standard policy
to cover all contingencies. Also, some businesses, regardless of
their size, do not fit the profile of a standard businessowners
policy. For example, restaurants, wholesalers and garages have special
liability needs that are not met in the standard businessowners
policy. Your insurance agent can advise you of the best policy (or
policies) to protect you and your business.
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Your business may not
possess all the following types of property, but you can use this
list to make sure that you have considered all the property categories
and any insurance coverage that may be warranted:
- Buildings and other
structures (owned or leased)
- Furniture, equipment
and supplies
- Inventory
- Money and securities
- Records of accounts
receivable
- Improvements and betterments
you made to the premises
- Machinery
- Boilers
- Data processing equipment
and media (including computers)
- Valuable papers, books
and documents
- Mobile property such
as automobiles, trucks and construction equipment
- Satellite dishes
- Signs, fences, and
other outdoor property not attached to a building
- Intangible property
(good will, trademarks, etc.)
- Leased equipment
To establish the amount
of insurance you need on each, your insurance agent can help you
review the types of property you own and their uses. Some of these
items are covered in the basic policies. For others, coverage can
be added by an endorsement, or rider. And some, like money and securities,
may not be covered by a standard commercial policy and may require
a second, separate policy.
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The best thing to do
is to take a complete inventory of all your business property, determine
their value and decide if each is worth insuring. Then check to
see that the items on the inventory list are included in the basic
business property policy and covered for the correct amount. If
not, ask your agent about the cost of purchasing additional coverage
to meet your needs.
You also need to consider your business situation. Are you planning
a major expansion? Does your inventory have a decidedly peak season
(like a toy store in December)? Or does it fluctuate throughout
the year (like a clothing store)? Is your liability limit high enough
in light of the new job contract you just signed? Business policies
are designed to be added to or subtracted from to meet your needs.
Be sure to discuss changes to your business with your agent so that
he or she can be sure your policy still provides adequate coverage.
Some common additional coverages for business property include (although
this list is by no means all-inclusive):
Boiler and Machinery Insurance
Even if you do not own
a boiler, you may need this coverage. The term "boiler and machinery
insurance" is gradually being replaced with terms such as "equipment
breakdown" or "mechanical breakdown" coverage. This insurance provides
coverage against the sudden and accidental breakdown of boilers,
machinery or equipment, including computer systems and telephones/communication
systems. Coverage usually includes reimbursement for property damage,
expediting expenses (e.g., express transportation charges), and
business interruption losses.
Builders Risk Coverage
Covers buildings in the
course of construction. Depending on the policy, this coverage can
be for either the building's value at the time of loss or its full
value at the time of completion.
Building Ordinance
Coverage
Provides coverage when
a community has a building ordinance stating that when a building
is damaged to a specified extent (usually 50 percent), it must be
completely demolished and rebuilt in accordance with current building
codes rather than repaired. Special attention is required when establishing
the amount of insurance.
Business Interruption
Insurance
Covers the loss of earnings
as a result of damage or loss of business property. Reimbursement
for salaries, taxes, rents, and other expenses plus net profits
that would have been earned during the period of interruption can
be included.
Commercial Crime Coverages
Covers money and securities,
stock and fixtures against theft, burglary and robbery both on and
off the insured premises and from both employees and outsiders.
Debris Removal Coverage
Covers the cost of removing
debris after damage from fire or other covered peril that requires
debris removal before reconstruction of the damaged building can
begin. This is not part of fire insurance coverage and must be added
as an endorsement.
Fidelity Bonds
Covers business owners
for losses due to dishonest acts by their employees.
Glass Coverage
Provides coverage for
glass breakage such as store windows and plate glass on office fronts.
Inland Marine Insurance
Primarily covers property
in transit such as from warehouse to warehouse or warehouse to retail
store, as well as other people's property left on your business
premises, such as clothes left at a dry cleaning business or an
employee's personal effects left in the company locker room.
Insurance for Loss
of Lease Income or Value
Covers the loss of income
when rental property is damaged or destroyed and the loss of value
when the owner of the rental property also used some of its space
for business. If the tenant of the destroyed or damaged building
is forced to rent space elsewhere at a higher cost, this is called
loss of lease value.
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