There is no one answer to this because each business is different.
You can consult with your agent on the monetary limits needed to
cover your potential for loss. Obviously, a one-person accounting
firm will need to purchase less insurance than a store with a substantial
inventory. But each will need to make sure that all necessary business
property is covered, that the limits of liability are sufficient
to protect the owner and the employees, and that loss of income
is protected.
In addition, each business has unique needs and situations that
must be handled. If the store happens to be located on a flood-prone
area, the owner should invest in flood insurance. The accountant
may wish to purchase reconstruction-of-accounts-receivable insurance
to cover the loss of accounting records. The costs of reconstructing
those records, money borrowed because of delayed payments due to
the records being lost, and lost payments from those clients whose
records cannot be reconstructed are all covered.
Liability protection also will vary from business to business. A
retail business is more at risk for potential suits than a business
that is not open to the public. Also, in some states, courts tend
to respond more positively to lawsuits, increasing both the likelihood
of successful lawsuits and the amount of damages awarded. In today's
lawsuit-conscious society, higher liability limits are extremely
important and relatively inexpensive. Your agent can help you decide
how much coverage is needed for your particular business.
Return to Small Business Index
Property insurance can be purchased on the basis of the property's
actual value, on its replacement cost, or on an agreed amount. The
differences between the three are:
Actual Cash Value
The replacement cost of the item minus depreciation. For example,
a new desk may cost $500. If your 7-year-old desk gets damaged in
a fire, it might have depreciated 50 percent. Therefore, you would
be paid $250 for it.
Replacement Coverage
The cost of replacing an item without deducting for depreciation.
So today's cost for a desk of a size and construction similar to
the 7-year-old one damaged by fire would determine the amount of
compensation. If it costs $500 today, that would be the replacement
coverage.
Agreed Amount
Art objects, antiques and other unique items are usually insured
at an amount agreed upon when the policy is being written. An appraiser
values the goods to be insured and the business owner and the insurer
agree upon an amount that the insurer will pay if the goods are
destroyed due to an covered peril.
Check your policy. If you prefer replacement coverage and do not
already have it, this coverage can be added to your policy. Inflation-guard
coverage, which automatically increases your insurance amount a
certain percentage, protects against rising construction costs.
Your agent can advise you of the costs involved.
Return to Small Business Index
Basic property insurance policies generally cover losses caused
by fire or lightning and the cost of removing property to protect
it from further damage (e.g., removing inventory or equipment from
a damaged building so it won't be stolen). "Extended perils," including
windstorm, hail, explosion, riot and civil commotion, and damage
caused by aircraft, automobiles or vandalism, are usually covered
in a standard policy. Other important perils, often not covered
and considered "optional" in almost all standard policies, include
earthquake and flood damage, building collapse, and glass breakage.
Property insurance can be written as either "named peril" policies
or so-called "all risk" policies. A named peril policy provides
coverage for those perils specifically named in the policy. An all
risk policy covers loss by any perils not specifically excluded
in the policy. The term "all risk" does not mean that all perils
will be covered and, to avoid confusion, is often replaced with
the term "special form" or "special causes of loss" coverage.
Check with your agent on the perils covered by your policy. If you
wish, additional coverage can be added.
Return to Small Business Index
No business can afford to be unprepared for a lawsuit. Liability
insurance protects your business assets when the business is sued
for something the business did (or failed to do) that contributed
to injury or property damage to someone else. Liability coverage
extends not only to paying damages but also to the attorneys' fees
and other costs involved in defending against the lawsuit - whether
valid or not.
The standard businessowners policy provides liability coverage,
as does a separate policy known as a commercial general liability
(CGL) insurance policy. Generally, commercial liability insurance,
whether purchased in a separate policy or as part of a standard
businessowners policy, will cover bodily injury, property damage,
personal injury or advertising injury. The medical expenses of a
person or persons (other than employees) injured at the business
or as a direct result of the operations of the business are also
covered.
Usually excluded from both types of liability insurance policies
are suits by customers against a business for nonperformance of
a contract and by employees charging wrongful termination or racial
or gender discrimination or harassment.
Check with your agent about the best liability protection covering
all types of situations that may arise in your business.
Return to Small Business Index
Yes, but in addition to covering the vehicles you own for liability,
medical payments, uninsured motorist coverage, comprehensive and
collision, it also covers you when you rent a car and when your
employees are operating their personal cars for your business. Be
sure to review your auto exposures with your agent.
Return to Small Business Index