Do You Have the Right Insurance Coverage for Your Business?

You've invested a lot of time, money and resources into your business - you need to protect not only the business, but also your employees, your premises, your assets and your future. You cannot afford to leave yourself exposed to unnecessary risk. Stinting on your insurance as a means of saving money is false economy - it's a short-term saving, at the expense of future viability.

Determining the Coverage You Need

Do you know what types of insurance coverage your business actually needs? Each industry has its own unique risks and liability issues. It's important to analyze each facet of your operation to determine what could conceivably go wrong, what sorts of hazards your employees and customers may be exposed to (even minor ones), and what different types of policies are available to limit your liability and protect yourself and your business against claims and damages.

In an era when people will sue for just about any silly reason (remember the infamous McDonald's hot coffee lawsuit?), it has become increasingly important to get it right when putting together your business insurance package. You should start by obtaining risk analyses and insurance quotes from at least three insurance agents, preferably agents who have experience with your type of business and are familiar with the inherent risks. Whenever possible, you should insure with a local agent so you can arrange face-to-face discussions about your specific insurance needs - someone to whom you can become a recognizable person instead of just a policy number. Here is a list of the types of business insurance that you should consider in your Quest for Ideal Coverage.

Business Owner's Insurance

Business owner's insurance coverage is like a homeowner's policy for a business. It packages together a number of coverages and the premiums typically cost less than they would if you purchased these coverages separately. A business owner's policy usually includes:

• property insurance (buildings, equipment and inventory),
• business interruption insurance, to cover situations that may cause you to temporarily shut down operations or reduce production,
• casualty protection,
• crime insurance (theft, fraud and destruction),
• liability and product liability insurance,
• vehicle coverage for borrowed or rented / leased vehicles.

This type of insurance is more cost effective for small to mid-sized businesses, and may include much, if not most, of the coverage that your operation requires.

Property Insurance

The business owner's policy may not extend to damage outside of your premises. If you're located in a multi-occupancy building, you may be required to carry additional property insurance as a condition of your lease.

Liability Insurance

Liability insurance insures against claims for damage to property or injury to persons for which you are held to be responsible, including negligence claims, and suits filed by employees injured on the job. Liability insurance policies cover the legal costs and any damages awarded to the claimant.

Product Liability Insurance

Product liability insurance covers you in the event a product you produce causes harm to a purchaser of that product, or any third party. The purpose of product liability insurance is to protect your business against paying legal or court costs for claims arising from such an event.

Professional Liability Insurance

Professional liability (or professional indemnity) insurance protects service providers against claims for negligence, misrepresentation, violations of fair dealing and good faith, and inaccurate or incorrect professional advice. It is required by law to be carried by medical practitioners (malpractice insurance) and legal practices (errors and omissions - known as E&O - insurance).

Vehicle Insurance

If your business owns any vehicles, you are required by law to have adequate collision and liability coverage on all of your commercially used vehicles.

Workers' Compensation Insurance

Workers' compensation provides wage replacement and medical benefits for employees who are injured on the job. In return for receiving workers' compensation, the employee relinquishes the right to sue the employer for negligence. By law, employers must carry workers' compensation insurance for all employees.

How to Save Money on Your Business Insurance

As mentioned earlier, a Business Owner's Policy will bundle a lot of essential coverages into one package, at a lower premium. But remember that you get what you pay for. The cheapest policy may not provide you with the best protection. There are other ways to keep your insurance costs down without compromising the safety of your business and your employees.

1. Increase your deductibles. Increasing the amount of your deductible under each policy will decrease the amount of your premiums. While it will also mean that you will pay more money out-of-pocket in the event that something goes wrong in the future, it will positively affect your cash flow in the here-and-now.

2. Take advantage of group rates through business organizations and professional associations. Many business organizations offer special discounted insurance rates to their members. Calculate the cost of paying the association dues plus what you'll pay with the special insurance rate, and compare that to what you're paying now.

3. Use the risk analyses as a guide to reducing your liability. Remember those risk analyses you obtained from the insurance brokers? They pinpoint the areas of risk in your business. Eliminate or deal with as many as you can, and inform your broker about what actions you've taken. This should help reduce your premium costs.

4. Shop around. Get quotes from several brokers, do some Internet research, and talk to friends and business associates about their insurance coverages. Be informed before you decide.

5. Insure the building, not the land. There is no need to insure the land that the building stands on. The land can't be damaged, destroyed or stolen. Your property insurance should cover the replacement value of the structures only, NOT the land.

Schedule Annual Insurance Reviews

Review your policies once a year with your insurance agent, to make sure you're still adequately covered and still getting the best value for your money. Laws and regulations change, and it's important to be sure that you haven't left a gaping hope in your coverage out of neglect or lack of information. You may have bought new equipment, expanded your operations, hired more employees since you bought your insurance - any of these events can mean your coverages are no longer adequate. Or perhaps you've scaled back your business and sold some assets, in which case you may be over-insured.

Regular reviews are the best way to determine whether your current insurance coverage is still sufficient for your growing business.