Today, businesses face greater risks than ever before. In addition to such typical risks as theft and fire, there are a host of other risks that are unique to each particular type of business. That's why it is essential that businessowners make sure they buy the right type and amount of insurance and update their policies annually to include improvements, major purchases and increased rebuilding costs as well as any liability risks, according to the Insurance Information Institute (I.I.I.).
"One of the biggest mistakes businessowners make is that they don't buy the right type of insurance and often have gaps in their coverage, " said Loretta Worters, vice president, I.I.I. . "Businessowners should contact their agent or company representative annually to make sure that their insurance is adequate."
A Businessowner's Policy (BOP) is recommended for most small businesses (usually 100 employees or less), as it is often the most affordable way to obtain broad coverage. Combining both property and liability insurance, a BOP will cover your business in the event of property damage, suspended operations, lawsuits resulting from bodily injury or property damage to others, etc.
BOPs do not cover professional liability, auto insurance, workers compensation or health and disability insurance, however. You'll need separate insurance policies to cover professional services, vehicles and your employees.
For medium and larger businesses, there are more comprehensive commercial policies. To properly insure your business, the I.I.I. suggests that you ask your agent or company representative these four important questions:
1. Do I have enough insurance to rebuild my business property and replace all of my merchandise and possessions?
A Building and Personal Property Coverage (BPP) policy is commonly used to cover any combination of the following three broad categories: the building, your business personal property and the personal property of others. Usually the covered building is owned by the insured. However, a lessee might insure a leased building when required to do so by the terms of the lease.
Your Business Personal Property includes seven specific categories:
It is vital that the values of property are accurately reported and updated annually to reflect inflation and other increases in cost.
2. Do I have enough insurance to protect the personal property of my employees?
You will need to add Personal Effects and Property of Others coverage to your policy. This coverage permits the insured to extend up to $2,500 worth of its business personal property coverage to personal effects of the insured and its officers, partners or employees and personal property of others in the insured's care, custody or control. The personal effects coverage does not include theft, even if theft is a covered cause of loss under the policy.
If the $2,500 limit is inadequate to cover personal property to others in the insured's possession, a higher limit can be purchased.
3. Do I have enough insurance to keep my business open?
A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential. That's why business interruption insurance is so important.
"Make sure the policy limits are sufficient to cover your company for more than a few days," Worters said. "After a major disaster, it can take more time than many people anticipate to get a business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in," she added. "Too many businessowners fail to think about how they would manage if a fire or other disaster damaged their business premises so that it was temporarily unusable."
The price of the policy is related to the risk of a fire or other disaster damaging your premises. All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fire. Also a real estate agency can more easily operate out of another location.
You can purchase any one of these or any combination of them that would make sense for your business:
4. Do I have enough insurance to protect my assets from a lawsuit?
The only way to protect your assets is to carry adequate business liability insurance. A Commercial General Liability (CGL) insurance policy is the first line of defense against many common claims. CGL policies cover claims in four basic categories of business liability:
In addition to covering the claims listed above, Commercial General Liability policies also cover the cost to defend or settle claims.
For more information on how to properly insure your business, visit www.iii.org.