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Businesses cannot 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 damage, but also to the attorneys’ fees and other costs involved in defending against the lawsuit—whether valid or not.
The standard business owner’s 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 business owner’s 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, racial or gender discrimination or harassment.In addition, excluded are acts of certain types of professions. For example, medical malpractice by someone in the healthcare field, advice or actions of an attorney, or injury resulting from certain work performed. These types of liability exposures can be covered by separate policies known as professional liability and employment practices liability.
Check with your agent about the best liability protection covering all types of situations that may arise in your business.
Yes. The chance that you could suffer a loss begins with the first day of business. 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. In addition, if you rent space for your business, your landlord will probably require that you be adequately insured as well.
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 Business Owners Policy (BOP).
Generally, these BOP 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. However, these BOP policies do not fit every business, and many times, do not cover exposures known to certain professions. In these cases, a more comprehensive Commercial Package Policy would be necessary. This allows your broker to tailor coverages that are right for you.
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 business owner’s policy. Your insurance agent can advise you of the best policy (or policies) to protect you and your business.
The best thing to do is to take a complete inventory of all of 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, such as inland marine 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 ongoing 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.
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 seven-year-old desk gets damaged in a fire, it may have depreciated 50 percent. Therefore, you would receive $250 for the desk.
Replacement coverage is 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 seven-year-old one damaged by fire would determine the amount of compensation. If it costs $500 today, then you would receive $500 for the desk under the replacement coverage.
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 a 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.
When was the last time you updated your business insurance policies? Take the Quantum Challenge to see if you need an updated policy. (Short answer: You do.)