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Archive for February, 2012

Do I Need Director’s and Officer’s Liability Insurance?

Tuesday, February 28th, 2012

Businesses change and grow over time.  Sometimes there are changes in ownership or family members assume officer positions within the business.  A business owner may decide it’s time to have a board of director’s for the business.  Another business or business segment may be purchased.  It may be time to consider Director’s and Officer’s liability insurance for your business.

Directors and Officers Liability insurance will offer financial protection for those acting in a fiduciary role and managing the direction and affairs of the business and act with due diligence.  In the absence or perceived absence of a loss to due this diligence, the officers and directors may be held liable.

Directors and Officers Liability insurance will provide coverage for the directors, officers, managers, and employees for suits brought in which it is alleged they were not prudent and caused financial harm as a result.  Many business owners confuse errors and omissions liability coverage.

E & O covers product and services issues and not performance and fiduciary responsibility.  It is important to review this coverage and whether Errors and Omissions coverage is also needed.

Any lawsuit brought against the company and its officers can be costly and time consuming as well as financially devastating.  In this business climate, any issue can trigger a lawsuit.  These issues could be a result of a financial report, a conflict of interest, a financial loss, the perception or actual evidence of fraud or dishonesty, even a company sale or merger.

Having D & O in place can reduce the risk of these types of suits.  D & O insurance may also offer employment practices liability coverage as part of the policy.  This insurance covers against suits brought against the company by employees for allegations like discrimination and wrongful termination.  Again, this coverage is different from workers compensation.

Sit down with your licensed insurance agent to determine if this coverage makes sense for your business.  As your business grows, don’t let the risk exposure grow with it.

Small Business Planning

Sunday, February 26th, 2012

Small business insurance planning for both start ups and existing small businesses is important.

Once you’ve gone into business, protecting that business is not an option. Insuring your small business is a must to protect the assets of both the business and the owner.  Any business will be exposed to a variety of risks.  Two major areas of coverage needed are property and liability.  Both of these types of coverage and more are available as separate policies or combined in a business owner’s policy.

General liability insurance protects the business against a lawsuit for personal injury or property damage.  It will cover the cost of the lawsuit as well as damages.  No matter how much care is taken, a client can perceive your company did them wrong.  One lawsuit and award of damages can financially ruin any size business.  Every new and existing business needs to have general liability coverage in place.

Next is business property insurance which will cover buildings and contents, and some equipment.  Inventory and office furnishing for example will be covered.  This coverage will cover for damage from accidents, thefts or fire.  It’s important to note that certain property damage from natural disasters like flooding, hurricanes or earthquakes may need separate insurance.

It is important to work with your licensed insurance professional to determine what coverage is included and what risk may still exist. It’s important to understand that professional liability, or errors and omissions insurance is not included.  Talk to your licensed insurance professional to determine if you need E & O insurance.  Understand what is covered in your business insurance and what is not.

Talk to your insurance professional about combining these insurances if possible into a business owner’s policy, or BOP.

In addition, other coverage such as business interruption or crime insurance may be added to the business owner’s policy.  Varieties of specific options are available and depend on your business’s need.  Your agent will define these coverage options and what makes sense for your business.

Determining Deductibles for Your Business Insurance

Friday, February 24th, 2012

You might have asked yourself how you should determine what deductible is right for your business insurance.

First, let’s review what a deductible is and how it works in regards to your business insurance policy. Your insurance carrier will cover almost all of a covered loss, saving your business from a large, sometimes crippling cash outlay.  The portion not covered is your deductible, the amount you have agreed to be responsible for paying.

Say a covered claim is $10,000 and your deductible is $2,500, then the insurance company pays $7,500 and your business is required to pay the remaining $2,500.  No matter if the claim is $2,000 or $40,000, subject to coverage limits (the maximum a policy will pay) your deductible remains at $2,500.

So, in the case of the $2,000, it is paid 100% by the business because the deductible was not met.  Deductibles can usually be negotiated or have a tier system to choose from.  It’s important to understand the impact your deductible will have in the event a claim is made.

The higher the deductible, the lower the premium and vice versa for the policy.  Determine the risk and exposure for each policy type your business has in place or may need to add.  Depending on the risk, and the type of insurance, it may make sense to pay a lower premium and a higher deductible for your business.  While this would certainly be a good thing for cash flow, some risk may be high enough to justify the lower deductible and higher premium.

Look at the risk and make sure a claim wouldn’t jeopardize the financial solvency of the business.  The question needed to be asked is can my business afford to pay this deductible in the event of an incident. Work with your insurance professional to maximize coverage while making the premiums affordable.   Make sure as you work together to put together scenarios and the results and impact of filing a claim.

Property insurance deductibles can also be figured by an individual claim basis or an aggregate basis.  Typically, small companies with no or few claims will find the individual claim basis attractive.  However, if your company or industry has a large number of claims annually, it may be prudent to look at the aggregate basis.

Finding appropriate coverage and affordable premiums starts with your licensed insurance professional.  Other resources to use are your state department of insurance as well as any industry associations. Together with your agent, you will put together an insurance package with the right deductibles and coverage to protect your small business.

What Is Landlord Insurance and Do I Need It?

Wednesday, February 22nd, 2012

Real estate agents sometimes mistake the size of the rental property in defining and talking about insurance needs to buyers. The definition of a business is providing goods or services in return for payment.  As a landlord, you are providing a place to live or conduct business in return for the rent check which is a payment.

Therefore, owning any rental property needs to be considered and treated as a business. Any business is exposed to risk and should have insurance in place to protect the property and assets of the business and its owners.

A landlord policy should be put in place to reduce the risk inherent with being a landlord.

It is extremely important to the responsibility and accountability you hold to your tenants, your property, any lien holders, and you by the financial risk assumed as a landlord. Whether you’re renting out an apartment, a home, an office or an entire building, you need to think of this a business.

Proper liability insurance in place to cover you and your property is a must.  A landlord can be held liable for negligence.  Make sure your property is maintained and eliminate safety hazards.  Fix problems quickly and periodically check your property.  Review your liability limits and insure you put than minimums in place.  Discuss the option of adding an umbrella policy if necessary.

Understand that liability is not subject to just physical problems with the building. For instance, if you have tenants with a dangerous animal or performing dangerous activity, or criminal activity, the liability can fall back to the landlord.

Insure the buildings at full value and update as often as needed.  If not, you can be subject to shared loss or coinsurance in the event of a claim.  Sit down with your licensed insurance professional and determine what coverage is necessary to protect you.

There are way too many reasons to list as to why you should have landlord insurance.

Whether starting with a duplex, or purchasing an office or apartment building, take the exposure to risk seriously from the start.  Owning a property and building equity is a great way to start building assets.  Just don’t risk that hard work by not getting landlord insurance.

Understanding Business Insurance, Part 2

Monday, February 20th, 2012

Following up on our last entry, this is more of what you should understand about your business insurance. And you should understand it, as we pointed out, as well as you understand your own product or service.

Do not make this costly assumption and overlook business interruption insurance.  Sit down with a contractor and determine how long a renovation or rebuild would take.  You must also consider the time if multiple businesses may also be in need of renovation or repair as a result of an area wide disaster.  If you’re in an area prone to tornados, hurricanes, or earthquakes, check with your state department of insurance.  They may maintain records for how rebuilding or an area may take.

Another assumption by business owners is their equipment will operate without ever breaking down.  Some also mistakenly think this may be covered in their business property insurance.  Mechanical breakdown insurance, sometimes known as boiler and machinery insurance will cover these costly repairs or replacements.  In the event your business uses specialized equipment or often is held to deadlines, this insurance must be considered.

Many more assumptions are made by business owners every day that put their businesses at high levels of risk.  Assuming your general liability coverage may be enough is one.  Often professional liability insurance is needed to supplement that coverage, or perhaps even a commercial umbrella policy which would kick in after other limits are met.

You should never assume it won’t happen to you, it can and it will.  No one ever believes it when an event takes place, but they always breathe easier knowing the proper coverage is there when it does.

Understanding Business Insurance, Part 1

Saturday, February 18th, 2012

As a business owner, you need to understand your business insurance as well as your product or service.

One mistake we often see business owners make time and time again is not reading or understanding the coverage they have in place.  It’s critical to know the ins and outs — also often referred to as exclusions — of how your policies work and what is covered.

Your business insurance, also known as your commercial insurance is more expensive as a rule, and much more complicated than your personal insurance.  More important, is having an understanding how your business coverage works.

Not understanding your insurance and how it works in the event of a catastrophe can lead to financial ruin for a business.  Many business owners assume that if the building they own or lease floods, it is covered.  The same is true of a tornado or wind storm.

The fact is that  it is very possible none of these may be covered by the current property insurance you have in place.  Many policies will cover rebuilding, but what about debris removal.  In the event of a catastrophe, the debris removal could run into tens of thousands of dollars, even more.  You need to understand what is covered and what’s not long before the potential for a disaster is eminent.

A big mistake business owners make is not about the insurance, but the down time involved in the event of a disaster.  Especially if other locations may have the similar damage and issues, rebuilding could take months or even a year or more.

Home-Based Business and Commercial Insurance

Thursday, February 16th, 2012

We are asked, “Does my home based business need commercial insurance?”

It started with the internet boom and one parent deciding to stay home with the kids.  Then, the economy went into the tank forcing many people out of the workforce.  Now, millions of Americans are starting businesses and working from home.

Almost all of these home based business owners have a home owner’s policy in place to cover losses to the home and the contents.  However, when it comes to your home business, most homeowner’s policies cap any business losses to $2500 or even less.

Some folks may not worry about the loss of a computer or printer as a simple example.

But think about simple items and how the costs can quickly add up.  The paper supply, the modem, router, power cords, as well as business receipts and documents all add up.  Do you keep inventory or tools at your home?  What if a client comes to your home and is injured from a fall? Your homeowner’s policy probably isn’t going to cover a lawsuit and now your home and assets are at risk.

There are several ways to reduce this risk.  These days, it may be possible to get a business endorsement added to your homeowner’s policy.  This endorsement may cover damages to your equipment, inventory, and possibly even some general liability coverage.  Sit down with your agent and discuss options.  Make sure you understand the exclusions, what’s covered.

Ask you agent if a combo policy is available.  This combines homeowners with coverage like commercial liability insurance.  By combining coverage, it’s possible to save some premium dollars.

For most people, it may make sense to look at a business owner’s policy and let your homeowner’s policy just protect your home.  A business owner’s policy combines general liability coverage with business property insurance as well as many additional options such as business interruption insurance.

The bottom line is to sit down with a licensed insurance professional and discuss the risk and options available to you.  Take the time to really understand what coverage is needed for your particular situation.

Top Deadly Commercial Insurance Mistakes

Tuesday, February 14th, 2012

Many business owners, especially just starting out make some terrible decisions, or what we call deadly sins of business insurance.  By committing these actions, or sins, you are risking your business, your assets, and your good name.

The first deadly sin or mistake a business owner makes, “No one will ever sue my business.”

The irrational thinking behind this is the business has no assets, is newly established, or you fill in the blanks.  The fact is every business and everyone can be sued.  Once a judgment is rendered, a persistent attorney can file a judgment lien which doesn’t go away.  Assets can be frozen or seized and wages garnished.  In fact, lawsuits are on the rise.  Not having the proper insurance coverage to defend against a lawsuit is playing Russian roulette with your business’s future and maybe your families as well.

The second deadly sin is thinking because you set up your business as a corporation, you are all set.  Many business owners think they are 100 percent protected by the wall of incorporation.

Facts what they are, a corporation protects the officers and owners from actions or damages against the corporation.  However, that corporate shield can be pierced or even stripped and a business owner held liable personally.  A business and its owners are legally liable for any action that hurts others. Even if a company is incorporated, owners can be sued personally for their own actions in the company. They risk losing their personal assets and perhaps even their home if a liability lawsuit against them is successful. Without doing a case study, the smaller and newer the corporation, the more likely this could happen.

The third deadly sin committed by business owners regarding their insurance coverage is that nothing could ever happen to them.

Often, business owners mistakenly think their business will continue to provide for their family.  Most businesses don’t survive the death of a principle.  Often, the business is dissolved to pay off obligations.  This leaves the family and the employees of the business devastated.  Have an exit strategy and contingent plan in place and fund it through business insurance.

The fourth sin is thinking a home based business is covered under a homeowners’ policy.

As a rule, just the opposite is true.  In fact, a normal claim may be denied if a carrier finds it could be related to your home based business.

The Most Often Missed Component of Small Business Insurance

Sunday, February 12th, 2012

At some point in time, you took a risk and started a small business.  Through many lean moments, long hours, and perseverance, your business is growing.  You’ve added some employees and now can actually take a vacation again with the family.  But is everything really in good shape?  Could you have missed one of the most serious components of insurance planning, life insurance?

A fact of life is people die, even successful small, medium, and large business owners.  Another real and sad fact is these business owners never thought about what would happen to their business, their employees, and their families if they did.  In fact, they mistakenly believe the business will take care of their family and itself when the reality is that many, many businesses just die along with the owner because of a lack of planning.

You have a lease or a mortgage, capital loans, payroll and other obligations which need to be paid. Do you know what your creditors will actually do should you pass away? You may have some personal life insurance for your family but can your estate be held liable for expenses owed by your business?  Do you have partners or investors in your business?  If you die, can your spouse assume your role in the company?  How quickly?  What will stop your employees from jumping ship and taking clients and even assets with them?  These are scenarios and conversations you need to have now with your insurance professional, attorney, business partners and immediate family.

Every business needs a continuity plan in place funded by life insurance for the owners and investors.  A ‘Buy –Sell Agreement” in place will insure your spouse and family are taken care of and your business will have a far better chance of succeeding.  The Buy-Sell Agreement will purchase the value of your ownership from your spouse while allowing the remaining partners to focus on the day to day operation of the business.  If you’re a sole proprietor, a succession plan will essentially work the same way.  Insuring the obligations are met and your family taken care of through life insurance.  In addition, disability insurance as part of this plan needs to be discussed.  A conversation about key-man insurance is also necessary to help protect the business.

Sit down and have the difficult discussion of developing a succession plan and strategy to put into place in the event of a premature death.  Your licensed insurance professional can show you various scenarios and how to have adequate funds through life insurance to finance these options.

Coffee House Insurance

Friday, February 10th, 2012

Owning and running a coffee house can be intense and stressful as well as fun and rewarding.  But thanks to the popularity of Starbucks and other upscale coffee houses, this segment is growing.

Don’t let your commercial coffee house insurance add to the stress. Having a good commercial coffee insurance policy in place will reduce stress and worry down the road.  Spend your time creating new and exciting coffees and lattes for your clients and not worrying about what ifs.

A good commercial coffee house insurance policy should cover employees, buildings and equipment, loss of income, and general liability.  Due to the nature of the work, a shut down or business interruption could be disastrous.  Make sure a loss of income insurance is included.  Product liability is a must for a coffee house owner to put into place.

A coffee house insurance policy needs to provide coverage for a variety of risks.  There are a number of coverage options with varying limits and deductibles.  Talk to your licensed insurance professional to review what is available.  Make sure to get product liability insurance as part of the package no matter what you other options you choose. On product liability claim can be financial ruin for a small start up or even established coffee house business.

In addition to these coverage options, your commercial coffee house insurance should cover workers compensation, property, and general liability.  Other specialty coverage that is available includes plate glass and signage for your retail location.

Make sure you discuss the distinct aspects of your business with your licensed insurance professional so they can help you determine the appropriate coverage.  Spend your days with customers and building your business, not worrying about risks associated with running a retail coffee operation.