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Business Insurance Information |
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What does a business owners policy cover?
Independent Insurance Services of Central Iowa offers policies
that combine protection from all major property and liability
risks in one package. (They also sell coverages separately.) One
package purchased by small and mid-sized businesses is the
business owners policy (BOP). Package policies are created for
businesses that generally face the same kind and degree of risk.
Larger companies might purchase a commercial package policy or
customize their policies to meet the special risks they face.
BOPs include:
1. Property insurance for buildings and contents owned by
the company -- there are two different forms, standard and
special, which provides more comprehensive coverage.
2. Business interruption insurance, which covers the loss of
income resulting from a fire or other catastrophe that disrupts
the operation of the business. It can also include the extra
expense of operating out of a temporary location.
3. Liability protection, which covers your company's legal
responsibility for the harm it may cause to others. This harm is
a result of things that you and your employees do or fail to do
in your business operations that may cause bodily injury or
property damage due to defective products, faulty installations
and errors in services provided.
BOPs do NOT cover professional liability, auto insurance,
worker’s compensation or health and disability insurance. You'll
need separate insurance policies to cover professional services,
vehicles and your employees.
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Do I need professional liability
insurance?
Professionals that operate their own businesses need
professional liability insurance in addition to an in-home
business or business owners policy. This protects them against
financial losses from lawsuits filed against them by their
clients.
Professionals are expected to have extensive technical knowledge
or training in their particular area of expertise. They are also
expected to perform the services for which they were hired,
according to the standards of conduct in their profession. If
they fail to use the degree of skill expected of them, they can
be held responsible in a court of law for any harm they cause to
another person or business. When liability is limited to acts of
negligence, professional liability insurance may be called
"errors and omissions" liability.
Professional liability insurance is a specialty coverage.
Professional liability coverage is not provided under homeowners
endorsements, in-home business policies or business owners
policies (BOPs).
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Do I need a commercial auto
insurance policy?
As a business owner, you need the same kinds of insurance
coverages for the car you use in your business as you do for a
car used for personal travel -- liability, collision and
comprehensive, medical payments (known as personal injury
protection in some states) and coverage for uninsured motorists.
In fact, many business people use the same vehicle for both
business and pleasure. If the vehicle is owned by the business,
make sure the name of the business appears on the policy as the
"principal insured" rather than your name. This will avoid
possible confusion in the event that you need to file a claim or
a claim is filed against you.
Whether you need to buy a business auto insurance policy will
depend on the kind of driving you do. A good insurance agent
will ask you many details about how you use vehicles in your
business, who will be driving them and whether employees, if you
have them, are likely to be driving their own cars for your
business.
While the major coverages are the same, a business auto policy
differs from a personal auto policy in many technical respects.
Ask your insurance agent to explain all the differences and
options.
If you have a personal umbrella liability policy, there's
generally an exclusion for business-related liability. Make sure
you have sufficient auto liability coverage.
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Do I need business
interruption insurance?
Business interruption insurance can be as vital to your survival
as a business as fire insurance. Most people would never
consider opening a business without buying insurance to cover
damage due to fire and windstorms. But too many small business
owners fail to think about how they would manage if a fire or
other disaster damaged their business premises so that they were
temporarily unusable. Business interruption coverage is not sold
separately. It is added to a property insurance policy or
included in a package policy.
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.
1. Business interruption insurance compensates you for lost
income if your company has to vacate the premises due to
disaster-related damage that is covered under your property
insurance policy, such as a fire. Business interruption
insurance covers the profits you would have earned, based on
your financial records, had the disaster not occurred. The
policy also covers operating expenses, like electricity, that
continue even though business activities have come to a
temporary halt.
2. Make sure the policy limits are sufficient to cover your
company for more than a few days. After a major disaster, it can
take more time than many people anticipate to get the business
back on track. There is generally a 48-hour waiting period
before business interruption coverage kicks in.
3. 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.
Extra Expense Insurance
Extra expense insurance reimburses your company for a reasonable
sum of money that it spends, over and above normal operating
expenses, to avoid having to shut down during the restoration
period. Usually, extra expenses will be paid if they help to
decrease business interruption costs. In some instances, extra
expense insurance alone may provide sufficient coverage, without
the purchase of business interruption insurance.
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How do I insure my home
business?
If you're running a business from your home, you may not have
enough insurance to protect your business equipment. A typical
homeowners policy provides only $2,500 coverage for business
equipment, which is usually not enough to cover all of your
business property. You may also need coverage for liability and
lost income. Insurance companies differ considerably in the
types of business operations they will cover under the various
options they offer. So it's wise to shop around for coverage
options as well as price.
Regardless of the type of policy you choose, if you're a
professional working out of your home, you probably need
professional liability insurance. Some types of in-home
businesses, such as those that make or sell food products or
sell home-made personal care products, may have to buy special
policies.
To insure your business, you have three basic choices, depending
on the nature of your business and the insurance company you buy
it from.
They are:
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Homeowners Policy Endorsement.
You may be able to add a simple endorsement to your existing
homeowners policy to double your standard coverage for
business equipment such as computers. For as little as $25 you
can raise the policy limits from $2,500 to $5,000. Some
insurance companies will allow you to increase your coverage
up to $10,000 in increments of $2,500.
You can also buy a homeowners liability endorsement. You need
liability coverage in case clients or delivery people get hurt
on your premises. They may trip and fall down your front
steps, for example, and sue you for failure to keep the steps
in a safe condition.
The homeowners liability endorsement is typically available
only to businesses that have few business-related visitors,
such as writers. But some insurers will provide this kind of
endorsement to piano teachers, for example, depending on the
number of students. These endorsements are available in most
states.
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In-Home Business Policy/Program.
An in-home business policy provides more comprehensive
coverage for business equipment and liability than a
homeowners policy endorsement. These policies, which may also
be called in-home business endorsements, vary significantly
depending on the insurer.
In addition to protection for your business property, most
policies reimburse you for the loss of important papers and
records, accounts receivable and off-site business property.
Some will pay for the income you lose (business interruption)
in the event your home is so badly damaged by a fire or other
disaster that it can't be used for a while. They'll also pay
for the extra expense of operating out of a temporary
location.
Some in-home business policies allow a certain number of
full-time employees, generally up to three. In-home business
policies generally include broader liability insurance for
higher amounts of coverage. They may offer protection against
lawsuits for injuries caused by the products or services you
offer, for example.
In-home business policies are available from homeowners
insurance companies and specialty insurers that sell
stand-alone in-home business policies. This means that you
don't have to purchase your homeowners insurance from them.
- Business owners Policy
(BOP).
Created specifically for small-to-mid-size businesses, this
policy is an excellent solution if your home-based business
operates in more than one location. A BOP, like the in-home
business policy, covers business property and equipment, loss
of income, extra expense and liability. However, these
coverages are on a much broader scale than the in-home
business policy.
A BOP doesn't include workers compensation, health or
disability insurance. If you have employees, you'll need
separate policies for these coverages.
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Insurance Information Institute
www.iii.org/individuals/business/ |
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