Thursday, April 3, 2014

INSURANCE COVERAGE FOR THE SMALL AND MEDIUM BUSINESS

(From the prospective of a personal injury trial lawyer)

This blog post was written by attorney Daniel Allen of Bautista Allen LLC, a Kansas City BBB accredited business.  For more information click here: Kansas City personal injury lawyers

I am a trial lawyer in Kansas City, Missouri. I have spent my career representing people and families that have been seriously injured or killed due to the fault of another. Most of my career has been spent representing individuals and families against some of the largest companies in the world. I take my work very seriously.

I do not expect any business or corporation to look fondly upon my work or me. However misdirected, I have come to live with that slight. However, despite pop impressions of trial lawyers like me, I am not anti-business. I have a big heart and an entrepreneur spirit, and many of my friends own small and medium-sized businesses.

One of those friends recently came to me seeking counsel on obtaining insurance for his new small business.  While business owners are not normal clients for my practice, I can certainly provide insight as to how a personal injury lawyer might look at risks associated with any business venture.

Insurance! Insurance! Insurance! I cannot stress enough the importance of business insurance. Insurance should be a close friend of your business, and with that friendship comes more peace-of-mind.  Adequate insurance not only protects the assets of your business and your family, but it is also the right thing to do. While I suspect your business has no intention of hurting anyone or anything, accidents and mistakes do happen. It would be very risky to operate as though the actions of your company will never result in someone being hurt or killed. The risks are actually much greater than you know. Your company must protect against these potential accidents and mistakes, and your company must get adequate insurance.

In all the excitement of starting and running your own business, thinking about and obtaining insurance is not the most appealing. Budgets can be tight when running a business, but obtaining adequate insurance is absolutely critical to protecting you and your small business. Matters of liability and risk must be serious considerations in the management of your company. But, the good news is that a little insurance goes a long way in providing that protection and peace-of-mind. Once your business is adequately insured, you should be able to rest assured that your business and your family are secure.

This article will discuss some of the most common forms of business insurance that every business should consider.

Types of Business Insurance

By and large, insurance coverage is available for most conceivable risks associated with your business. Some of the most common forms of insurance include (1) general commercial liability policies, (2) product liabitly policies, (3) professional liability policies, (4) commercial property insurance, (5) automotive policies, (6) workers compensation insurance, (7) insurance for home-based businesses, and (8) umbrella / excess insurance.
The cost and amount of coverage needed for you company will depend on the type of company you are operating and your company’s potential exposure to risk. You should certainly discuss your specific business risks with a reputable insurance agent or broker to determine the specifics of your insurance needs.
General Commercial Liability Insurance
General Commercial Liability (“GCL”) insurance is something every single business must obtain. I say “must” obtain, because not having a GCL is not only extraordinarily risky, but potentially un-ethical.
While many believe their business operations would never result in the physical injury or death of another person, it can and does happen. In the unlikely, but tragic potential that the operation of your business results in physical injury to another, you need to be properly insured.  Again, whether you sell coffee, mow lawns, or operate an accounting firm, every single business has some exposure to mistakes and accidents that can hurt people. Your company should be covered by a GCL. This type of insurance provides protections from legal accusations and lawsuits arising from accidents, mistakes, injuries and claims of negligence. This policy protects you and your company against settlements and verdicts against your company as the result of bodily injury, death, property damage, medical expenses, libel, slander, the cost of defending lawsuits.  
The amount of liability coverage that your company needs depends on many factors, much of which center on the risks associated with your type of business. By way of example, a small accounting firm may have much less exposure to physically hurting someone than a coffee shop or concert venue. You should consult an insurance broker or agent in making decisions on the amount of coverage to obtain.
Product Liability Insurance
For those companies that design, manufacture, wholesale, distribute, or retail a product, your business may have “strict liability” for any defects, malfunctions or deficiencies of that product. This is true even if your company had no involvement whatsoever in the design or manufacture of the product and merely acted as the distributor. Product liability insurance protects against financial risks associated with a product defect that causes injury or bodily harm to another. Again, the amount of insurance your company should purchase depends on the risks associated with the products that your company manufactures or sells. A small clothing store would have far less risk than a car dealership.
Professional Liability Insurance
Businesses that provide professional services should consider having professional liability insurance (also known as errors and omissions insurance). Examples include attorney malpractice insurance, medical malpractice insurance, real estate agent insurance, and insurance coverage for professional engineers, architects, brokers, and construction contractors, etc..  This type of liability coverage protects your business against malpractice, errors, and negligence in providing professional services to your customers. Depending on your specific profession, you may be required by law to obtain professional liability insurance. For example, lawyers are required to purchase attorney malpractice insurance as a condition of practicing law.
Commercial Property Insurance
Commercial Property Insurance covers losses and damage of your company’s property due to a wide-variety of events such as fire, smoke, wind and hail storms, etc... The definition of "property" is normally broad, and can include lost income, business interruptions, buildings, computers, company papers and money. You must consult with your insurance agent or broker to more fully understand what the policy ultimately covers. Companies with a lot of physical assets or expensive assets should seriously consider this type of insurance coverage.
Automotive Insurance
If your company operates any motor vehicles, trucks, or commercial vehicles, your company will need automotive insurance. That includes everything from the local flower shop that delivers flowers, the accountant that pays personal visits, and any business that uses a motor vehicle in any aspect of its business. Just like insurance you obtain in the operation of personal motor vehicles, your business will need liability and property-damage coverage for the operation of motor vehicles in your business.  The amount of insurance your company needs will depends on the specifics of your business; but one must consider that risks associated with truck accidents or motor vehicle accidents are very high. Additionally, if your company involves use of a commercial motor vehicle, or transports goods or persons for profit, then your risks are especially high. For commercial motor vehicles, governments have special laws on the amount of insurance your company must carry. 
Workers Compensation Insurance
Depending on your state, your business may be required to carry worker’s compensation insurance for your employees. This insurance covers injuries to your business employees suffered during the course and scope of their employment with your business. You should consult your commercial insurance agent or broker about your state’s requirements regarding workers compensation insurance and assess your needs from that perspective.
Home-Based Business Insurance
Hark! Homeowners' insurance policies do not cover losses of a home-based business. Depending on risks to your business, you may look at adding a rider to your homeowners' policy to cover business risks such as property damage. But, in the end, homeowner policies with riders only go so far in covering home-based businesses, and you will certainly need some or all of the insurance policies discussed herein.

Umbrella / Excess Insurance Policies
I am big fan of umbrella / excess insurance policies. These policies protect against liabilities against your company over-and-above the underlying insurance coverage that your company already possesses. It’s an “umbrella” in the context that it provides over-arching insurance protection for the operations of your business, and it is “excess” in the sense that it provides additional coverage and protection on top of your current levels of protections. By and large, these policies are very cheap, but provide enormous peace-of-mind.

Conclusion

Insurance, insurance, insurance! Your small business needs insurance. Your medium business needs insurance. Your large company needs insurance. Every business needs insurance. That is fact. If your company does not have insurance, you and your company are acting in a very risky manner.  To assess your company’s insurance needs, sit down with an agent, broker or lawyer, and talk to them about your business. Accidents and mistakes will happen. Make sure your business is protected against these accidents and mistakes. It’s not only financially intelligent, but it is the responsible thing to do for your customers, employees and community. 

20 comments:

  1. Insurance plan will be the equitable move of the chance of the burning, derived from one of enterprise to an alternative as a swap regarding transaction. This can be a type of chance management mainly helpful to hedge from the chance of the dependant, doubtful burning. Insurance quote Mesa

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  2. Does every insurance company cover commercial businesses? Do they have to cover all your employees as well? That would have to be something to keep in mind when doing a budget. http://meyersinsurance.com/contact.html

    ReplyDelete
  3. I didn't realize that commercial insurance can also cover stolen property. That gives me one more great reason to look into it! My husband and I own a small business, and we always thought it wasn't worth getting insured, but it looks more and more worth it every day!

    Rosie | http://www.klondikeinsurance.com/commercial.htm

    ReplyDelete
  4. All of these different insurances are making my head swim! How do you know what kind of insurances you need for your business? For example, I own a small business and only have a few employees. With that being said, should I get worker's compensation insurance on top of the commercial insurance I already have?
    Claudia Rosenburg | http://www.klondikeinsurance.com/commercial.htm

    ReplyDelete
  5. My husband and I really want to start a business but are trying to work out all the details. There is a lot that has to go in to starting one up. If we do end up doing it we would definitely need insurance so this is good to know.

    http://www.natcorpbro.com.au/list.asp?pID=2

    ReplyDelete
  6. Interesting article about business insurance, Thank You

    Best Regards,

    Bisnis Asuransi

    ReplyDelete
  7. I think it's good for the smaller businesses to get insurance. I'm sure they'll need it for some sort of accident or court case. I would imagine that it's tough being a small business owner, but they can protect themselves by getting insurance. http://tallahassee-insurancefl.com/Business/

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  8. I had no idea that there was so many types of l insurance that a company could get. I had only herd of commercial insurance, property insurance and workers compensation insurance. What would you recommended getting for a medium sized business?

    Brad | Commercial Insurance

    ReplyDelete
  9. I have a small business, and I didn't think it would be this hard to find good insurance! I don't know exactly what kind of coverage I'm looking for, but I really need to get on it fast.

    Jim Tracy | http://www.klondikeinsurance.com/commercial.htm

    ReplyDelete
  10. It is good to know that coverage is available when it comes to being a small business. Having commercial insurance can carry a lot of benefits with it. I would love to open a small business one of these days.

    http://www.affordable-insurance-services.com

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  13. I am just getting my business started, and we are going to need insurance very soon. We already have over 100 customers, and 20 employees. I don't know why I haven't taken care of this yet, but sometimes finding the right insurance company for your business can be difficult. http://www.gregthomasinsurance.com

    ReplyDelete
  14. Business insurance to cover product liability must have very high rates these days, what with class action lawsuits and recalls every other week. To compensate one individual or another business is one thing; to try and gather help for everyone affected by a bad product would be monumental. The R & D department is under a lot of pressure to make it right the first time.

    Paul | benfarrarandco.com

    ReplyDelete
  15. My friend needs to get some insurance for his business. I think it is a good idea to get some quotes first before making a decision. Business insurance is definitely a necessity though.
    Gary Puntman | http://www.cranberryinsurance.net/Life-Insurance-Plans-Cranberry-Township-PA.html

    ReplyDelete
  16. You made sure to understood everything about the commercial insurance we have for our business. I think it's important that we know what is covered and what isn't. If we are aware of our circumstances and know the logistics of our insurance then we are less likely to find ourselves in a sticky situation. Insurance is great if you understand what it can do for you.
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  17. I agree that it's important to have a solid understanding of what is covered in a small business insurance plan, Nicole. My small business really needs to find an insurance plan right now. We want to find the right premium, so we're carefully going over all of the details before selecting a premium.
    https://www.orangeinsurance.com/business-quote.html

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  18. Having the right kind of insurance is really important for a business. Liability coverage is important for any business, but the degree and kind of coverage will be different. It would not be the same kind of coverage for a software company as it would be for a martial arts studio.
    http://www.ianhewitt.com.au/#!small-business-insurance/c12tu

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  19. Insurance is a very smart and very important thing to have if your a business owner. You never know what can happen and if something bad does happen and you don't have insurance to cover you the costs can be very bad. It's worth getting good insurance to cover your business.

    http://www.parkway.com.au/business-insurance/

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  20. I have built my own construction company for a year now. We are not insured as a company yet. I cannot even figure out how to offer each employee health benefits.
    http://www.parkway.com.au/business-insurance/

    ReplyDelete