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Business Insurance Your comprehensive guide
Business insurance protects owners from losses that they risk in the administration and operation of their business. Since the size, function and infrastructure of each organization is unique, assessing material risks and purchasing the right business coverage can be a difficult and complex process.
$171.8B / 39%
While business owners frequently underestimate or completely overlook their insurance coverage needs, premiums paid on commercial insurance policies still make up the largest sector of the U.S. insurance market.
Assess Your Coverage Needs
In order to properly evaluate your insurance needs, you need to have detailed financial records and a list of possible risks to compare to the losses you could suffer. That means you should sit down and take an inventory of your major assets and risks to review with your broker. Start by putting together a full spreadsheet of your organization s assets, financial obligations and the risks any sudden changes could bring to them.
Obviously, the format and prioritization of this inventory will depend on the type of business you run, how you produce value and what kind of product you deliver to your market. It s best to cull all of this information from your existing business plan if you have one.
These are the most basic considerations you ll want to cover, regardless of the type of organization you run:
- Property and vehicle damage: Can cover damage to a building, its contents and any other piece of equipment or vehicle owned by the company.
- Income lost due to business interruptions: Covers some of the expenses and income lost when a fire or another emergency causes a business to shut down
- Liability costs: Assumes the legal responsibility and costs a business may have to undertake when they cause harm to others
- Workers compensation: Pays for the medical care and a lost wages that a business is legally required to pay when an employee is injured, regardless of fault.
Ultimately, you want to assess the value and risks of all of your assets. For most businesses, this means listing assets in terms of potential losses related to property damage and liability costs. Measuring each risk will provide windows to other potential exposures and you will need to determine the best way to protect your business from losses related to each. For example, a fleet of company owned vehicles can produce damage to the vehicles as well potential legal liability if they are involved in an accident. Loss of vehicles can also produce loss of business income.
As you take this inventory remember to include physical properties like buildings, land, office equipment, and vehicles, as well as your intellectual and financial properties like investment capital, securities and current insurance policies. For each asset, source of income and operational cost, consider:
- What is this asset worth? Identify the replacement values and potential liability costs associated with each
- How critical is this asset our operations? Determine if/to what extent your operations could continue if one of these properties was damaged or lost
- How could this asset be lost and what would happen if was? Figure out what circumstance or events could lead to loss or damage of each asset or the ways in which you would be rendered unable to cover your current operational costs
Understand Your Policy Options
Now that you know your basic coverage needs, you can start shopping for policies that make sense for your organization s budget. This sounds harder than it is — most small businesses require similar types of coverage, so now it s just a matter of researching types of coverage and start working with an agent to find a best-fit business owner s policy package. If you have an existing relationship with an insurance carrier that may be a building block for purchasing additional coverages. Here s a breakdown of the coverage options available:
Business Owners Policies
These all-in-one package policies, often called BOPs, are often ideal for small to mid-size businesses that require standard coverages, such as small offices, stores and some types of small service and processing businesses. Eligibility for BOP packages depends upon:
- The size of premises and value of its contents
- The level of liability coverage required
- The type of commercial operation and extent of off-premises servicing
Private Sector Business Starts, 1993:Q1 — 2012:Q4*