by Kathy Lamm
You’ve worked hard to build your business and want to be sure it is properly protected. Business Insurance can be complicated and expensive, especially for certain types of industries. Also, certain key events in your business may change your insurance needs. For example, staffing or ownership changes, leasing, remodeling or buying space, purchasing or leasing equipment or vehicles, large inventory changes, changing or adding different lines of business or any other material business change could warrant a need to adjust your coverage. Here are the most common types of insurance that business owners should consider and talk to their agent about:
General Liability/BOP
This is perhaps the most common and well-known type of insurance and is often referred to as “slip and fall” coverage. However, the right general liability package can be a very robust policy and protect you well beyond the typical client tripping and falling.
A general liability package policy (also known as a Business Owner Policy or BOP) can also provide protection for your building (if owned or required by your lease), your tenant improvements, your inventory, furniture and equipment, damage to your space, theft, loss of business income, signage and even credit card or data breaches. In addition, you are generally protected if you are sued for false advertising claims, defective work or damage to someone else’s person or business.
What a general liability policy or BOP will not cover is workers compensation, commercial vehicles or professional liability.
Professional Liability/E&O
Depending on the type of service you offer, you may also need to purchase a professional liability policy that covers the actual work that you provide. For example, a doctor or accountant would need a general liability policy to protect their office but then also a professional liability policy to cover their actions as a doctor or accountant. If they were to get sued for giving wrong medical or tax advice, a general liability policy will not cover them.
Professional liability policies (also referred to as Errors & Omissions or E&O) can be expensive depending on the type of profession you are in. You can almost always buy an individual policy; however, if your profession is part of larger association ( such as the American Medical Association or a State Bar Association), check to see if a discounted group option may be available.
Product Liability
If your business offers a product rather than a service, then you may also need additional product liability coverage. Your general liability policy should provide some coverage for products and completed operations however it may not be enough. If you manufacture, sell or distribute a product that could be considered higher risk, or if you wish to sell your product through a large retailer such as Amazon, you will be required to get a separate policy to increase your product liability coverage.
Commercial Auto
If you have vehicles registered to the business, they must be insured with a commercial policy not a personal policy. These could include vehicles used by the owners, sales people or employees, delivery vehicles, vans or trucks. For construction companies this could also include some heavy equipment.
If your vehicles are owned and insured by you personally, or you ask employees to use their own vehicles for company business, then it is highly recommended that you add a non-owned/hired auto endorsement to your general liability policy. This endorsement extends liability from your business policy to any vehicle not owned or rented by the business. If you (or an employee) are at fault in an accident while using your vehicle for business, your personal policy may not cover you and this endorsement will help to bridge that potential gap.
Umbrella/Excess
There may be occasions when the coverage offered by your general liability policy is not enough. In that case you can increase coverage by purchasing an umbrella or excess liability policy. It is important to note that this will usually only increase the limits on your general liability policy, not your professional, product or commercial auto policies.
Workers Compensation
Any person who works for you who is not a 15% owner or more (including family members) is legally required to have workers compensation coverage. If you use independent contractors and do not maintain proof that they carry their own insurance, you could also be liable to cover them. Another potential risk, especially for non-profits, schools or churches is volunteer labor. An honest conversation with your agent as well as a good safety record can go a long way to helping reduce your workers compensation rates. If you are required to have workers compensation and do not, your state board can immediately shut down your business and fine you heavily until coverage is in place.
Cyber-Liability and Employment Practices Liability
These are newer options and becoming increasingly more common. Both are usually quite expensive on their own but can often be added to a general liability or BOP at a fairly low cost. They offer lower levels of protection (usually $50,000 – $150,000) in the event you are sued for a cyber breach or for your actions as an employer.
Small businesses have a significant risk of cyberattacks. If you were to get hacked and a third party got a hold of any sensitive data (such as customer info, credit card info, medical data), you could be held liable. In some instances you may be required to follow a legal process of sending notice and offering free credit monitoring. You can buy additional coverage that will assist you in the event of a breach and help lower the overall cost to your business.
Also, there may come a time when you are sued by an employee for harassment, wrongful termination or discrimination. These suits are not covered by a general liability policy so this could be a potentially valuable addition to your coverage. If your primary concern is wage and hour complaints, be sure to check the coverage carefully. In many cases wage and hour complaints may be excluded or require an additional endorsement.
Key-Man/Buy-Sell/Retirement Planning
All business owners should have a succession plan. Your business structure, business partners, family dynamics and long-term goals all play a key role in the future of your business and can have a negative impact if you don’t properly plan. There are a variety of insurance and financial options available to help business owners pre-plan and pre-fund everything now to ensure smooth sailing down the road.
In conclusion, take the time to find a broker or agent who values long-term client relationships, takes the time to learn about your business and checks in frequently. A trusted insurance agent or broker is an important member of your strategic team and should be able to advise you as your business grows, changes or downsizes.
Kathy Lamm is a seasoned insurance and financial services professional with over 25 years of experience. She specializes in Commercial Insurance (business liability, property, worker’s comp, comm. auto) as well as Personal Insurance (life, home, auto, personal liability, landlord, specialty properties, recreational vehicle, flood, earthquake). You can reach her at 866-416-8939 or klamm@farmersagent.com.
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