New Year’s Resolution: Review Insurance Coverage
At the start of a new year, it’s important for small business owners to review their business and financial plans. Part of reviewing these plans includes making sure the business’ current insurance still fits the business’ current needs and risks.
Protecting your business with insurance is a critical part of small business ownership. You put your business at risk if you don’t have adequate coverage. Uninsured catastrophic losses can threaten the very existence of the business you have worked so hard to build. Insurance is a form of risk management essential to all businesses.
Securing the right type of insurance – as well as the right amount – can make the difference between a business that succeeds and one that fails due to under-insured or non-insured losses. Each business and its particular situation is unique. There are many variables that determine the right insurance for your small business including business structure, business activities, and location. To protect your business, you must accurately assess the risks you face and choose insurance accordingly.
Below is a summary of the kinds of business insurance to consider for your small business:
- General Liability Insurance – provides protection against claims of negligence, accidents, and injuries.
- Product Liability Insurance – protects against financial loss as a result of a product defect that can cause injury.
- Professional Liability Insurance (commonly referred to as Errors and Omissions Insurance) – protects service providers financially in the case of a claim against them for negligence, errors, or wrongful acts in the performance of their duties.
- Commercial Property Insurance – provides coverage for loss and damage of company property due to a variety of reasons. Property insurance policies come in two basic forms: (1) all-risk policies covering a wide range of incidents and perils except those noted in the policy; (2) named-peril policies that cover losses from only those perils listed in the policy. All risk-policies generally cover risks faced by the average small business, while named-peril policies are usually purchased when there is a high risk of peril in certain areas. For example, if your business is located in a flood zone, you need to get a separate flood insurance policy.
- Business Interruption – covers lost profits if your business is shut down or seriously disrupted by a covered loss.
- Workers’ Compensation and Disability Insurance – required by NYS law if you have any employees.
- Business Life Insurance – covers numerous problems that arise with the death of a business owner.
- Business Owner’s Policy – provides protection from a wide assortment of risks in one complete package.
- Home-Based Business Insurance – most homeowners’ policies contain a business use exclusion that denies coverage to business equipment, supplies, and inventories. Depending on risks to your business, you may add riders to your homeowner’s policy to cover normal business risks such as property damage. However, homeowners’ policies only go so far in covering home-based businesses and you may need to purchase additional policies to cover other risks such as general and professional liability.
Things can change over time. An annual insurance “physical” ensures you continue to meet the needs and risks of your business. Since there is such a wide variety of insurance available, always discuss your business insurance needs with a professional insurance agent, broker, or consultant.
Mary Ellen Smyth is the Director of the NYC Business Solution Center in Staten Island. If you have a question or comment for Mary Ellen, drop her a note below. And, please share this blog entry with your colleagues on Facebook, Twitter, LinkedIn, email, and your favorite social media sites.