Commercial Insurance and Why You Need it

Regardless of business type, size, or location, small businesses need insurance. In addition to insuring business assets, small-business owners are also protecting their personal assets and their reputation. As well, many states require small businesses to carry certain coverage, and for some businesses (such as building contractors), even customers may want proof of insurance coverage.

If you’ve previously passed on coverage because of the price, think again. You’re risking bigger costs if your business is found liable for a large loss.

Your agent can help you navigate the various coverage options available. But your first step is to decide what you want covered, what you need protection against, what losses and risks your customers face, and what risks or losses your employees face.

Small business insurance consists of three main components: liability insurance; coverage for property and buildings; and coverage for business equipment and other contents. The following are some types of available coverage:

Employer’s liability insurance:

Legally, businesses with more than one employee must carry this coverage. It provides protection for costs incurred (including damages and legal fees) if an employee becomes injured or ill as a result of his or her job.

Public liability insurance:

If your business regularly comes into contact with the public, this provides protection in the event that they or their property are injured or harmed in some way. This is essential if customers visit your business premises.

Professional indemnity insurance:

Mistakes causing financial harm to a customer or client can happen in a number of professions. Also known as errors and omissions (E&O) insurance, this covers claims or legal costs incurred if this transpires.

Key man insurance:

If an employee vital to your company’s success dies or is seriously injured and unable to work, key man insurance helps cover what the loss of this individual would cost your business. A coverage amount is decided before a policy is purchased by determining potential losses stemming from that employee’s absence (say your top salesman is injured). This may be hard to quantify, and the amount you’ve settled on may be insufficient, but at least there’s something there to compensate for the loss.

Business interruption insurance:

If a disaster causes you to shut your doors for an extended period of time, the losses could sink your business. This policy will allow you to return to original operation levels.

Commercial vehicle insurance:

If you or your employees drive company vehicles, this is required by law. The right coverage depends on the vehicles, and how often and how they’re used.

Insurance for property and buildings:

Business property damages and losses due to fire, lightning, riot, explosions, malicious damage, storms or floods, or vehicle damage is covered by most commercial policies.

Business contents insurance:

As seen, your property and building coverage for physical locations provides protection for buildings themselves-not their contents. This covers content losses inside your building and includes anything that would fall out if you turned it upside down.

Commercial Auto Insurance Can Save Your Company

If you or your employees drive vehicles for business, using standard auto insurance instead of commercial auto insurance can put your business at risk. Here are some benefits of commercial auto insurance:

Liability: Businesses run higher risks of being sued when commercial vehicles cause accidents leaving other parties injured. You should carry the highest liability limit you can handle. Available commercial liability limits are higher than standard auto insurance-ranging from around $100,000 to millions of dollars. Most commercial policies also offer single liability limit amounts.

Any auto liability: This extends your current commercial auto insurance liability coverage to any recently purchased, nonowned, or hired commercial vehicles.

Rental reimbursement and downtime: For businesses with incomes that depend on commercial vehicles, rental reimbursement helps pay for rental vehicles, makes vehicle payments, and covers other expenses and bills if you are unable to operate your commercial vehicle after an accident.

Individual named insured coverage: This extends coverage from commercial auto insurance to vehicles you drive for both business and personal uses.

Nonowned vehicle coverage: This protects you and your employees when driving any nonowned commercial vehicles for business purposes.

Single deductible choices: If your business vehicle uses specialty equipment or trailers, you can cover them as well as the vehicle. In the event of a single loss of multiple items, you’d only pay one deductible rather than a separate deductible for each item.

Does My Car Insurance Cover Other Drivers?

Many people are concerned about lending their cars to friends. They should be. They could be liable. If someone drives your car, it’s important to know if you’re protected.

States’ laws and insurers’ rules vary; your agent can explain them as they apply to you. In the meantime here are some general rules of thumb concerning who’s covered by your policy when driving your car.

Permissive Use Drivers (PUD)

PUDs have permission to borrow your car occasionally. For example, if a friend borrows your car to run to the store, are you covered?

Yes, but note that in a PUD accident, you and the PUD could face lawsuits to cover remaining accident costs if your policy’s liability limits are exhausted and your PUD has no coverage of his own. If the PUD does have vehicle insurance, the not-at-fault party can make a claim on this policy.

Household Members

Each state and insurer has different laws about household residents with drivers’ licenses who drive another household member’s vehicle.

Are your household members covered?

Maybe, depending on your state, insurer, and whether the household member is an excluded driver, nondriver, or driver on your policy.

If a household resident owns a vehicle and has his or her own insurance, he or she may be excluded from your policy; claims won’t be covered under your policy if this person has an accident while driving your vehicle.

If a household member classified as a nondriver has an accident driving your car, your claim would likely be covered. But nondrivers with licenses are rated on your policy as drivers, so if they have a bad driving record, this will impact your premiums.

If you don’t disclose household members, your insurer can deny claims and cancel your policy, and you could be sued and/or possibly charged with insurance fraud. When it comes to insurance, honesty is the way to the best policy.

Extra Coverage Can Help ‘Float Your Boat’ This Summer

Many boat owners assume their boats are covered under homeowners insurance policies. Homeowners insurance typically offers up to $1,000 in coverage for boats, boat trailers, motors, and related equipment-perhaps sufficient for small craft owners. However, the following exclusions exist:

  • Losses in the water, including damage from sinking and collision, including hitting rocks or other debris.
  • Wind loss if your boat is left in the open. Keep boats in a locked building on your property.
  • Flood damage.
  • Theft losses if they occur off your property. Take extreme safety measures to avoid theft when the boat is off your property.

Owners of high-value, regularly used boats may want to consider extra coverage, such as:

  • Coverage for hazards like sinking and collision is available as “special perils coverage.” Annual premiums are about 2 percent of the value of the boat and its related equipment, with at least a $100 deductible required. Higher deductibles mean lower premiums-which is good only if the premium savings justify the higher out-of-pocket expenses if losses occur.

Also, special perils coverage can usually be bought as a “scheduled item” on homeowners insurance. If you don’t have homeowners insurance, and/or need to save some money temporarily while still having limited coverage, some insurers may allow you to add your boat to your auto insurance. This should be considered temporary; you have the same limitations in coverage as with homeowners insurance, and this solution won’t cover loss of personal property on the boat.

Traveling? Check Your Health Insurance Plan First

A recent U.K. survey found that one in ten travel insurance customers did not acknowledge preexisting medical conditions if they thought their conditions were stable.

What is a preexisting condition? Insurers may define it differently, but any medical condition for which you have had symptoms, consulted with a medical provider, or have been treated is considered preexisting by most insurers. This includes adjustments or changes in medications for conditions considered stable.

Most policies have a “lookback period,” which determines the amount of time a condition must be stable to be covered. The lookback period varies by policy, but typically ranges from 60 to 365 days.

If you do plan to travel, note that your regular health plan may or may not include coverage. Although insurers are now prevented by the ACA from denying coverage for individuals with preexisting conditions, this may not extend to travel.

Says the Centers for Disease Control and Prevention (CDC): “Some health insurance carriers…may provide coverage for emergencies that occur while traveling abroad. Travelers should carefully examine their coverage and planned itinerary to determine exactly which medical services, if any, will be covered abroad and the level of supplemental insurance needed.

Among the many important items to look for in your policy are “exclusions for treating exacerbations of preexisting medical conditions,” the CDC adds. When a condition is stable for a long period of time, we may forget to report it. However, any omission related to a preexisting condition may invalidate your travel coverage.

Cost Management Tips for HDHP Policyholders

High-deductible healthcare plans (HDHPs) are great options for those seeking lower premiums. And, as many employers are now passing on more employee benefit costs to their employees, more individuals may find themselves with HDHPs. It’s estimated that in 2015, four of five large employers will offer HDHPs as an option, and one in three will offer HDHPs only.

While HDHPs are on the rise, so are HDHP deductibles. In 2014, the average deductible was $1,217 for a single employee with group insurance, almost twice what it was in 2006. And the increases extend to HDHPs offered through health insurance exchanges, as well as employer plans.

HDHPs are good options for many individuals and families. However, HDHP policyholders should understand that higher out-of-pocket costs mean that they must be very conscious of managing their healthcare costs.

For HDHP policyholders-especially those with extremely high deductibles-there are several ways to keep healthcare costs down without putting their health at risk. For example:

Practice preventive care: First, make full use of policy-covered preventive services even if deductibles haven’t been met. Second, improve your overall health and that of family members to avoid future health problems.

Track healthcare expenses: Keep receipts and records so you’ll know when you’re close to meeting deductibles.

Get price estimates for services you may need down the line, so you can plan ahead for possible healthcare expenses-which you may have to pay yourself if your deductible hasn’t been met.

Enroll in a Healthcare Savings Account (HSA), funded by an individual, an employer, or another individual, or in a Health Reimbursement Arrangement or Account (HRA), funded through an employer.

As always, read your policy very carefully. HDHPs can be good options, but they can also be confusing. Ask your insurance agent or your employer if you have any questions.

Employer Life Insurance May Not Be Sufficient

Many of us receive our life insurance through our employers, and it’s often cheaper that way. But there may be reasons to buy supplemental life insurance. Here are three:

It may not be sufficient

First, your employer may not offer enough life insurance to meet your needs. If your death would be a financial burden on your loved ones, experts often recommend you obtain coverage worth five to ten times your annual salary. And be sure you include supplemental income, such as bonuses and commissions, in your calculations of your annual salary; they count.

It may not be portable

Second, you could lose your coverage. When you change jobs, you typically lose your life insurance coverage; if you are going to a new job, it may offer coverage, but it may not be as good. This lack of portability is particularly problematic as we age, because as older workers we’re less likely to be able to qualify for an individual life insurance policy. And even if we are able to, it might be very expensive. As well, it’s always a possibility that your employer might stop offering life insurance to save money, leaving you without coverage.

Carrier ratings

Finally, with employer-sponsored life insurance, you don’t get to choose the provider. It’s possible that the insurance carrier your company has chosen is rated lower than you’d like, risking the possibility the insurance you paid for won’t be there when you need it. Your carrier’s A.M. Best rating will tell you whether it’s financially stable or not.

Be prepared

While it’s certainly wise to take advantage of the free or inexpensive life insurance offered by your employer, you may want to supplement it with insurance from other sources. Ensure you purchase when you’re younger and it’s less expensive, and buy sufficient supplemental insurance to ensure you’re covered in all eventualities, including job loss and declining health.