Frequently Asked Questions for Business Insurance

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Business insurance protects your company from loss, damage and liability. For example, if some of your business property gets damaged, your insurance would cover some or all of the cost of repairing or replacing the property. If one of your customers is injured at your business, your business insurance would cover the their medical bills. Many small business owners buy a Business Owner’s Policy (BOP), a package policy that covers major property and liability exposures as well as a loss of income if your business cannot operate for a period of time.

If your business is sued either for something your business did or did not do, liability insurance can cover you. Liability insurance covers damages and settlements stemming from a lawsuit, up to the policy limits. Many liability policies also cover attorneys’ fees and other costs associated with defending against a lawsuit. However, you would need an employment practices liability policy for protection against claims of discrimination or harassment.

Yes. Even if you work alone, you should have property and liability insurance to protect the assets of your business. You also may need worker’s compensation insurance to cover part-time or temporary employees and yourself. You can check with your state insurance department to find out your state’s worker’s compensation requirements.

The following list is just a brief example of the kinds of property business insurance can protect:

• Owned or leased buildings.
• Building improvements.
• Boilers and machinery.
• Furniture and supplies.
• Owned or leased equipment.
• Inventory.
• Money and securities.
• Important papers and business records.
• Books and documents.
• Automobiles and trucks.
• Construction equipment.
• Signs, fences, and other outdoor property.
• Intangible property such as patents and trademarks.

Property insurance is based on your property’s actual cash value (its replacement cost minus depreciation), its current replacement cost or another agreed-upon amount, such as an appraisal.

Homeowners policies are not designed to cover home-based businesses. Most homeowners policies limit property losses to $2,500 in your home and $250 away from home. These limits probably would not cover damage to or the loss of your business assets, such as computers, fax machines, telephones, file cabinets, and other equipment. Also, homeowners policies do not include business liability coverage.

Only entities that have more than 50% of the ownership in common may be combined on one policy.

The type of business insured determines who can be covered under the policy. For instance, if you own a business as a sole proprietorship, then you and your spouse may be named insureds under the policy. If your business is a corporation, then you and others can be named insureds, as well as executive officers, directors, and stockholders. However, any parties insured are covered for liability claims and damages related to activities or services performed for the business, not for personal liability.

The types of businesses that typically can obtain a BOP include the following:

• Accountants.
• Appliance repair shops.
• Bakeries.
• Dental offices and laboratories.
• Doctor’s offices.
• Funeral homes.
• Hair salons.
• Laundries and dry cleaners.
• Law firms.
• Locksmiths.
• Photocopying centers.
• Shoe repair shops.
• Small manufacturers.
• Watch, clock, and jewelry repair shops.

Businesses with risks outside the scope of a BOP include the following:

• Amusement parks
• Auto dealers and repair shops
• Banks
• Bars
• Restaurants
• Theaters

Umbrella Insurance is an extension of liability coverage (Umbrella, that sits on top of your typical auto and homeowners policies). In the event that your financial loss exceeds the amount covered by other liability insurance policies, a umbrella policy coverage will be triggered, up to the limit of the policy. Sometimes the insurance company also protects the insured in situations not covered by the usual liability policies. Be sure to read your policy!

1. Protection for claims of personal injuries or property damage caused by you, your employees, or hazards on your property, for which you are found legally liable.
2. Personal liability coverage for incidents that occur on or off your property.
3. Additional protection above your basic auto policy for auto-related liabilities.
4. Protection against personal injury claims, such as slander, libel, wrongful eviction, and false arrest.
5. Legal defense costs for a covered loss, including lawyers’ fees and associated court costs.

Umbrella policies typically provide broad coverage. Furthermore, if something is not expressly excluded from coverage, it is covered. Exclusions vary from one insurer to another, and from one policy to another, but the following are some typical exclusions:

1. Intentional damage caused by you or an employee.
2. Liability that you accept under the terms of a contract or agreement.
3. Liability related to the ownership, maintenance, and use of aircraft, nontraditional watercraft (jet skis, air boats, etc.), and most recreational vehicles.
4. Damage to property owned, used, or maintained by you (the insured).
5. Damage covered under a workers compensation policy.
6. Liability arising from an act of war.

There is no exact way to figure the appropriate level of umbrella coverage you need. Your first impulse might be to protect your assets, but this figure is practically irrelevant. A judgment against you could easily wipe out your assets and put your future earnings in jeopardy. Instead, consider factors such as how often you have visitors at your business, how much you and/or your employees drive for business, and whether your business could give the impression that you have deep pockets.

Coverage limits vary, but a typical policy will provide $1 million to $10 million worth of liability coverage.

Workers compensation insurance provides coverage that is purchased by the employer to cover certain employee-related injuries incurred while “on the clock”. In the event that an employee is disabled or killed on the job, the dependents are paid benefits by the insurance company.

Most states require that all employees must be protected by state workers’ compensation coverage. Among the factors considered by state laws are whether the employer controls the actions of the worker and whether the work performed by the worker is part of the regular business of the employer. Independent contractors, agricultural employees, domestic employees, and casual employees are usually not covered under workers’ compensation statutes.

Depending upon your state’s laws, failure to carry workers’ compensation coverage may be punishable by fines, civil penalties, criminal penalties, exclusion from public contracts, and/or cease and desist orders.