Types of Insurance You Need as a Small Business Owner

Small Business Owner Insurance

If you are the typical small business owner, spending time on insurance is probably not high on your list of desired activities. You have plenty of other things on your plate. However, you understand that in order to properly protect your assets, protect others, and comply with state, federal, lender, landlord, and customer requirements – you need insurance. Since you need it, it is important that you have a basic understanding of the exposures and the types of insurance you need as a small business owner.

This article is intended to give you a basic introduction to the major coverage options so that you will be better prepared to talk to your insurance agent about exposures, insurance coverages, and priorities.

The types of insurance you need vary based upon the size of your company, the jurisdictions you operate in, and the nature of your business. Because of the breadth and complexity of insurance exposures and coverage, working with a knowledgeable independent insurance agent is highly recommended.

 

Business Liability Insurance

Buying A Basket Of Coverage

The good news is that most insurers of small businesses have created affordable packages or baskets of coverage designed to meet many of the core protection needs of small business owners. They often refer to these baskets of coverage as a BOP or a Small Commercial “Package” Policy.   Often, insurers have bundles of coverage that are designed for specific industries – doctors, dentists, attorneys, gas stations, dry cleaners, restaurants, etc.. These packages are usually the most affordable way for such a business to purchase coverage. However, these packages are not meant to be “all” that is needed in the way of coverage. Usually they need to be supplemented by additional insurance purchases.

These packages will usually address coverage for a number of the exposures that are typical to a small business:

  • General Liability Coverage: This coverage part usually provides insurance for your premises liability (bodily injury and property damage), products liability (bodily injury and property damage), personal and advertising injury (slander, libel, false imprisonment, use of another’s advertising slogan, etc.), and medical payments (small amount of coverage for medical payments for visitors who are injured on your premises – without regard to liability). It is important that you give your insurance agent a list of all of the types of services and operations you engage in so that he or she can make sure you are properly covered for General Liability. If, by written or oral contract, you have assumed the liability of others, you will also want to give the details of such contractual assumptions of risk to your agent. You should review all contracts with your agent to see if you have obligated yourself. One common obligation assumed in property leases is Fire Legal Liability, which is liability for damage to the property of others resulting from a fire emanating from the space you lease or the operations therein.
  • Property Coverage: Property insurance usually covers your real and personal business property – buildings and contents. It is important that you share with your agent the types of property you have and where that property is located.   If you have other people’s property in your care, custody, and control, you will want to provide details to your agent. If you have exposure to goods while in transit (either incoming or outgoing) you will want to provide details to your agent.   If you have property at temporary locations, such as job sites or public warehouses, provide details to your agent.   It is advisable to secure some type of a reasonable limit on your policy for property at unnamed locations, just to be safe.When you get your insurance policy, it is highly recommended that you look at the “exclusions,” the definition of “property covered” and the listing of “property not covered.” Reviewing these will often lead you to realize that you have an exposure that is not covered, which you then may desire to discuss with your agent.
  • Business Income Coverage: Business Income covers the loss of income you sustain (and possibly continuing wages for your employees – if you select the option “including ordinary payroll”) during the period of time that your business is disrupted due to a covered loss to your real or personal property. Some package policies include this coverage on an “Actual Loss Sustained” or “ALS” basis. These business income policies typically have no dollar limit on them for your loss of income coverage, and typically cover the actual loss of income you sustain during the “period of indemnity,” which is typically the period of time it takes you to repair your facilities with due diligence and dispatch.As the income of most businesses continues to be reduced for a period of time after the repairs have taken place to your premises (it takes a while to win customers back) it is often advisable to secure a policy with an “extended period of indemnity” feature, which may cover the continuing reduction in income you experience after the repairs to your facility have been completed.If your policy does not provide business income coverage on an “Actual Loss Sustained” basis, then you will need to pick a limit of insurance on your business income policy.   Pick this limit wisely, and work with your CFO and CPA on determining possible worst case scenarios.If you have long-term contracts with customers, recognize that most business income policies exclude loss of income resulting from the cancelation of contracts. So, if a client refuses to pay or cancels their contract to avoid paying, then you may not be covered.  If damages to your premises results in the loss of a contract to serve or supply a key customer, this could put you out of business.If you have such an exposure, talk to your agent about the possibility of getting this exposure covered.   An extreme example of this would be the owner of a metal shop who builds a new facility just to make front fenders for a new car model of a major automobile manufacturer.     The business owner secures a four-year contract with the auto company and then builds a new facility just to make the fenders. The building is hit by a tornado and the automobile company cancels the four-year contract, moving it to another metalworker, who can immediately begin producing the fenders.The typical business income coverage also will only provide coverage for loss of income resulting from insured loss or damage to your real and personal property at your premises.   For many business owners, a loss at a key supplier’s or a key customer’s location could cause a significant business income loss.   You can usually buy coverage for business income loss resulting from losses by insured perils at the locations of key suppliers or key customers. This is often referred to as coverage on “feeder” or “dependent” properties and is also sometimes referred to as “contingent business interruption” coverage.
  • Extra Expense:   While “Business Income” covers the loss of income you sustain during an insured disruption of your business, “Extra Expense” typically covers the additional costs of maintaining services to your customers during the period of interruption.   This coverage can be very important. A good example is the dry cleaning business.   If you ran a dry cleaning business in a strip mall, what would happen if your strip mall burned to the ground?   If it took six months to rebuild the location, for those six months your customers would be going somewhere else for their dry cleaning. How many of them would bring their business back to you when you reopen six months later?   If they had a good experience at a different dry cleaning business, they might never come back.If you had Extra Expense coverage, you could rent a new location right away, do additional advertising, and perhaps send a mailer to your customers informing them of your new temporary location. You would then be more likely to keep your customers and your reputation.The typical “Extra Expense” coverage will reimburse you for such reasonable costs of continuing to serve your customers. When you do purchase “Business Income” coverage, you should strongly consider also including “Extra Expense” coverage, particularly when you serve customers out of a fixed location, there are many substitutes to your product or services, or your business relies on the use specialized equipment.
  • Crime Coverage: Crime policies typically cover Theft or Burglary of Money and Securities.    They typically have an On-Premises Limit and an Off Premises Limit. You also can purchase coverage for loss of Money and Securities resulting from Employee Theft, Robbery, Forgery, or Computer Fraud. If you are in the business of handling financial transactions for others – banks, stock brokers, lenders, leasing companies, investment managers, trust operations, etc., or if you handle on-line financial transactions, you will want to be extra diligent in sharing the extent and nature of these exposures with your insurance agent. Employee theft/embezzlement is one of the largest exposures to small businesses, and Computer Fraud is a growing exposure.
  • Employee Benefits Liability: This coverage, also known as EBL, generally provides coverage for liability arising out of errors or omissions in the administration of employee benefits plans. For example, if you forgot to place coverage on an employee for medical coverage and she then incurred a sizable uninsured medical bill.
  • Fiduciary Liability: The Employee Retirement Income Security Act of 1974 established that fiduciaries can be liable for losses resulting from errors or omissions in the administration of benefits or for breaches in their fiduciary duties.   ERISA lays out some of the duties and responsibilities of employers as respects their administration of benefit plans. (Click here for more information on ERISA.) It is becoming increasingly difficult for employers to keep up with all the fiduciary requirements they face.   If your business offers employees health care coverage, retirement plans, 401k’s, profit sharing plans, stock purchase plans, or similar benefits, your agent will likely recommend this coverage. Talk to your agent about your exposures here and your agent will help recommend the coverage that is right for you.Optional Coverages You Can Add To A Package Or BOP Policy
  • Cyber Liability/Data Compromise/Data Breach:   In the event there is a data/personal information breach, this coverage may protect you for your legal liability as well as provide credit monitoring services and credit restoration services for your customers.   It may also cover fines that you face as a result of the information breach and the cost of attending administrative hearings.
  • Equipment Breakdown Coverage: Potentially covers the cost to repair or replace property damaged from explosions of pressure vessels or the cost to repair or replace machinery, boilers, office equipment, HVAC systems, or electronic equipment damaged by mechanical and electronic breakdowns. May also cover resultant business income loss. Coverage can vary tremendously by insurer.
  • Accounts Receivable: Usually providing coverage for the loss of receivables due to your inability to collect them as a result of loss or damage to your records by an insured peril. It will usually also cover the cost to reconstruct those records in order to collect from customers, if that is feasible and economical.
  • Valuable Papers: Can provide coverage for the cost of recreating valuable paper or digital records of things like manuscripts, deeds, maps, drawings, abstracts, and similar valuable documents.   If you have a physical or digital exposure to such items in your business, talk to your agent about the particulars.
  • Fine Arts: The typical property policy either excludes fine arts, has a small sub-limit on fine arts, excludes some of the main perils of concern (breakage for example), or does not have the right policy valuation clause for fine arts.   If your business has fine arts such as paintings, statues, sculptures, or collectibles, discuss the details with your agent so you can secure the proper coverage.
  • Outdoor Trees, Shrubs, & Plants: These are typically excluded or severely limited in property policies. If you have expensive landscaping, you may wish to talk to your agent about securing specific coverage. Additionally, if you are actually in the business of growing, selling, or installing trees, shrubs and plants, you will want to talk to your agent about securing the right type of coverage.
  • Exhibition/Fair/Trade Show/Sales Samples Coverage: If you carry products, booths, sales samples and similar types of properties to exhibitions, trade shows, or to customers, you may want to secure coverage for this by endorsement.   Some business owners have high valued booths and displays that they bring or have a contractor bring to shows. Sometimes these are worth hundreds of thousands of dollars.
  • Signs/Glass/Lettering: Your insurance policy may or may not automatically cover signs, building glass, or lettering/decals painted or placed onto glass.   Signs, particularly those that are outside of the building, can be rather expensive to replace. Talk to your agent about your exposure to these items to make sure you secure the proper insurance coverage.

 

Business Property Insurance

Other Property Coverage You May Wish to Consider

  • Earthquake: Earthquake coverage generally covers loss or damage resulting from earth movement caused by earthquake, but may also, depending upon the policy, cover earth movement from other causes, including some that are manmade.   If your property is in an area with a known exposure to earthquake, you may wish to secure a quotation for this optional coverage.   Deductibles typically run $25,000 or more.   If your building is sprinklered, you may also wish to purchase earthquake sprinkler leakage coverage, which will cover the loss that results from water leaking from your sprinkler system as a result of earth movement.   Earthquake sprinkler leakage coverage, often referred to as EQSL, is generally relatively inexpensive compared to purchasing Earthquake coverage on your building and contents.

The potential for earthquake damage is sometimes assessed based upon the likely intensity of the forces at a particular building site.   “Modified Mercalli Intensity” is one of the common measures used.   Click here to learn more about the Modified Mercalli Intensity Scale.

There are a variety of sources you can use to look up the Modified Mercalli Intensity grading for the location where your property is located. Your agent can work with an insurer to get you information.   You can click here, for a link to a USGS hazard map that will give you a sense of the relative earthquake damage risk across the country.

  • Flood:   Flood endorsements are not all the same, so you will need to read them to see what you are actually buying.   Flood coverage can include the rising of waters beyond their normal boundaries, the inundation of normally dry lands from excess rains, sewer backup, and possibly additional causes of water damage.   Flood coverage can sometimes be restricted, where you have the endorsement, but it states that coverage does not apply in certain federal flood zones.   If your property happens to be in one of those designated zones, you may not have coverage.   When you are in a known flood zone, most insurers are likely not going to be interested in providing flood coverage.   In such cases, the National Flood Insurance Program may be your only option to secure coverage.   Click here for more information on the National Flood Insurance Program, which is commonly available through your local insurance agent.
  • Sewer Backup: Sewer backup is generally available as an optional endorsement. It usually covers water which backs up through sewers and drains. However, sewer backup endorsements vary tremendously. Some will not cover water that backs up unless that backup is caused by a blockage in the sewer system.   In such a policy, you would not have coverage if the sewer simply backed up due to inundation from heavy rains.   Most sewer backup policies do not cover sewer backup that results from the rising or overflow of a body of water.   So, if your sewer backs up because of the nearby river flooding, you will likely have no coverage for that sewer backup loss unless you also purchased Flood coverage.
  • Windstorm: While windstorm coverage is normally included in most property policies, it is not uncommon for insurers to exclude the perils of windstorm and wind blown water in areas that are highly susceptible to windstorm loss. In Florida and in coastal areas of Alabama, Louisiana, Mississippi, North Carolina, South Carolina, and Texas, insurers may exclude windstorm and ask you to secure coverage through the state-sponsored wind insurance program.  Your independent agent can help you navigate these waters.

If you are interested in more details on any of these specific insurance coverages, one good place to look is the IRMI website.   IRMI is the International Risk Management Institute. Click here to be redirected to their website.

 

Small Business Employee Insurance

Workers Compensation & Employers Liability Coverage

  • Workers Compensation Insurance: Covers a portion of an employee’s lost wages and covers the reasonable cost of medically necessary services that arise as a result of an injury sustained in the course and scope of employment.   The laws on workers compensation vary tremendously by state.   If you have employees, you should presume that, by law, you need to secure workers compensation insurance, unless your agent advises you otherwise.Owners, officers, partners and volunteers may or may not be covered, and you should have a conversation with your agent about whether you desire coverage for owners, officers, partners, and volunteers.If you have no employees, but use “independent contractors,” do not just assume that you do not need to secure workers compensation insurance coverage. If someone is badly injured, the state will be looking to find coverage for the injured worker. The state is likely to take a very narrow view of who qualifies as an “independent contractor” when faced with an injured worker that has no coverage. Always talk to your agent before deciding you do not need to purchase workers compensation coverage.Some states have options that allow you to opt out of the workers compensation requirement. If you are contemplating such a move, you should make sure you receive counsel from a professional who truly understands the potential legal and financial consequences of doing so.
  • Employers Liability Insurance: This coverage is generally intended to provide an employer protection for suits arising out of injury to employees in the course and scope of employment when, for some legal reason, the workers compensation benefits are deemed to not be the exclusive remedy available to compensate the employee, his family, and those who depend upon the employee. It is usually sold as part of the workers compensation policy.   However, it is sold stand-alone for exposures in North Dakota, Ohio, Puerto Rico, the U.S. Virgin Islands, Washington, and Wyoming, where the government is the sole provider of workers compensation coverage.

Other Major Insurance for Small Businesses

While all of the potential coverage needs of a small business can’t be addressed in a short article, and you really should consult a professional, independent insurance agent, here are a few other major coverages that you should consider purchasing:

  • Directors & Officers Insurance: D&O Insurance generally provides protection to the directors and officers of an organization for suits alleging harm as a result of wrongful acts committed by them in their capacity as directors and officers. Such suits can come from stockholders, other owners, employees, former employees, people who received services from a non-profit, customers, creditors, and a variety of other sources – including competitors.   Coverage may also be purchased to protect the entity itself, which is usually referred to as “entity coverage.”Many owners of private companies, who have no stockholders, wrongly assume that they have no exposure to the management liabilities covered by a D&O policy. As shown above, stockholders are but one of the many potential sources of a management liability lawsuit. For profit, not for profit, public, and private companies all have exposure to management liability lawsuits.   You should talk to your insurance agent about your exposures and whether you should secure a D&O policy.
  • Employment Practices Liability: An EPLI policy generally provides coverage for suits against an employer alleging wrongful termination, discrimination, retaliation, harassment, hostile work environment, breach of contract or other employment related issues.   As small employers often do not have attorneys and human resources professionals on staff, their controls to guard against EPLI exposures are often not as solid as you might find in a larger organization. The exposure to EPLI claims is significant. You should talk to your agent about the cost of securing some level of coverage for EPLI.   The cost of defending even a baseless EPLI claim can easily run $50,000 or more.
  • Pollution Liability:   Pollution policies vary tremendously, and are often customizable. A pollution policy typically covers the costs for clean-up of accidental pollution, liability losses arising out injury, illness or death caused by pollution or contaminants, and liability for property damage caused by pollution and contaminants.   If your business: deals with hazardous substances, potential pollutants, contaminants, or irritants (including the transportation thereof); does any environmental assessments; performs any mold remediation, asbestos remediation, environmental engineering, water damage remediation, environment remediation; or performs any other services that may involve pollutants, contaminants, or irritants; you have a heightened need for pollution liability coverage and should definitely discuss the details of your operations and exposures with your insurance agent.Any time your business is buying or selling a property, you should also talk to your insurance agent about pollution liability.
  • Liquor Liability: General liability policies usually provide some coverage to your organization for liability arising out of “host liquor,” which is generally liquor that was served but not sold.If serving or manufacturing liquor is part of your business (restaurant, bar, brewery, liquor distributor, liquor store, liquor manufacturer, wedding caterer, etc.) you will generally need to secure a separate liquor liability policy. Any time liquor is sold, whether on or off the premises, you will likely need to purchase separate liquor liability coverage.When thinking about your liquor liability exposures, don’t just think about your normal, daily operations.   Special events, like fundraisers, are often sponsored by organizations and often involve the sale of liquor.   This is particularly the case with many non-profits.
  • Products Recall Coverage: If you produce or sell products, or components or ingredients to the products of others, that could potentially be dangerous and could potentially lead to the need to recall products for the sake of consumer safety, you may wish to secure product recall coverage. This is particularly the case when your product is one that is potentially subject to certain well known food borne illnesses, when your products are used in drugs or nutriceuticals, or when your products are used by young children.
  • Manufacturer’s Errors & Omissions: Manufacturers E&O coverage typically responds to your liability for damages resulting from your negligence in the design or manufacture of products or component parts.   If you custom design and build products to meet individualized customer needs, you manufacture equipment to customer specifications, or you represent that your products meet certain specific quality, performance, or durability standards, you should probably talk to your insurance agent about manufacturer’s errors and omissions coverage.
  • Umbrella Policy: An excess or umbrella policy is often purchased to provide higher liability limits. Automobile, General Liability, and Employer’s Liability policies usually are issued with limits of $1,000,000 or less. Umbrella policies are often purchased to provide limits that apply above those provided on the underlying liability policies. An umbrella policy will typically have a schedule of underlying insurance policies.

The traditional “umbrella liability” policy usually covers those areas of insurance and exposures that are included in the “primary” liability policies plus other exposures not excluded by the umbrella policy language. Coverage provided by an “umbrella liability” may be broader than the coverages provided by the underlying liability policies.

An “excess liability” policy is usually “following form,” meaning that it usually covers only what is covered in the underlying primary policies. Insurers will sometimes attach additional exclusions to excess and umbrella policies, to exclude certain risks that they do not wish to entertain or to add absolute clarity as respects their coverage intentions.   For example, insurers will often add an “absolute pollution exclusion” to their excess and umbrella policies to make it absolutely clear that they intend to provide no pollution coverage.

Excess and Umbrella policies do not provide additional limits of coverage on all coverages that are included in your primary underlying liability policies. Coverage in your excess or umbrella policy is not afforded for many of the exposures that are sub-limited in your primary underlying policies. You should talk to your insurance agent to get a better understanding of what excess and umbrella policies do and do not cover.

  • Auto Policy: Auto policies can be purchased to provide liability coverage for liability arising out the ownership, maintenance, or use of your vehicles. You can also purchase coverage for loss or damage to the vehicles themselves (comprehensive & collision coverage). Automobile coverage has many different options.   It is important that you sit with your agent and walk through the various options. Optional commercial auto policy coverages you should likely discuss with your agent are:
    • Hired and Non-Owned Liability;
    • Hired Car Physical Damage;
    • Drive Other Car Liability and Physical Damage;
    • Underinsured and Uninsured Motorist;
    • Rental Reimbursement & Towing;
    • Glass;
    • Lease Gap;
    • Specialized/Custom Auto Equipment;
    • No-Fault/Med-Pay/PIP.
  • Professional Liability/Errors & Omissions: Professional/E&O policies usually cover liability for damages arising out of acts, errors, or omissions in the conduct of a professional service that requires specialized training or certification. General Liability policies will often exclude coverage for Professional Liability exposures, making the purchase of separate coverage necessary. Some examples of the types of professions requiring coverage are:
    • Engineers;
    • Architects;
    • Appraisers;
    • Lawyers;
    • Accountants;
    • Medical Professionals;
    • Programmers;
    • Social Workers, Priests, Pastors, Rabbis;
    • Advertising Agencies;

When you give your insurance agent a complete description of your operations, he or she should be able to determine whether you need professional liability coverage and what type(s) you need.

  • Abuse & Molestation Coverage: If your operations involve services to or supervision of vulnerable children or vulnerable adults, you may want to purchase a separate coverage part for abuse and molestation.   This will typically cover the liability of the organization for abuse and molestation of others by employees or volunteers. Some examples of organizations that should consider purchasing this coverage are:
    • Religious Institutions;
    • Day Care and Pre-School risks;
    • Schools;
    • Providers of services to the mentally challenged;
    • YMCA’s, Boy Scouts, Girl Scouts and similar youth organizations;
    • Any other organizations working with youth – youth sports, boys & girls clubs, camps, tutors, etc.
  • Inland Marine: There are a variety of “inland marine” forms designed to provide coverage for specific exposures that are unique to specialized business operations.   Some common examples include:
    • Contractors Equipment: Covering backhoes, bulldozers, lawnmowers and similar equipment used in your business;
    • Installation Floater: Covering property being installed on customers’ premises up to the point that is has been accepted by the customer – kitchen cabinets, millwork, interior build-out, etc;
    • Testing/Hot Testing Coverage: If you are in the business of selling and installing machinery and equipment, there is sometimes a proving or testing period for the equipment where you have a financial interest in the equipment and are responsible for it until it has been tested, proven, and accepted by the customer.   Often, your Installation Floater (see above) will exclude coverage for damage to machinery or equipment while being tested. If you have this exposure, you will want to discuss it with your insurance agent;
    • Builders Risk: Covering structures you are building or remodeling until the work has been accepted by the buyer or the work is completed/ceased;
    • Rental Equipment Floater: Covering equipment that you rent from others;
    • Rigger’s Liability: Covering your liability for loss or damage to goods that you were hired to move (usually with a crane or other specialized lifting equipment);
    • Motor Truck Cargo: Covering your liability as a common carrier (trucker) for damage to goods of others in your care, custody, or control;
    • Bailee Coverage: Covering your liability for loss or damage to property of others that is in your care, custody or control for repair, cleaning, appraisal, or storage;
    • Transportation: Covering goods while in transit to or from your organization at your risk, whether on your vehicles or the vehicles of others. You may need an Ocean Cargo policy if your transportation exposures involve transit via waterways or aircraft, or involve international transit;
    • Patterns, Dies, Molds: Covering patterns, dies and molds of others in your care, custody, or control;
    • Precious Metals: Providing coverage for precious metals used in your business;
    • Jewelry Coverage: Covering jewelry and precious stones held for repair, sale, cleaning, or appraisal;
    • Employee Tools: Covering employee tools on your premises or worksites.
  • Health Insurance: Health insurance can be secured on just select individuals or offered more broadly on a group basis. Many coverage/benefit level options are available and various deductible and coinsurance options are available.Legal requirements for when it must be offered, and what level of benefits you must provide, vary by the size of your firm, where your employees are located, and the contractual requirements you may have with some of your customers. The Affordable Care Act also mandates the provision of coverage in certain instances and mandates minimum coverage standards.It is important that you understand what is required and that you comply, at a minimum, with such requirements. An insurance agent with knowledge of health insurance can help you to navigate these waters.
  • Disability Insurance (Short Term & Long Term):   Disability insurance is designed to replace a portion of your employees’ salaries when they are unable to work, or unable to fully return to their prior duties as a result of a disability.   Coverage can be on a short term basis or a long term basis. Generally, only a percentage of an employee’s income is covered, in order to provide more incentive for the employee to actively try to rehabilitate and return to work.   Coverage can be purchased on a group or an individual basis.   Coverage is generally reasonably priced.   This is a coverage that most employers should offer to their employees, even if they pass along the full cost of the program to the employees. One out of every four workers will experience some form of a disabling injury before retirement. As a small business owner, disability insurance is one coverage you personally should not go without. While you can always file bankruptcy if you face liabilities that you failed to insure, if you are unable to work due to a disability, you may be unable to generate any income for the rest of your life.   The benefits you may be able to collect from Social Security for a qualifying disability are minimal.
  • Travel Accident Insurance: Generally these programs provide coverage for accidental death or dismemberment during business travel. Coverage usually has a schedule of benefits based upon the type of accident and there is a separate limit for accidental death. They can be purchased on individuals or as a group program.   Coverage is generally very affordable.
  • Life Insurance:   These policies generally pay out a specified amount in the event of the death of a covered individual.   Coverage can be purchased on an individual basis or as part of a group program.   Many small business owners will purchase coverage on themselves or on certain key employees to make sure they can provide for loved ones when they are gone or provide for the orderly transition of their business if they or a key employee dies unexpectedly. Life insurance is also often purchased as part of an estate plan or tax strategy to help facilitate the transition of the business to new ownership upon the death of an owner. Many coverage options are available and a significant degree of customization is available.   Often tax, legal, and insurance professionals work together to formulate the best overall approach to be taken in the purchase of life insurance.
  • Kidnap & Ransom Insurance: K&R insurance is purchased to provide coverage for kidnapping (ransom), extortion, hijacking, and wrongful detention. It generally covers the services of dealing with the negotiation and crisis and also provides coverage for the ransom that must be paid to protect the people or property from harm and to recover the people or property.   Coverage is often highly customizable and coverage varies tremendously from insurer to insurer. If you or your employees will be working in areas of the world where there is a significant exposure to kidnapping and extortion, it may be wise to secure a quotation for this coverage. There is often a warranty in these policies that you can not divulge to anyone that you have the coverage. Failure to comply with this warranty could void coverage.
  • Foreign Insurance Coverage: The coverages outlined up to this point are often restricted to the United States or to the United States and its territories and possessions. (In fact, some of them may be restricted even further than that.) It is quite possible that your business has exposures outside of the United States. You should talk to your insurance agent about all of your foreign exposures.   Below you will find a list of a few of the foreign exposures you will want to bring to the attention of your insurance agent if they apply to your business situation:
    • You or any of your employees travel outside the United States on business;
    • You sell products outside of the United States;
    • There is a high likelihood that your products will end up outside the United States or be used outside the United States;
    • You have property that you own or have a financial interest in that is outside of the United States;
    • You have key customers outside of the U.S., or you have key suppliers outside of the U.S.;
    • You have employees working abroad for you;
    • Your business owns, leases, or rents vehicles outside of the Unites States or has employees driving their own vehicles outside the United States.

Note that if you operate a home based business, your homeowner’s insurance policy will likely offer limited or no coverage for business related property and will likely be lacking many of the coverages you would get with a quality small business commercial package policy.

Although this introduction to the some of the potential insurance needs of a small business is lengthy, it doesn’t cover every possible insurance coverage needed and does not go into detail on some of the restrictions and limitations that may apply to each coverage.  For example, your small business might have special exposures such as owning an airplane or watercraft. You should consult a professional agent to discuss your exposures and coverage needs.   It also is important that you read your insurance policies, as doing so will often make you aware of important conditions or restrictions.

Even a smaller business faces complex exposures and should involve an insurance agent in the process.

Other Enhanced Insurance articles related to Small Business Insurance:

How Much Does Business Insurance Cost

Independent Contractor Insurance

Should a Small Business Buy Insurance Online

First Named Insured in Commercial General Liability Insurance

Small Business Insurance

Home-Based Business Insurance

Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.

While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.

13 Types Of Insurance A Small Business Owner Should Have from Forbes

Jim Ketterson is an insurance expert with more than 25 years of experience in the industry. He has served as a President of an insurance company, an insurance underwriter, and has held various roles in insurance company product management. He has his Chartered Property Casualty Underwriter designation and a MBA in Finance. The information he offers in his posts is general in nature and may not be appropriate, accurate, or applicable in all situations. Before making any important insurance decisions, you should seek the advice of a qualified insurance agent and discuss the particulars of your individual situation. Follow Jim on Twitter @MNinsurancePro

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