As every small business owner knows, small businesses aren’t immune to the many problems that larger businesses face. Managing financial and human resources, dealing with vendors and suppliers, and maintaining production and customer service are universal issues, no matter what size your business is. Similarly, protecting the firm’s assets against various types of risk is an overarching concern for large and small businesses alike.
As the owner of a small business, your insurance needs are in many ways unique to the type of product or service you provide. Nevertheless, there are certain coverages that most businesses need.
Commercial General Liability Insurance
Commercial general liability insurance is the foundation of your business insurance coverage. It protects your assets in many kinds of third-party claims, such as property damage, bodily injury and medical expenses claims. It will also help pay your legal costs in the event you are sued.
What Commercial General Liability Covers
To some extent, different types of small businesses face different types of risk. For example, a dry cleaning business would likely not be exposed to the same types of risk as a consulting business or computer repair firm. However, certain types of claims are common to many businesses, regardless of the specific type of product or service they provide.
Bodily Injury and Medical Expenses Claims
Any time customers visit your business establishment, there is a risk that someone could get hurt. No matter how safety conscious you and your employees are, an elderly client could trip over an oddly placed piece of furniture and break her hip, or someone could slip in a puddle of water left by your cleaning staff and sprain his wrist. In either case, the customer will expect you to pick up the tab for their medical costs, and may even file a lawsuit.
Fortunately, commercial general liability insurance will cover most bodily injury and medical expenses claims, as well as your legal and defense costs if you are sued. In many cases, it will also pay the cost of immediate medical care, such as an ambulance ride or a trip to an emergency room. In the event someone is seriously injured and requires long-term care, the cost of their rehabilitation and ongoing medical needs will be covered as well.
If you provide a service that requires handling a client’s property, you can be held liable for damage to property that is left in your care, even if the damage is not your fault. Say, for example, a customer leaves his $3,000 gaming computer at your establishment so you can install an upgrade, and one of your employees knocks it off the shelf. Or suppose a woman brings her $5,000 leather coat to your dry-cleaning establishment, and an employee inadvertently cleans it with the wrong solution, causing a huge and indelible stain. In both cases, you would be liable for repairing or replacing the customer’s damaged property, and you could even be sued.
Commercial general liability insurance protects your assets in instances like these and other similar events. Most policies also cover property damage that happens in a location other than your business premises — for example, if you are cleaning a client’s hardwood floors and accidentally knock over a $5,000 vase. In addition to paying to repair or replace the injured parties property, it will also cover attorney’s fees, legal costs, and any settlements or judgements awarded by the court.
Personal and Advertising Injury
The personal and advertising coverage in your Commercial General Liability protects your assets in the event you are sued for defamation, copyright infringement, invasion of privacy or other similar claims. For example, let’s say you own a car repair business and you post on social media that a competitor charges customers for services he doesn’t provide. The competitor could sue you for libel and — if the allegation is false — win.
Similarly, if you advertise your business using photos from a competitor’s website, or copy the logo of XYZ Widget Co. and use it as your own, the other company can sue you for copyright infringement. What’s more, it would most likely win.
In either case, your Commercial General Liability insurance will pick up your defense costs, as well as the payment of any settlement or court-ordered judgement that ensued.
If your company sells a product that causes injury to a third party, you can be sued for damages, even if the harm caused was not at all your fault. Suppose, for example, you’re an auto mechanic who installs new brake drums on a customers car, and the drums contain a manufacturing defect that you knew nothing about. The brakes fail, and the customer is badly injured as a result.
Even though you knew nothing about the defect, and even though the faulty brake drums were not your fault, you can still be sued under most state’s product liability laws. In fact, under the theory of “strict liability,” the injured party doesn’t even have to prove that anyone was negligent to win his case — just that a product defect occurred.
Product liability claims can be brought against any vendor in a product’s supply chain, including:
- The product manufacturer
- A manufacturer of component parts
- A company that assembles or installs the product
- The wholesale distributor
- The retailer who sold the product to the consumer
Fortunately, most Commercial General Liability policies offer protection in product liability claims, and will cover your defense costs and any monetary awards for which you are held liable by the courts.
Worker’s Compensation Insurance
Regardless of the nature of your small business, if you are an employer, you need Worker’s Compensation insurance to protect you and your employees. Although not all states require small businesses to carry Worker’s Compensation insurance, it is essential coverage if you want make sure your employees are covered in the event they are injured on the job. It also helps protect your assets from lengthy and financially devastating lawsuits.
Worker’s Compensation is no fault-insurance that will pay the medical expenses, rehabilitation costs and a portion of the lost wages of any employee who is injured on the job, It will also pay for job retraining in the event the employee cannot resume his normal responsibilities once he is able to return to work.
How Worker’s Compensation Protects You
The Worker’s Compensation insurance system is designed to minimize employee-employer lawsuits by providing a no-fault process for injured employees to receive the financial help they need. However, there may still be instances when an injured employee might sue your company if he sustains an injury at work.
Say, for example, you own an auto-body shop and an employee becomes ill because he was exposed to toxic chemicals on the job. If the employee believes you failed to provide adequate safety training or protective gear, and that failure caused his injury, he could sue you for negligence. Additionally, if the employee died as a result of his injury, his family could sue you for his pain and suffering or wrongful death.
That’s why most worker’s compensation policies include Employer’s Liability coverage, which defrays the cost of a Worker’s Compensation related lawsuits. The coverage will pay your attorney’s fees, court costs and any monetary damages awarded by the court.
Tip: In most states, insurance companies are prohibited from paying punitive damages which are, by nature, intended to sanction and deter egregious negligence or unlawful behavior.
Commercial Umbrella Insurance
While Commercial General Liability insurance protects your business against many kinds of risks, there are instances when just general liability coverage is simply not enough. Say, for example, you are sued for selling a skateboard that caused injury to 100s of customers. The court costs and potential monetary awards might easily exceed the limits of your coverage, leaving you on the hook for the excess costs.
What Is Umbrella Insurance?
Also known as excess liability coverage, commercial umbrella insurance expands the limits of your existing liability insurance, protecting your assets in the event of a long, drawn out lawsuit or large monetary claims. Umbrella insurance is relatively inexpensive, so it’s possible to increase your coverage significantly without breaking the bank.
Commercial umbrella insurance can expand several different types of coverage, including
- General liability coverage — covers third-party slip and fall accidents, product liability, and advertising and personal injury claims
- Employment liability coverage — covers worker’s compensation lawsuits
- Commercial auto liability — covers serious car wrecks for which you or an employee are at fault
Tip: Not all umbrella policies offer the same coverage, and exclusions often apply. Speak with your Carmoon Group agent to find a commercial umbrella policy that is right for you.
Commercial Property Insurance
Commercial property insurance protects you financially from many different kinds of threat, including natural and manmade disasters, vandalism and theft. If, for example, your entire office were destroyed in structure fire, your commercial property insurance would pay to repair or replace the property you lost.
Commercial property insurance covers many different types of business property, including:
- The physical structure in which your business is housed
- Office equipment, such as computers and printers
- Your personal belongings and those of your employees
- Business supplies
It may also cover the cost of keeping your business operations going while your premises are being repaired. Known as Business Interruption Insurance, this coverage will typically pay your:
- Relocation costs
- Cost of moving and storage of inventory
- Lost income
- Payroll expenses for employees who continue to work
- Operational expenses that continue even when business operations are temporarily on hold (for example, property taxes, rent and insurance costs)
Commercial Property insurance policies are normally written written in one of two ways:
- Replacement Value: This type of policy will pay you the amount it will cost to replace an item in today’s market regardless of how old the item is.
- Actual cash value This policy will pay you the replacement value of the item minus depreciation
The premiums for a replacement-value policy are, understandably, more expensive. But if you don’t have large cash reserves, it may be wise to pay more up front so that you can resume normal operations quickly after a loss.
Business Owner’s Policy
For many small businesses, buying separate commercial liability and property insurance is an unnecessary expense. If you run a small, low-risk business, you may qualify for a Business Owner’s Policy or BOP. This bundled coverage typically costs less than coverage purchased individually, and provides more than adequate protection for the average small business.
What Does a Business Owner’s Policy Include?
A Business Owner’s Policy combines your Commercial Liability and Commercial Property coverages into one. It covers your business premises, equipment, furnishings and personal property in the event they are stolen or damaged due to a covered peril, such as a fire. It also covers property that belongs to a third party that was left in your care (for example, a computer that was left at your shop for repair.) Many policies also cover your business property when it’s not on-site (for example, a business laptop that’s stolen from your car.) Business interruption insurance is typically included as well.
Business Owner’s Policies also provide liability coverage that protects your assets in the event you are liable for third-party damages or are sued. sued. Most policies offer the same types of coverage as Commercial General Liability insurance, including:
- Bodily injury
- Property damage
- Medical expenses
- Personal & Advertising Injury
The coverage will also pay your attorney’s fees, court costs and damages awarded by the court in the event you are sued. However, policy limits are usually lower than those for Commercial General Liability, so always discuss your exposures with your Carmoon Group agent before deciding on what’s best for you.
Tip: Not all small businesses will qualify for a business owner’s policy. If your business is highly specialized or classified as “high-risk,” this coverage may not be right for you. Additionally, larger businesses and those that need more than 12 months of business interruption insurance are typically not able to take advantage of a Business Owner’s Policy. Talk to your Carmoon Group agent to find the best policy for your needs.
Owning your own business is a challenging endeavor, and you’ve undoubtedly got a lot on your mind. Taking care of day to day operations is a full time job, so you probably don’t spend much time thinking about “what ifs”.
What if, for example, your office burned down or your inventory was destroyed in a warehouse fire? Or what if you were sued for sexual harassment by a disgruntled employee? Would you be prepared?
Business or commercial insurance protects your assets if you are liable for many different types of third party claims. But many business owners have no clear idea of what type of insurance they do and don’t need.
Since no two businesses are exactly alike, the type and amount of coverage appropriate for your company is difficult to predict. But if you own a small business with fewer than 20 employees, the questions below will help you determine what kind of coverage you need.
Do You Own A Small Business?
No matter what type of business you own, Commercial Liability Insurance is the backbone of your coverage. It protects your assets in the event that someone is injured or suffers damage to their personal property at your place of business and helps pay your defense costs if you’re sued.
If you are a professional service provider, such as a financial consultant, attorney, insurance agent or realtor, you may also need Professional Liability Insurance (Errors & Omissions coverage) in the event you are sued in connection with services you provided that caused a client financial or other harm.
Do You Own or Rent An Office?
Commercial Property insurance will help you rebuild your office and any adjacent structures in the event they’re destroyed in a fire, windstorm or other weather-related event. Commercial Property insurance is available as stand alone coverage, but it can also be bundled with your Commercial Liability insurance in a vehicle known as Business Owner’s Policy, or BOP. Not all small businesses qualify for this bundled coverage, but talk to your Carmoon Group agent to find out if you do.
Do You Have Employees?
If you have any employees, most states require that you carry Workers Compensation Insurance, which protects employees who are injured on the job. This no-fault insurance also protects you because it pays an injured worker’s medical expenses, rehabilitation costs and a portion of his lost wages. That means the injured employee doesn’t have to sue you to get the help she needs.
Most small employers also need Employment Practices Liability Insurance to protect their assets in the event they are sued for discrimination, wrongful termination, sexual harassment or other employment-related claim. Small businesses are especially vulnerable to these types of lawsuits because they rarely have a dedicated Human Resources department to advise them about applicable state and federal laws.
Do You Take Credit Cards?
If you accept credit cards or electronic payments, your customer’s financial data may be subject to a cyber attack. Even businesses that simply store customer information on a server are vulnerable to hackers, malware and denial of service attacks. Protect yourself from the financial consequences of a data breach with Cyber Liability insurance, which will assist you in paying for customer notifications, credit monitoring and the cost of complying with state and federal laws.
Do You or Your Employees Use a Vehicle for Work?
Even if you don’t own a dedicated company automobile, if you use a car, truck or van in your business, your personal auto insurance will not cover you if you or an employee is in a crash. You need Commercial Auto Insurance to cover any vehicle titled in your business’ name, and Hired and Nonowned Vehicle Coverage to insure any personal or rented vehicles that you or your employees use for work.
Are You a Nonprofit?
The directors and officers of nonprofit companies are subject to intense public scrutiny and are more likely than for-profit executives to be sued. To attract and retain the most talented professionals, many nonprofits purchase Directors & Officers Insurance, which covers legal fees, defense costs and any monetary judgements for a director or officer who is sued in connection with his role as a member of the board.
Do You Sell Liquor?
If you own a catering business, bar or restaurant where alcohol is served, Liquor Liability insurance is a must. In all 50 of the United States, your business can be held liable for alcohol- related damages that occur on your premises (such as a fight between patrons.) Additionally, all but eight states hold businesses that serve alcohol liable if they serve liquor to an intoxicated patron who then leaves the premises and causes property damage or injury to anyone, including themselves. Liquor liability insurance will help defray the cost of any legal action resulting from these kinds of issues. What’s more, it is legally required in most states.
Do You Have a Lot Cash on Hand?
Few small businesses have a lot of extra cash in the bank, which means they are ill-prepared if they should find themselves the subject of a long and costly lawsuit. With Commercial Umbrella coverage, you can increase the limits of your Commercial Liability and Commercial Automobile insurance by $1 million increments for a very affordable rate.
At The Carmoon Group, we specialize in creating small business insurance packages tailored to your unique needs. We work with a large network of affiliates rather than a single insurer, so we can find you the best coverage for your company at the most affordable rates. Call us at 516-292-3780 to set up an appointment for your insurance review, or request a free quote online now.