First, start by imagining a disaster. One day, you get to work — the first one there as usual. You find the door already unlocked, which sends up a big red flag in your mind because you know you locked the door the previous night. (You are last to leave as well.) You open the door and find . . . desk drawers open, file cabinets overturned . . . and the personal computers on each desktop — where are the PCs?
By the time your employees arrive for work, you have realized you are living a worst-case scenario. The office has been gutted by thieves, and there’s no way your business can be operational any time soon. When you consider your insurance you need to be in this mindset so you can plan for the worst. Below are a few topics and points to consider.
For business with moderate risk and common type of business a business owner policy will be available. A business owner policy is known as a BOP in the insurance world. A BOP comes with a package of coverages that include types of property and types of liability coverages. Too many to list here, but we will touch on a few of the most beneficial ones in my mind.
1) Business Income: this coverage protects you from the loss of income. For example if a fire occurs and you can’t open your doors for 2 months. The loss of income during that time can be a very large loss, and with this coverage it will be covered.
2) Glass deductible buy back: Most policies will come with a 1K or higher deductible, you might know that, but did you know that most leases you sign make you responsible for the exterior glass? So if someone throws a rock thru the window you are left footing the bill. With this coverage there is a zero deductible.
3) Outdoor sign coverage: On a BOP sign coverage is a lined item and not part of your personal property so it’s very important to address the coverage for your signs.
4) You business property and your improvements need to be covered and often the greatest exposure businesses face.
5) Liability: Advertising, Products completed operations, Personal injury, Medical, and Premise and operations, to name some of the coverages. A loss without coverage here can close a business down so it’s important to consider your risks and coverages.
1) Not distinguishing between business property and tenant improvements. The business properties are items that can move and aren’t built into the building. They are more likely to be stolen and cost more per thousand to insure. The tenant improvements like walls, built in shelving, etc. have lower cost per thousand and should be broken apart.
2) The insurance company insures the location and 100 feet away. If you start moving things to a warehouse, new location, at your home, or transporting items you are at risk and need to let the insurance company know so it can be covered properly.
3) Update changes with the insurance company. A small change in your business can sometimes mean big changes needed on the policy to be covered properly.
There are many factors that drive the cost of coverage or even if particular company will write your policy for you. Below are a few of the biggest factors.
1) The type of business plays a major role in cost and eligibility. Insurance companies like businesses that are common so they can pool risk and understand the business. They use Sic codes to accomplish this.
2) Number of employees helps gauge the exposure for the insurance company and influences cost.
3) Total receipts, just like number of employees, gauges the exposure and cost.
4) If a big part of sales is alcohol, you can expect to pay more.
5) If you are a direct importer from oversees and then you sell wholesale, it’s going to cost. Since it’s hard to sue back to the real wholesaler you bear almost all the risk and so in turn the insurance company does too.
The above items are just the tip of the iceberg for Business insurance and for this reason business insurance shouldn’t be treated like commodity item. Not all policies are the same and a good agent is important to partner with the business, and develop a relationship. From there they can guide you to coverages and foresee issues.