3 Benefits of a Business Owner’s Policy.

What is a BOP?  If you work in insurance long enough, this becomes a question you receive quite frequently.  Many small businesses shop their policy around themselves to many different insurance companies. This can save those businesses some money, but it does come at the expense of the business owner’s precious time. Most insurance companies attempt to remedy this problem by offering a Business Owner’s Policy (BOP).

Find the answers to your questions about a Business Owner's Policy at My Insurance Question.com

A Business Owner’s Policy is an insurance package designed for businesses in a particular industry. These packages can be adjusted to fit the needs of each individual business, but they most commonly come in packages specific to each industry.  Over time, insurance companies have found certain coverages are needed by all businesses in a particular industry.  Because they have a unique insight in to the loss history of many businesses in that particular industry they tend to recommend a certain package of policies for that industry.  By offering a business owner’s policy, insurance companies can make sure there are no gaps in coverage.  At the same time they can make sure the business is not carrying too much or unnecessary coverage. Carrying a BOP benefits a business owner in three main ways.

Pricing

Pricing is one of the first aspects that attract business owner’s to choosing a BOP.  Insurance carriers are more likely to give businesses a discount if they know they are going to sell a business multiple policies. Business Owners can do the shopping for themselves, but they have to spend time searching for better coverage and price instead of working on their business. With the help of a good independent insurance agent, a business owner can allow the agent to shop the policy around to many insurance carriers. This allows the agent to negotiate the best price and the most complete coverage. For this reason, it is important to choose an insurance agent who has relationships with many insurance providers, not just a select few. Many agencies work exclusively with just a few carriers and this does not allow the agent to shop around your policy if you are in a tough classification code or have a negative claims history.

No gaps in coverage

Another great reason to consider a BOP is to ensure there are no gaps in coverage. Shopping for your policies individually might save a business a few bucks on the front end, but it be very detrimental to your business when a claim occurs.  This is a portion of the insurance industry where a few grey areas occur. When an incident occurs and a business has policy from many different carriers, at best they business will have to wait additional time while the carriers determine who is liable for the claim.  At worst, having several different carriers can cause the claim to not be covered at all.  On the contrary, if the policies are all with one carrier, the underwriter will just determine which policy needs to kick in and then processes the claim.  This is because, if you have a BOP with just one carrier typically there is General Liability, Professional Liability and an Umbrella policy. In this case the insurance company just determines which policy is in effect and processes your claim. When every policy is carried with one insurance carrier, that carrier can ensure there are no gaps in your policy.

Certificates

The final way businesses benefit from carrying a Business Owner’s Policy is when there is a need for a certificate. This occurs when businesses are involved in projects they are contracted on. Many artisan contractors do work for several general contractors. Take an electrician as an example. For each general contractor an electrician does a project for they need a certificate proving insurance coverage. If each coverage is with a different carrier that is an additional call the electrician has to make. If that electrician has a BOP they call one agent and can get a certificate for all of their policies.

These are three of the many benefits business owners get when they go with a Business Owner’s Policy. BOP’s are a win-win situation because the insurance company benefits from more business while the business owner benefits from having better service, more complete coverage and usually a better price. When in need of a business insurance quote it is also important to consult with an insurance agency who partners with many carriers. This will allow their agents to shop the policy to more carriers and ensure your business is getting the best coverage at the absolute lowest rates in the industry.

Business Interruption Insurance

Business Interruption Insurance is the key when disaster strikes your business.

Business Interruption Insurance is the key to protect your business when disaster strikes.

Having good commercial insurance is essential to the long term stability of your business.  It is a product that is necessary for you business, but a product you hope you never have to use. When there is a disaster that strikes your business, the quality of your coverage can mean the difference between a bump in the road and the end of your business.  One key policy to help your business whether the storm when a disaster strikes is business interruption insurance.

According to the Insurance Information Institute, “Business interruption insurance compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the revenue you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt”.

This policy is normally offered as part of a Business Owners’ Package, but not always.  It is important to confirm with your agent if this is included in your package.  If it is not they will more than likely bring it to your attention as an add-on.  It is a policy to strongly consider for your business.  This business can help you pay necessary bills, retain key employees and may just be the difference between success and failure when a claim occurs.

In most states general liability and workers compensation insurance is required by law, but those are the bare minimum coverages any business should secure. Most businesses need several additional coverages to properly protect the organization.  If you own property or vehicles their is a need for commercial property and auto coverage.  If you own specialized equipment there may be a need for inland marine coverage.  The one frequently forgotten coverage is business interruption coverage.  Many small business owners fail to anticipate how they will pay their bills in the event a claim causes their business to be closed for a period of time.  When this occurs the bills keep coming and payroll has to be met.  If you are a cash strapped company, failing to secure this coverage may cause the ultimate failure of your business.

5 Ways to Save $$$ on commercial insurance

5 Ways to save on Commercial Insurance

Partner with an independent insurance agent. 

The first and foremost way to save money when you are purchasing commercial insurance for your small business is to partner with an independent insurance agent.  Independent agents have the ability to shop your policy around to a number of carriers who are actively quoting policies in your industry and classification code.  Carriers appetites for particular coverages and class codes can vary dramatically from carrier to carrier.  If you use an agency who partners with only one carrier or a select few, you are putting your business at the mercy of those few carriers. If you are in a high risk classification code it may result in you only have the choice of one carrier. Independent agents can prevent this policy by shopping your policy around so you don’t have to.

Consider bundling your coverages

Carriers offer the ability to bundle policies in the form of a Business Owners Package (BOP) or Commercial Package Policy (CPP).  The carriers do this as a way to save money for small businesses and the carrier benefits by securing more commercial insurance coverages from the small business owner.  This benefits the small business community in many ways. First, it saves on premium because carriers are more willing to give a credit or discount if they know they are collecting on several policies.  Also, and possibly more important, it prevents gaps in coverage.  If a business owner purchases several policies from a number of carriers their may be a grey area in between the two policies that causes the incident to not be covered by the policies.  Even if the occurrence is covered it usually takes a longer amount of time to get a pay out because the two carriers debate who is actually liable for the claim.

Set up a Safety Program

Safety Programs are a great way to limit your commercial insurance cost without a lot of time or effort from your business.  Safety Programs can help you get coverage if you are in a hi-risk industry that many carriers are hesitant to quote coverage.  It can also help you prevent a carrier from raising your rates due to a large or frequent claims in one term.  On top of saving money on insurance premium, safety programs help your workforce stay healthy and productive which is good for your productivity.

Request a policy review.

A policy review can be asked for at any time on all commercial insurance policies.  Periodically it is important to do this for a few reasons.  One the review may identify you are in the incorrect classification code that is costing you unnecessary premium.  This is especially important if you change something about the operations of your business.  A great example of this would be if you are a landscaping company that has decided to add snow removal services to your business.  Most insurance agents will exclude this part of the policy unless you specifically tell them you do snow removal.  A policy review can either prevent an uncovered loss or lower what you pay in premium throughout the year.

Ask for available credits and debits. 

Insurance agents interact with a lot of customers throughout a typical business day.  These customers are usually from diverse backgrounds and they each have their own priorities when shopping for commercial insurance.  Some just want to get the process over quickly so they can get back to running their business. Other business owners want to make sure they have their business insured to the fullest capabilities possible.  Other business owners do not mind if it takes them an entire business day if they can save 5-10% on premium.  Expressing your priorities to your agent is important to help them serve your needs.  Additional credits or debits may be available for your business, you may just have to ask.

 

 

My employees drive their own car for work, do I really need separate Commercial Auto Coverage for their Cars?

Won’t their personal insurance plans cover any wrecks they have?

The answer to this question is yes and no.  Like most things in life it depends.  If your employees drive their personal cars for business operations, you do not necessarily need a full commercial auto insurance policy.  There is another policy that will cover just this situation.  The coverage is called Hired and Non-Owned Auto Coverage.  This coverage is specifically for businesses who have employees who either use their personal car for work or drive a rented car at some time for business purposes.

Commercial Auto Insurance

Hired and Non-Owned Auto Liability covers bodily injury and property damage caused by a vehicle you hire (including rented or borrowed vehicles) or caused by non-owned vehicles of your employees. In most cases it does not pay for the physical damage to the vehicle itself; that’s covered by the owner’s insurance. Although this option is available on some policies.

Whether you realize it or not, as a business owner, you at least occasionally find yourself in situations where this coverage is needed. Errands and rental situations always come up. Just a few examples of when there is a need for this coverage include:  When you send an employee to pick up lunch, renting a car while on a business trip, to impress a client, you send a limo to pick them up, or an employee runs to pick up office supplies at the local Sam’s club.

So the answer to the original question: Won’t their personal insurance plans cover any wrecks they have? It may cover damage to their vehicle, but in most cases it will not cover any liability to the other person who’s may be injured or whose car has been damaged. The reason for this is because the only reason the employee is driving at the time of the wreck is because of the directions of the business.  Had the person not been working there is no reason to believe the person would have been behind the wheel at that place in time. For that reason, the liability is the responsibility of the business and not the individual employee. This is why it is important to have the right form of commercial auto insurance.

For this reason, it is crucial to secure hired and non-owned auto coverage for your business.  Not just a commercial auto insurance policy.  It can be added to most business owner’s policies for a minimal amount. No matter what the amount of the premium, it will most certainly be less than the damage to your business if an accident happens and you are not covered.  Uncovered losses involving a vehicle are the types of losses that some businesses are not able to survive.

 

 

Declaration Page. What is it? Where is it? Is it important?

I am sure at some point in time you have had an insurance agent ask you for your policy declaration page or pages. If you are like most business owners, you think to yourself what are they asking me for. Basically, what these pages represent are the cliff notes of your insurance policy for that particular line of insurance. You will notice that your worker’s compensation declaration page is shorter than your business owners package or general liability. These declarations will not list all of the exclusions in your policy.  It will only list the coverage limits you currently have. Here is the definition of declarations: The front page (or pages) of a policy that specify the named insured, address, policy period, location of premises, policy limits, and other key information that varies from insured to insured. The declarations page is also known as the information page. Often informally referred to as the “dec” or “dec page.”

 

The next thought most business owners have is, where do I find the declaration page. The declaration page or pages can be found in the front 3rd of your insurance policy. Most of the time it’s within the first 10 pages. This is especially the case for worker’s compensation. For your general liability and business owners package policy it may be a few further pages in. The key to identifying it is when you start to see wording such as limits or premium. When you see that and how the premium pricing is broken down then you are in the right place. It will show your experience mod from the current term, premium discounts, state taxes, fees, expense constant, and a few other items on there. Some of this will vary on what type of policy it is.

 

This information is important to insurance agents for a wide variety of reasons. Most of the time a business owner thinks we only want to see these pages so that we can beat the price on your current policy. Yes, that is helpful information to use but it doesn’t necessarily mean that our carriers will just price it below your policy just in order to win your business. Our underwriters like to know pricing information so they can compare it to other policies that are either doing the exact same type of business or something very similar, and offer you a quote accordingly. If they generally don’t know what you are paying, then they will go on the conservative side and offer a policy that is in the average of pricing for that industry based on where they have priced and written the type of business you are doing. I feel, the most important reason for this to me is that I like to view these pages to give you an apples to apples comparison of the two policies. Also, I can check to see if you are truly covered correctly.  If their may be gaps that are missing some key coverages or are underinsured in areas that you would not want to be underinsured in.  Thus we can present you with a quote exactly like the one you have with the same coverage and limits. This will also enable us to present another quote option, if necessary.  Typically this option is where we think your limits should be and additional coverages that you may not have that most people in your line of work have. The key to remember when being asked for your declaration page or pages is that we as insurance producers are wanting to make sure your covered correctly and at a fair price. We are here to get you a fair price, but we are also here to make sure you do not have any gaps when a claim does occur.  We don’t like audit surprises or coverage gaps at the time when you think you are covered just as much as you do. The declaration page is so much more than just a price to beat.

General Liability Insurance

General liability insurance protects a company’s assets and pays for obligations. For example, it covers medical costs incurred if someone gets hurt on your property or when there are property damages or injuries caused by you or your employees. Liability insurance also covers the cost of your legal defense and any settlement or award should you be successfully sued. Generally, these include compensatory damages, non-monetary losses suffered by the injured party, and punitive damages. General liability insurance can also protect you against any liability as a tenant if you cause damage to a property that you rent, such as by fire or other covered loss. Finally, it can also cover claims of false or misleading advertising, including libel, slander, and copyright infringement.

General Liability Insurance

Getting liability insurance is a wise investment that doesn’t cost much – annual premiums could range from $425 and up on your line of business and coverage needs. That’s certainly a lot less than the thousands, if not millions, of dollars you may need to spend fighting your case in court. General liability insurance can be purchased on its own, but it can also be included as part of a Business Owner’s Policy (BOP) which bundles liability and property insurance into one policy. If you have a BOP, check it to see what your liability coverage limit is. You may find that it is quite low, in which case you may need additional coverage through a separate policy. There are specific liability products catered to contractors that you can add some tools and equipment coverage making it into a BOP that costs the same if not better than just getting liability coverage by itself. The coverage you need depends on the type of business you are in and the perceived risk associated with it.

How general liability insurance works is the same as many insurance plans, your general liability policy will outline the maximum amount the insurance company will pay against a liability claim. So, if your small business gets sued for $250,000 for medical costs associated with an injury caused by a worksite hazard, plus an additional $100,000 in legal fees, but your coverage maxes out at $300,000, then you are responsible for paying the difference of $50,000. If you are on the higher end of the risk scale and already have general liability insurance, you can also opt for umbrella insurance that increases your coverage limits. This will cover you in situations in which you’re worried that your existing coverage won’t cover all your costs should someone file and win a claim against you. The most commonly asked limit we have found is $1,000,000 per occurrence with a $2,000,000 aggregate.

Find out if your business needs a commercial umbrella policy at myinsurancequestion.com

 If an incident occurs that may lead to a claim, you should notify your insurance company or agent immediately. Be prepared to explain what has happened in detail including the time, date, the names of any witnesses, and any other pertinent information.

Remember General Liability Insurance just like all other kinds of insurance are designed to help you in a time of need. Make sure you review your policies with your insurance agent on a regular basis.  This can help you make sure you are up to date on coverages and that you have the limits that best suit your business. This is important because your business has probably changed a great deal from the first time you took a policy out when you open your doors.

Inland Marine Insurance Coverage

Four things to remember when purchasing Inland Marine Coverage.

 

Inland Marine Coverage is frequently referred to as ‘Floaters’ or ‘Equipment’ Coverage. That is because it is designed to protect equipment that a business owns, leases or rents that is not a vehicle or a piece of property. It is also typically equipment that is going to be transported in some way shape or form. This can include a mower that a landscaping business is transporting to a clients premises or a product being delivered to a customer. Many business owners think this part of their business is covered by their basic general liability policy, but that is incorrect. If they partner with a good insurance agent they know what is and what is not covered by each of the policy they may or may not be purchasing for their business. If you find that inland marine coverage is right for your business, here are four things to keep in mind in relation to this policy.

  • Choose an agent who partners with many carriers and not just a select few. 
  • Determine the proper classification code for your business. 
  • Inventory all equipment that needs to be protected under the policy.   
  • Establish a good working relationship with your Insurance Agent.

Choose an agent who partners with many carriers and not just a select few. 

By choosing an agent who partners with many different carriers you are allowing yourself to let the insurance agent shop the policy for you. Some agents work with only one carrier or just a select few carriers. This means they are not able to make sure you are getting the absolute best coverage at the best price. You can always shop the coverage around to several agents, but wouldn’t your time be better spent running your business. Finding an agent you trust and who knows your industry well can allow you to let the insurance professionals do their job. It allows you to get back to doing what you do best, which is running your business.

Determine the proper classification code for your business. 

Most industries have several classification codes within the industry. Insurance agents and insurance carriers are in the business of analyzing risk. It is in the best interest of their business to always assume more risk until proven otherwise. If you are in a less risky classification code within your industry the agent and carrier are only going to know this if you bring it to their attention. Otherwise they will probably assume your business takes on more risk. This will result in you paying more premium and may cause some claims to not be covered. Now, these mistakes typically do get fixed at the end of term audit, but even when they are fixed you still have been tying up cash into premium you did not owe that could have been used to reinvest in your business. In some cases if you are classified into a less risky class code you will owe more in premium after the audit. In the worst case scenarios your claim may not be covered because you are misclassified and the carrier would not have offered coverage in your higher risk class code.

Inventory all equipment that needs to be protected under the policy.  

It is very important to keep an up to date inventory of all the equipment you want listed under your Inland Marine Coverage Policy. Taking pictures of the equipment is a good idea as well because if there is a claim you will get replacement level value for the equipment that is damaged or destroyed. If you have an expensive version of whatever piece of equipment you are covering the best way to prove that is with a picture. Keeping this information on file with your agent and especially your carrier is crucial when a claim does occur.

Establish a good working relationship with your Insurance Agent.

The better relationship you have with your agent the smoother the process will be when you go to renew your policy and when a claim inevitably does occur. If they know you, your business and what is important to you as a business owner they can better insure your business the way you want it to be protected. Some business owners are okay with excepting some of the risk. Other business owners want to be protect to the fullest limits of the policy. The agent can only attempt to cover your business the way you want them to if you let them know what you expect and how you run your business. This relationship can also come in handy when a claim does occur. If you were combative during the quoting process and then your business has a claim six weeks into your term it does not speak highly of the way you operate your business. On the contrary, if you take some extra time to explain all the intricacies of your business and the way in which you want to be insured during the quoting process it starts off the relationship on the right foot. Later when a claim does occur this process will move through much more smoothly and your agent will be much more likely to go to bat for you with the insurance carrier.

20 terms you need to know when purchasing or renewing commercial insurance

For many business owners, purchasing insurance is a foreign concept. Like many industries there are terms only the insiders know and they frequently use when discussing the policies. Here is a list of 20 terms that will give you a leg up the next time you are purchasing or renewing your commercial insurance policy.

 20 commercial insurance terms to be aware of the next time you look to buy small business insurance.

Insurer –  a person or company that underwrites an insurance risk; the party in an insurance contract undertaking the risk to pay compensation.

Insured –  a person or organization covered by an insurance policy.

Peril –   the possibility that you will be hurt or killed or that something unpleasant or bad will happen.  exposure to the risk of being injured, destroyed, or lost.

Premium –   An amount to be paid for an insurance policy. It is an amount paid periodically to the insurer by the insured for covering their risk.

Deductible –  A deductible is the amount you have to pay out-of-pocket before the insurance company will cover your remaining costs. 

1st person liability –  First person liability is for damage that is done to you or your business. A good example of this would be a commercial property insurance policy. This policy covers the damages to you and your property. It does not cover the damage to another persons’ property or if they are hurt on your property.

3rd person liability –  Third person liability is liability that you or your business has to other third parties. Third parties can include customers, vendors, other businesses or anyone who may be harm by the actions of you or your business.

 Claims-made policy –  A policy written on a claims-made basis means that if the insurance is in place when the claim is made, but not when the occurrence took place than the insurer responsible for the claim is the insurer when the claim is made. This is common for professionals like a lawyer or an engineer. In these professions a claim is frequently filed months if not years after the occurrence takes place. At that time the insured may have coverage with a different company and there may be some discrepancy between who is responsible for the claim.

Occurrence based Policy –  A policy written on an occurrence basis means that the insurer responsible for the claim is the insurer who was in place when the occurrence took place. If an engineer works on a house and there is a problem with the house years later than the insurer responsible for the occurrence is the insurer that was in place when the occurrence took place.

 Endorsement –  an endorsement is a document attached to an insurance policy that amends the policy in some way. An endorsement may add, remove or alter the scope of coverage under the policy.

Negligence –  Negligence in relation to insurance means a person or business did not demonstrate appropriate amounts of care or responsibility for a particular situation. The failure to take appropriate precautions can cause you to be considered liable for the damage.  This can also be referred to as the failure to use a degree of care considered reasonable under a given set of circumstances. Liability policies are designed to cover claims of negligence.

Named Insured –  Any person, business or organization who is specifically named as an insured on an insurance policy. This is different from entities who although unnamed may fall within the policy definition of an insured.

Ordinance or Law Coverage –  Coverage for loss caused by the enforcement of an ordinance or law regulating construction and repair of a damaged property. Older structures that are damaged may need to be upgraded in regards to electrical, plumbing, venting, etc. A typical commercial property insurance policy does not pay for these additional cost. This policy is an endorsement on top of your commercial insurance policy and will cover the additional costs needed to bring the new building up to date.

A 'Hammer Clause' is a provision within an insurance policy that gives the insurer the right to settle for an undisclosed amount and if the insured does not agree to the settlement than they take on some or all of the risk. Hammer Clause –  A ‘Hammer Clause‘ is a provision within an insurance policy that gives the insurer the right to settle for an undisclosed amount and if the insured does not agree to the settlement than they take on some or all of the risk. In some cases, the insured takes on all of the risk, but in many cases it is 70/30 or 50/50.

The Assigned Risk Provider (Also known as the pool or the state fund) –  The assigned risk provider applies to workers’ compensation coverage. It is the provider of last resort within each state for businesses who cannot obtain coverage on the open market. The business may not be able to obtain coverage for a number of reasons. Typically, it is because of the small size of the company or because of their loss history. The Assigned Risk Provider offers coverage at a higher rate and typically once you are in the pool you must stay in the pool for 2-3 years.

Business Owners’ Package (BOP) –  A business owner’s policy, commonly referred to as a BOP, combines several lines of coverage built into one policy. They are often better suited for small business owners because they offer targeted coverage options designed for specific types of businesses within certain industries. They are usually less expensive then purchasing coverage separately because the business is purchasing multiple policies for liability, property, commercial auto, etc. 

Find out if you as an Artisan Contractors need workers compensation insurance coverage at myinsurancequestion.comArtisan Contractor –   This term refers to businesses in several different industries. It includes many occupations that involve skilled work with tools at the customer’s premises. Carpenters, plumbers, electricians, roofers and tree surgeons are some professions that would be included in this group of businesses. Also included are diverse other skilled service providers, such as interior decorators, piano tuners and exterminators.

Loss History –  Loss history is a documented history of damages or losses connected with a given asset. It is a way for the insurance carrier to determine the amount of claims your business has against an insurance policy.  They use it to determine how much premium to charge or if they are willing to take on the risk altogether. 

Inland Marine Insurance – Inland Marine Insurance is property insurance for property that is likely to be in transit over land.  Many inland marine coverage forms provide coverage without regard to the location of the covered property; these are sometimes called “floater” policies. As a group, inland marine coverage forms are generally broader than property coverage forms.

Find out if your business truly needs commercial umbrella coverage at myinsurancequestion.comUmbrella Coverage –  The umbrella policy serves three purposes: it provides excess limits when the limits of underlying liability policies are exhausted by the payment of claims; it drops down and picks up where the underlying policy leaves off when the aggregate limit of the underlying policy in question is exhausted by the payment of claims; and it provides protection against some claims not covered by the underlying policies, subject to the assumption by the named insured of a self-insured retention (SIR).

Business Loss of Income Coverage

Business Loss of Income Coverage is an addition to a Commercial General Liability Policy.  It can be added to a Business Owners Policy (BOP) for as little as a few hundred dollars, depending on the size of your business. It covers the loss of income from damage to your building that results in a slow down or suspension in business. For many business owners; this coverage may not seem all that necessary, but when an incident occurs this coverage can many times be the difference between a business reopening or closing for good.

The most basic way a need for this coverage occurs is when a building catches fire. When this happens, the general liability and commercial property policies will cover a businesses expenses to repair the building to its previous condition. These policies will not pay to cover loss of revenue if your business is slow or suspended for an extended time. This can be thousands of dollars depending on how long your business is closed.

As a business owner it is important to realize that a Business Loss of Income Policy only kicks in if the loss is a covered loss. Meaning that if the loss occurs from something like an earthquake or flood; and the business does not have special coverage for that peril, than the business loss of income policy does not kick in. This is important to note in areas that have natural disaster risks. Examples of this are Florida for hurricanes, California for earthquakes, Missouri for tornadoes, everywhere for flood risks. Another risk that is associated with Business Loss of Income is Data Breach. When a data breach occurs it very likely can cause you to be closed for a certain amount of time while the data breach is dealt with. If you have Data breach Coverage in place than this will be a covered peril. If not the Business Loss of Income will not kick in and you are liable for the additional loss of revenue.

When a business owner decides to add this coverage the important thing to consider is how much risk you are willing to take and determine if that risk is worth the amount you save in premium. For most businesses this coverage can be added for a few hundred dollars. If it is added to a business owners package it can be even less. In most cases this cost is well worth the benefit you get when an occurrence does happen. In most instances, when a devastating accident occurs and a business does not have this coverage, the chances of them ever reopening are far less than if they have this coverage.

Q&A with Tim Davis

Q&A with Insurance Expert Tim Davis

 

What are the most significant Weather Related Risks for Small Businesses?

 

What’s the biggest mistake small business owners make when it comes to safeguarding their businesses from weather-related interruptions and why is that a problem?

The biggest mistake small business owners make is failing to buy business interruption coverage. This coverage is not a stand-alone policy, but is typically included on a business owners’ package (or BOP) policy. The Hartford has some of the best coverage available on their business interruption coverage as a part of their BOP policy, but several other carriers offer great coverage as well.

How can we know if we need flood insurance in addition to business interruption coverage?

Flood insurance will not only provide coverage to replace the damage to your building, but the business interruption coverage won’t respond for flood-related losses if you don’t have flood insurance in place.

What’s a common misconception about business insurance related to weather issues and what’s the truth? 

As highlighted above, business interruption coverage won’t apply to all weather-related issues. Whatever peril (or risk) caused the business interruption must be a covered peril on the BOP policy. If an earthquake caused the damage and interrupted your business, but you didn’t have earthquake coverage on your policy, then coverage for the earthquake damage wouldn’t exist.

Another common myth centers around off-premises power failure. If a weather-related event causes power to fail at a location away from your business (like a blackout or a transformer a mile away gets struck by lightning) … business interruption coverage won’t apply. With most policies, the weather-related cause of the power failure must happen at your business.

Do we need special coverage to protect from wildfires, or will traditional property & casualty cover us? Why or why not? 

A wild fire would be a covered cause of loss on many commercial property policies, but it is not guaranteed.  I would recommend reading over your policy – identify covered causes of loss as well as exclusions in the policy.

What kind of protection do we need related to employees and customers who might be injured on our premises during a weather event?

Your standard workers compensation insurance (for employees) and general liability insurance (for your customers) policies should suffice. These two policies should be enough to protect your business from incidents that occur on your premises.

What documents should we be sure to store safely to make the claims process go faster after a weather disaster strikes? Please describe each document and why it’s important.

Financial records will be the most helpful piece of information to provide to simplify the claims process. Carriers will evaluate the income losses your company sustained based off the company’s past sales history and reasonable projections of your company’s profits and losses for the time your company suffered from the weather-related interruption.  Policy information – including agent and carrier contact information.  Also, it is good to take pictures of the equipment in a building – including serial numbers.  This helps with replacement parts and valuation.

What phone numbers should we keep on hand in the event of a weather emergency and why? 

Make sure you have either your insurance agent’s number on hand, or (even better) the claims reporting phone number for the insurance carrier on your business owners’ package policy.  I would also consider having phone numbers for emergency response/clean up companies.  In the event of a major weather event, it is smart to have a few companies to choose from – maybe even consider a company from a neighboring community so that they are less likely to be impacted by the same weather event.

What’s the first thing we should do if our business is impacted by a weather event and why? 

Life safety is the very first concern – make sure that all employees and guests at your premises are accounted for and safe.  Then, secure your building and business personal property.   If you can help prevent further damage by taking additional steps, those extra expenses can be covered in some policies.

What else should small business owners know about preparing for and responding to a weather disaster? 

A proper BOP policy with business interruption coverage will provide a real sense of relief in the aftermath of a disaster. Loss of business income is the #1 reason that most businesses do not open after a serious loss. This coverage will help provide coverage for the actual income loss sustained; the net income (net profit or loss before income taxes) that would have been earned over that period; and provides costs for things like payroll so you can keep your employees while your company rebuilds.  Be prepared – think ahead – develop a contingency plan.  If something happens, have a plan already in place and make sure that everyone in the business is aware of what steps to take.

What other questions should I ask my agent about this coverage?

Check the time period you have for extended business income. Thirty days is standard coverage, but some carriers can offer up to 12 months by endorsement. Also ask your agent if you need contingent business interruption coverage — this pays out when your company is unable to operate because of an event like a natural disaster that damages the business of one of your suppliers or customers, which causes your company to lose income.