Linda Jenkins, December 26 2016
If you’re opening a business, you have a lot of planning to do. When you’re calculating your business expenses, don’t forget to get quotes on various types of insurance. This article takes a look at both insurance you are required to have as a business owner and other types of insurance that you should consider to prevent loss from employee injury, theft, fire and other major catastrophes, identity or check fraud and general liability.
Workers’ Compensation Insurance
If you have any employees besides yourself working in your home or place of business, you are required by law to have an active workers’ compensation policy. For some business owners, the cost of this policy will be rather inexpensive. This is true for businesses that have few employees and are located in a low-risk office space or other environment in which the surroundings and daily activities pose little risk of bodily injury. Even in these cases, though, workers’ compensation insurance is still required.
If you have a restaurant, a service business in which travel is required, a construction business, or another type of business in which the risk of bodily harm or injury is elevated, you may need to set aside much more for workers’ comp (depending on how many employees you have). The cost of workers' comp is based on risk factors and percentage of payroll. Therefore, a low-risk business may pay 20 cents per $100 of payroll, but a high-risk business may pay $30 per $100 of payroll or more.
The cost of not having workers' comp is high. If you get caught operating a business or if a claim is filed against your uninsured business, you could be fined up to $100K and still be responsible for restitution. Working with a payroll provider can make meeting the specific demands of this requirement much easier.
The laws on employee health insurance are changing. What once was a choice is quickly becoming mandatory. Visit eHealthinsurance to research your options online. The fees for PPO, HMO and Health Savings Accounts vary widely by state.
This is life insurance which covers the owner or other employees key to the operation of the small business. This is important to have from day one as it protects the value of the business until an employee can be replaced or the business itself can be sold or closed following an insured's death.
Flood, Natural Disaster and Fire
Your business should have at least enough fire, flood and natural disaster coverage to cover the replacement value of your business building and contents. This may seem like a high expense for a new business, but imagine being caught up in an electrical fire, earthquake, hurricane, or some other random act of Mother Nature, faulty wiring or plain malice and being forced to start over without any financial help whatsoever. Would you be able to do it? If you plan on getting any business loans, you may be required to have this type of insurance. You should also be very careful that you understand your policy's treatment of floods, as this is often considered separate from other disaster insurance policies.
Identity Theft and Check/Credit Card Fraud Insurance
You may be an entrepreneur working alone on your home based internet business and don’t feel the need for these different types of insurance plans. Have you considered identity theft and check/credit card fraud, though? Guess what happens if you process a credit card with proper credentials and make good on the order only to realize in 6 weeks that the credit card information was stolen.
Here’s what will happen: The credit card company will reimburse the owner of the credit card, but it won’t take the loss; it’s going to deduct the value of the transaction right from your merchant account. You will not only have paid the credit card processing fees, you will have essentially given away product or services. Plus, you may have experienced a particularly bad week or month with a lot of expenses and find that your account is overdrawn by the untimely withdrawal by your merchant account provider.
Business Property and Assets Insurance
Your sellable product isn’t the only thing at risk of damage. You may also have valuable furnishings, equipment, and décor that all need to be insured. Make sure that all your business’ possessions are considered when insuring your business and getting quotes.
Business Owner's Policy
A BOP is an excellent choice for many owners as it combines general liability insurance and property insurance into one policy. Depending on your unique business, you may need to extend or tailor this policy to fit your needs. For example, a dermatologist will need to add a Professional Liability policy in order to protect against claims of negligence. If you are in a high-risk category you may want to consider Umbrella Insurance to extend your liability coverage in the event of a lawsuit.
You shouldn’t guess at what plans you will need or how much your insurance will cost. Take the time to speak with a licensed insurance agent. Get insurance quotes from various commercial insurance providers, and be sure to account for all of your anticipated inventory and assets. Hiscox, founded in 1901, is now the #1 online small business insurer and an excellent place to start researching your insurance needs.