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Are You Properly Insured?

by Jim Martin

What exactly does your business insurance cover? Too many businesses take out insurance that protects them from liabilities arising from accidents that cause injury to customers or employees and damages due to misfortunes like floods and fires, but never ask if that is enough. Fire theft, theft and liability are obvious concerns, but you have to go past the obvious. Do you use specialized tools? They may require special insurance. What about business interruptions? If you have to shut down for some period, do you have insurance to cover the problems that will create?

Also, consider how critical you are to the business. You might want a life insurance policy that provides money to your business to keep it functioning while your estate is being settled. If the business uses vehicles, you will need more than the level of liability coverage you might have on a personal car.

Early in a business’ development, the founders need to consult with an insurance professional who can look at the nature of the business, explain the options and recommend the right coverage. Be aware that not all insurance agents are business experts.

After an agent has provided a detailed breakdown of the options and their costs, consider what you want to spend relative to each risk. Cover your biggest risks first, then work down the line. Don’t get needless coverage. For example, you might not need flood insurance if your business is on the top of a hill. But a small premium for what might seem like low-probability risk might be worthwhile if what it covered would be costly to handle on your own. You can also keep the cost down by opting for the highest deductible you can afford. (One other tip: set aside the difference between a high deductible premium and a low deductible premium, and in a few years you might save up the deductible.)

A package policy with riders may prove to be more economical than a group of separate policies (which often contain overlapping coverage). You definitely want to get all of your insurance from a single broker or agency. Keep in mind that a single agent will view your coverage as an important part of his business and should work hard to make sure that you are satisfied with and properly covered by what he provides.