Business Insurance

Purchasing property and liability insurance for your business can protect you from unforeseen disaster and make it easier to sleep at night. Property insurance covers damage to your property. Liability insurance covers your obligations to a third party for industrial or professional accidents involving bodily injury or property damage.

You may be able to get broader coverage and a cheaper premium by buying property and liability insurance together in what's called a "business owners policy" (BOP) or "comprehensive general liability" (CGL) policy. But you'll want to take a good look at what you need to insure and shop around before settling on one policy.

Basic Property Insurance

You'll definitely need fire, theft and damage coverage for:

• Buildings
• Furniture
• Equipment
• Inventory
• Accounts receivable records
• Vehicles
• Intangible property like trademarks or business goodwill

Insuring for Special Property Issues

If your business is in an area where floods, hurricanes or earthquakes are common, or if your business is prone to specific safety risks, such as glass breakage or toxic chemicals, you might want to check into the cost of extra insurance to cover those mishaps.

What Business Insurance Costs

Property insurance costs are based on actual cash value (meaning the market or depreciated value of the property) or replacement costs.

The cost of business property insurance will vary depending on whether you have a named-peril or an all-risk policy. A named-peril policy only covers losses from specific named perils, such as fire, smoke, and so forth. An all-risks policy covers losses from all perils except those specifically excluded from the policy. An all-risk policy will usually be more expensive, but it's important to carefully compare policies to be clear about what coverage you're actually getting.

The cost of property insurance will also depend on the type of business you have, where your business is located, the presence of safety equipment, such as water sprinklers and how many employees you have.

Deciding on a Deductible

The number of insurance claims you're anticipating will determine the type of deductible you need. If you think your chance of having a claim is low, you might want to consider what's called a per claim deductible. If you have a lot of claims, you'll probably want your deductible calculated on what's called an aggregate basis.

Liability Insurance

Business liability insurance is necessary to protect against losses your employees or machinery may cause. Even if your state's laws don't require you to carry liability insurance, it's still a good idea to maintain coverage.

Business liability insurance covers:

• Premises and operations
• Leasing mishaps
• Contracts
• Products and operations
• Injury to customers
• Vehicle accidents
• Professional malpractice

Professional liability insurance-sometimes referred to as errors and omissions insurance-protects against professional misjudgments that cause damage to others. An example would be insurance to cover surgery where the doctor used the wrong procedure or otherwise made a mistake.

Liability insurance is usually purchased according to "limits of liability," the maximum amount the policy will pay on a single incident. Limits of liability are sometimes divided into bodily injury and property damage, and should cover the costs of defending yourself in court.

Typically, a liability policy won't protect you against claims from:

• Contract nonperformance
• Wrongful termination of an employee from his or her position
• Sexual harassment
• Other employee-related lawsuits

You can sometimes purchase separate insurance called employment practices liability insurance (EPLI) to cover such claims.

Checking Out Insurance Companies

When shopping for insurance, you can get information about the companies you're interested in from many sources. Ask the agent for background materials on the company. Most states have governmental agencies that regulate insurance activities, and can provide information about complaints against specific insurance companies. You may also want to review rating services reports published by such companies as A.M. Best, Standard & Poors, Moodys or other rating services.

A little bit of research when purchasing business insurance can save you money in the long run.

If you would like an attorney to review your business insurance policy or you have questions about your policy, contact a small business attorney in your area.

Questions for Your Attorney

• Will a comprehensive general liability policy reimburse me for damage to my property?
• If a customer is injured on my business property, should my business liability insurance policy reimburse me for any damages that I have to pay?
• Will a comprehensive general liability insurance policy pay for claims against me for sexual harassment?

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