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Insurance Defined

[alert color=”red” icon=”alert”]As I am not an insurance agent, please be sure to use the guidance and expertise of a licensed agent to guide you through the process. Insurance needs will vary state to state.[/alert]

What are business bonds?
Bonds, in the business context, are like insurance. They back up a promise to do something; if the promise is breached, the bond pays off to complete the promise.  Two common bond-types are:

  1. Fidelity bonds provide insurance against loss from employee misconduct, such as theft or embezzlement, which is not otherwise covered by a company’s regular insurance coverage. A bond can provide blanket coverage for the actions of all employees or can be tailored to cover one or more specific employees (as is the case with a pension fidelity bond discussed below).
  2. Surety bonds are contracts involving three parties: the party required to perform (called the ‘principal’), the party for whom the work is being done (called an ‘obligor’), and the party who insures the action of the principal (called the ‘surety’). If the principal fails to perform a job covered by the surety bond or otherwise causes damage or loss to the obligee, then the surety pays the bond amount to the obligee, who can then use the money to complete the job with another company.

There are many variables in determining insurance coverage and premiums, including property values, gross sales, square footage of public areas and payroll. Nevertheless, you should still enlist the services of a licensed agent with a reputable agency to review your coverages, identify gaps in coverage, explain your options, and perhaps put together a customized insurance package for your business. By purchasing all of your policies with one agency, you may be able to take advantage of competitive rates and save money on premiums and deductibles by not overlapping or duplicating coverages.

Some agencies have packages specifically tailored to large and small businesses, with coverages offered by non-affiliated companies, and can offer a network of agents, claims employees and claims offices throughout the country. Whatever your business, look for agencies that offer a special Insurance Program in your field that is designed to protect your entire investment. Some agencies also offer financial services, including assistance in developing savings and investment plans.

Your agent should be someone you have personal rapport with, in an office convenient to your business, who will communicate with you in whatever style is most efficient for you i.e. e-mail, fax, cell phone, and during the hours you may wish to communicate. The actual insurance companies should have sufficient resources to protect your business, and their ratings should be acceptable to such authorities as A.M. Best, Standard & Poor’s and Moody’s.

The following types of coverage are a sampling of available policies, some being usual and customary for both large and small businesses:

  • Business Property Insurance will include protection for your building and contents in the event of a direct physical loss. This will vary depending on whether you own your building or not, and can include ‘special perils’ coverage. You may also purchase ‘extended coverage’ over and above what is usual and customary.
  • Wind and Flood Insurance may be necessary depending on your location, and may be offered in one policy or separate policies.
  • Business Interruption Insurance will cover loss of income for a specified period for a covered loss.
  • General Liability Insurance can include bodily injury liability (for injuries to other people in connection with your business), property damage (for damage to the property of others), personal injury liability (for wrongful entry, libel, slander, false arrest), advertising liability (for publishing inaccurate information resulting in slander or libel, violation of privacy, wrongful copying and infringement), liquor liability, legal defense, product liability, products/completed operations, and contracts. May include a $1,000,000 limit.
  • Umbrella Excess Liability Insurance will include excess limits over your primary policy’s $1,000,000 underlying limit.
  • Commercial Automobile Insurance can include auto liability (should you be sued as a result of an accident), collision (to cover damage to your vehicle), comprehensive (damage caused by fire and theft, and broken glass), and rental reimbursement (while your vehicle is unusable due to a covered loss).
  • Workers’ Compensation Insurance as required by your state for on-the-job injury and occupational disease.
  • Group Insurance for Employees can include basic term life, accidental death & dismemberment, business travel accident, optional term life, dependent term life, group universal life, group variable universal life, long-term care, short-term disability and long-term disability.
  • Cargo Insurance will cover your inventory while it is in transit or being stored.
  • Tool & Equipment Insurance will cover these items while in the company vehicle or at a job site.
  • Crime Insurance will cover loss due to burglary, robbery, dishonest employees, etc.
  • Contractor Insurance will cover losses of an artisan contractor.
  • Independent Distributor Insurance will cover losses of vendors of various products, and may also cover different types of portable computer equipment and articles in storage.
  • Carpet and Restoration Specialist Insurance is specifically for the cleaning and restoration services industry and includes commercial auto insurance, general liability, workers’ compensation, inland marine, business property and umbrella liability.

Be certain to define and understand who is covered by these policies. Persons essential to the ownership/operation of your business may need to be insured against disability and death by a special policy. If you have a problem with your insurance that your agent cannot help you with, then you should speak with the claims manager of the agency. If you do not get satisfaction from the claims manager, then contact your state insurance regulatory agency, customer service division.