Sunday, July 15, 2007

Business Insurance

The success of a business, whether it's a tiny enterprise run out of a room in your home or a large corporation, is largely dependent on hard work and ingenuity. However, no matter how industrious you are, one disaster can wipe out all your profits and even destroy your business. The key to making sure that all the effort and money you have invested in a business doesn't disappear when a disaster strikes is to protect it with the appropriate insurance.

It is not unusual for us to find that many small businesses we counsel are not insured and they do not include insurance costs when developing their small business venture. This is very risky practice as business insurance is necessary to protect your business in case of an unplanned financial liability. The reality is that lawsuits are filed against small businesses every day and owners are burdened with some very high costs to defend themselves and hefty payouts when they lose a case. A small business should acquire insurance from the beginning. A key issue is that some owners assume that because they form a corporation or an LLC for their business structure they are not liable for any lawsuits against their companies. That is just not true. Business owners, under certain circumstances, are still liable for their individual acts of negligence.

Some insurance coverage is elective and some is mandatory. Typically you start out buying liability and property insurance. Along with that you need to consider errors and omissions insurance, employment practices and product liability to name a few. You will pay unemployment insurance as mandated by law. In addition, you'll pay disability insurance in accordance with state regulations. Other types of insurance you may elect to purchase include: Health and Medical insurance, Disability insurance, Directors and Officers, Vehicle insurance, Business property insurance, Web site insurance and Life insurance for key persons.

If you have employees you are required to carry workers compensation insurance.

Home-based business should look into General Liability Insurance covered by a Business Umbrella Liability Policy. Depending on the type of homeowners insurance they have they may be able to increase their policy limits on business property by adding a simple endorsement to their homeowner policy. A business insurance agent will be able to advise the businessperson as to whether or not this endorsement is available and if your home business qualifies.

Learn about business insurance by talking to an insurance agent that specializes in business insurance and by visiting Internet web sites. The web site is a good place to start.

This article was written by Robin Noah, SCORE Orange County Management Counselor