Sure, You're Insured…But Does Your Policy Really Protect Your Business?Submitted by Reby Advisors | Certified Financial Planners | Danbury, CT on May 5th, 2017
Business owners, by their nature are creatures of optimism. The last thing that business owners want to think about is what can go wrong. If they have the right kind of insurance coverage, they may not have to think about it. It takes a thorough assessment of all of the possible risks and the business’ exposure to them to construct the right kind of insurance coverage. While most business owners have some sort of coverage they need to ask themselves whether their policy really does protect their business.
The very simple and frank fact of the matter is that there is no one single type of policy that will fully protect the business against every risk that could result in a monetary loss. If one were to consider the very worst case scenario for their business, and that’s not easy to do without the help of an objective, outside observer, the chances that their existing coverage would be enough to cover the damages are very slim. For most businesses, it would require several different types of coverage to consider the business fully protected.
Liability insurance: There is no question that business owners operate in an extremely litigious society, so this is obviously vital insurance coverage. Essentially, it covers you for damages caused by you, your business, or anyone for who you are responsible that result in injury or property loss.
Business owner insurance: This safety net coverage that protects against fire damage and other accidents.
Product liability insurance: If you manufacture a product you could be liable for any damage or injury it causes as a result of its use. This could be especially important for food products.
Property insurance: This covers damage to the business property, inside and out including equipment and inventory.
E & O insurance: If yours is service business that offers advice or consultation, errors and omission coverage protects the business against claims by your customers that your advice caused harm to them.
Business overhead expense insurance: There’s a 1 in 6 chance that a business owner under the age of 65 will become disabled due to an accident or a sickness that will last for more than 3 months. Business overhead coverage can provide the funds to keep the business operating during a long-term disability.
Auto insurance: If your business operates vehicles this is essential coverage.
While this all may seem overwhelming to consider, it pales in comparison to the financial consequences of an underinsured business. No business owner wants to imagine the worst case scenario, and no business owner wants to think about paying insurance premiums. But, the real worst case scenario is a business that is put out of business because it didn’t have adequate coverage.
There are ways to address your insurance needs with some degree of affordability. Working with a qualified business insurance specialist, you can conduct a thorough risk assessment to determine where the gaps in coverage are and look at specific insurances to fill the gaps. Many industry groups and associations offer group type coverage of different types of insurance. Based on your financial situation, you might be able to assume a higher self insurance through higher deductibles which could lower your costs. And, if there certain aspects of your business that present a higher degree of risk, you may want to consider either outsourcing that aspect or eliminating it from your business if that is at all possible.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.