February 2013 - InsureYourCompany

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Insurance is a wonderful thing our society has created and has become essential in the business world. It is important for policyholders to actually read the policy over and review what it covers and, more importantly what it doesn’t. Most business owners looking for insurance are concerned with the cost of insurance rather than the coverage. This is a fine approach until catastrophe strikes, like last October 2013 with Hurricane Sandy left many business owners without enough coverage. An insurance agent in New Jersey will likely be very qualified to advise on the proper business insurance coverage given their familiarity with known business and weather risks.

With Sandy policyholders were most worried about flood insurance. Standard property insurance and business owners policy do not have flood insurance in them. It is a separate policy that you property must qualify for. A recent article in BestWeek discusses the lawsuits being filed by business owners and homeowners against brokers for not presenting the right flood coverage options to their clients who lost property in the storm. It’s amazing to see how many people are interested in what the insurance policy covers after a loss has occurred.

Preparing for the unknown is what insurance is all about. Your broker should review the policy with you until you fully understand it but it is not their responsibility to make sure your read the policy. Reading an insurance policy is about as much fun as going to the dentist, but with a thorough review of your policy you will make sure it is everything you need.

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We have over 15 years of experience working with small IT consulting businesses. Why is that important? Because this experience has given us the time to learn how the IT industry works. When you bid for a contract to work for a vendor they will hand you a sample contract that has all the requirements. Let’s focus on the insurance requirements all consulting contracts have.

The most important insurance to look at is workers compensation. If you have employees it is required by law to maintain workers compensation. If you do not have employees it may still be required for LLC’s and Corporation. Each state has its own laws and regulations. Go online to each states department of insurance and check out what the laws are for your state or ask you local insurance agent. Some states are considered monopolistic; these states have legislation that requires workers compensation coverage be provided exclusively by that states’ designated Workers Compensation Program. There is no open market to buy insurance. For more information about monopolistic states call 732-832-7997.

General liability is liability insurance that covers an office where customers come in an out, they potentially can slip, trip or fall and injure themselves. General liability can protect you from this risk providing medical payments and litigation fees from lawsuits. It can also protect your office furniture, equipment and machinery from covered perils such as fire and theft.

Why you need it? This is a great product to protect your business and office but you need this insurance to meet contract requirements. Your work contract will require it. You can get liability only or liability and property coverage for your computers office furniture if you work out of an office.

A coverage part of general liability it is almost always required. Automobile liability can be confusing; you may say to yourself I don’t have any business autos why do I need auto liability. This coverage is for an auto you may use for your job. For example you rent a car while traveling for business. If there is an incident, property can be damaged and people can be injured. If you have Hired and Non-owned Auto liability you are covered from suit for this type of occurrence. It does not fix the car this is liability coverage only.

Why you need it? Hired and Non-owned Auto Liability is a requirement on your contract. Your client also wants you to have this coverage so if an incident happens it would be your insurance responsible and not their insurance.

Like an umbrella covers your form rain, Excess liability or Umbrella liability adds a level of protection to your general liability policy and workers compensation policy. When you meet your insurance policy limits, an umbrella policy provides extra or excess coverage. Say you general liability policy limit is $1M per occurrence, a lawsuit is made and a judgment of $1,500,000 is awarded. This is $500,000 over your limit. At this point you umbrella coverage is activated to pay out the remaining judgment. If you don’t have umbrella coverage the $500,000 can be your responsibility.

Why you need it? Umbrella liability (excess liability) is a coverage requirement on your vendor’s contract. Your client required this to make sure your policy limits can handle any incident that may happen. With your company meeting the required limits of insurance you are able to perform your work confidently and securely.

Professional liability insurance protects you against loss from a claim of alleged negligent acts or “errors and omissions” in the performance of your professional services. Your coverage will cover you for; Legal defense costs required to prove your case, all employees including W-2 employees and 1099 subcontractors, optional coverage for allegations of copyright infringement and intellectual property infringement, personal Injury against claims of libel, slander and invasion of privacy.

Why you need it? Professional Liability or Errors and Omissions insurance is another insurance policy requested by your client or vendor. This insurance would be used if your consulting or programming services leads your client to a financial loss. This insurance actually insures the work you do in case of an error or omission.

Third Party Fidelity Crime Bond is generally divided into two types, Fidelity Bonds and Surety Bonds. Fidelity surety bonds are different from insurance in that they always have three parties central to the contract; Principal – the entity or person that might cause the loss, Obligee – the entity that collects under the bond, should the principal cause a loss, Surety – the entity that pays the loss, such as an insurance company. Fidelity Bonds are technically a form of Surety Bonds, but are usually considered a distinct product in common usage.

Why you need it? This is another contract insurance requirement. Crime Bonds are issued as a guarantee against loss due to employee dishonesty. As such, they are an important part of a company’s insurance program, because they cover areas not covered in the companies Liability and Property coverage.

Your business is your life. “Life is 10% of what happens to you and 90% of how you react to it.” Having your business properly insured gives you confidence, security and access to do business. Insurance can help you react to life and the risks of being in business. Help prepare your business for success and make a comprehensive insurance package a part of your business plan. Being prepared will build a business that is reputable and reliable.

Employee Benefits
The face of every business is its employees. We recruit them, train them and hope they will stay for the long run. Providing an employee benefits package will make your business more appealing to work for. When you take the time to invest in a health plan rich with benefits you can gain an edge over your competitors, attracting the best and brightest employees to work for you. Showing that you invest in your employees will impact who you hire and how the business world looks at you.

Retaining your best employees is easy when you have a benefits program in place. If an employee is invested in a retirement plan along with a comprehensive health insurance plan they are more likely to stay with their current employer even if it may not be their ideal job. When employees have a service like health insurance available to them, they are more likely to participate in the prevention and wellness programs most plans provide. This encourages healthy habbits and discourages unhealthy ones like smoking or bad diet. With a healthy and happy work force the quality of work will increase and the attitude in the office will be positive and motivating. You may also find the health of your group can decrease the premium of health insurance.

Liability Insurance
In today’s society we throw lawsuits around like a box of cracker jacks. We need consumers but they are a risk so be prepared with liability insurance. If someone in your store slips, trips or falls liability insurance can shield you from out of court settlements, attorney expenses, judgments or settlements, medical expenses, and bonds if necessary. Business must also safeguard against things you may not have thought of like advertising injury, In the event your marketing violates someone’s copyright. The liability also extends to an alcohol related injury for example at your companies holiday party. Securing your company form lawsuit will give you the confidence you need to perform at your best.

Employment Practices Liability
Not only must you protect yourself against consumer lawsuit you must also protect against your employees and employment practices. With today’s laws and regulation on fair hiring, discrimination and sexual harassment something can slip through the cracks. By having employment practices liability you will have done your due diligence to protect yourself from lawsuit

Property and Casualty Insurance
While your employees are the face of your company the body is your office, warehouse, products and property. They are important parts of a business that also needs protection. With property and casualty insurance you can ensure that your equipment, machinery and inventory are safeguarded. A good agent will steer you towards a quality insurance company that require inspection and routine maintenance of you equipment and machinery. They will have a network of repairmen and inspectors that you can call to maintain your equipment for maximum efficiency.

Contract Requirements
Whether it is a federal regulation, state law, license requirement or contract, there will inevitably be and insurance requirement. Get the permission to do business by already having business insurance in place. A government agency can impose fines or even take away licenses that can shut your business down if you don’t have the required insurance. An insurance agent can help you prepare for such occurrences. If you are bidding for a new contract and your competitor is missing one of the contracts insurance requirements they will have to find an agent to get a quote and maybe lose out on that contract. You can win the bid and expand your business. Insurance is a key to business and can unlock a world of opportunities.

Watch our latest video on how to set goals and priorities to launch and grow your business.

In most cases, insurance policies are in force for one year and need to be renewed to continue coverage. Insurance companies base their rates in part on cost of living as well as other factors to determine how much premium to charge. At our technology insurance agency, we like to explain to our clients what factors an insurance company looks at when creating rates. Understanding the why and how of an insurance premium make our clients better consumers. Being an educated consumer will help you become a better business owner.

There are two categories to look at when understanding insurance premiums; inside factors and outside factors. Inside factors are within the insurance company. The salaries they pay their employees the benefits they provide and the overall cost of doing business. Every business in every industry has to account for annual cost of living increases. Did you know one primary way a state funds itself is through insurance taxes? The Federal and state governments tax insurance companies. The taxes help fund counties and municipalities, fire department and police. Insurance companies have internal departments to account and try to control these costs so they can keep their premiums low.

Outside factors affect the insurance company as a whole. The way the stock market performs, new laws that are passed, and catastrophic claims are all factors that the insurance company has no control of and affect the premiums. The insurance carrier accepts your premium and puts it aside in their claims pool. When a claim happens they pay out. While that reserve is still sitting there most insurance companies invest in the stock market, bonds and other investments to maxims their profit. So when the investments do well, the premiums go down when times and when the investments don’t do so well, there’s a good chance premiums will go up.

Premiums can increase following a catastrophic claim. For us on the east coast we recently experienced Hurricane Sandy. Its wide range of damage affected many people. Homes and business where lost, property was damaged and people where injured. Insurance is here to indemnify, to provide somebody with protection, especially financial protection, against possible loss, damage, or liability, and help give people their lives back. A large payout like this empties the insurance company’s claims pool. In response they will adjust premiums to replenish the pool.

There is another factor that has a large influence on insurance premiums, you, the business. Your business is seen as a risk to an insurance company. Your business is at risk from an accident or lawsuit. To measure the risk of each business, insurance carriers will look at several pieces of information. Your revenue, the number of employees you have, payroll and square footage of your business location. The revenue and square footage of a business tells how large of a company you are. It will tell them how much of your product you are selling or how many people are coming into your store. Your payroll will tell how many employees you have and projects you are working on. They also want to know what you do, what type of industry are you in. If you are a contractor you are more likely to be involved in a worker’s compensation claim than a person sitting behind a computer all day. Each year these factors will change, to measure the change an audit may be done asking for financial records. These changes will inevitably change the price the insurance company charges you.