Cover your Assets
Minimize your risk with business insurance.
Understanding risk is essential for anyone starting a new business. The same is true for anyone insuring a new business, says Jeffrey Olmstead, assistant vice president of property underwriting in the small commercial area at The Hartford Financial Services Group Inc. in Hartford, Connecticut. Insurance is available for many risks, but not all of them--especially business risks. "That can include the risk that [your] market won't materialize, that [your] location isn't appropriate, or that [your] customer base isn't looking for the products [you] are selling," says Olmstead. "Insurance is designed to help businesses manage certain kinds of risks, but not all the risks associated with running a firm." The following tips will help you decide on the best level of coverage:
45. Think about the kinds of risks you'll be exposed to, such as property loss. "That's exposure to loss of the building or business property such as equipment, machinery, stock and computers," Olmstead says. Perils to property include fire, flood and the like.
46. Carefully consider your liability. For example, third parties such as customers or others might sue the business for injury or property damage caused by the business. Umbrella liability policies are one popular solution to this risk. An expert advisor can help you tailor liability coverage to fit your circumstances.
Injury to employees is another area of potential liability. Workers' compensation insurance is required for almost all businesses in almost all jurisdictions. "That's a key distinction [from] property and liability," Olmstead notes. "If a business owner chooses not to acquire property and liability coverage, that's a chance they can take. But with regard to workers' comp, it's required."
Other risks depend on the business you are getting into. A restaurant that serves alcohol faces potential liability if one of its customers is involved in an accident after leaving the restaurant. "That's a specialized exposure," Olmstead says, "and there is specialized coverage for liquor liability that covers against lawsuits that come back to the business owner because of improper service of alcohol." Understand your business thoroughly so you can decide whether or not to pursue specialized coverage.
47. Shop around. After getting a good advisor and understanding your exposures, evaluate several providers and policies. "Ultimately, business owners are responsible for the coverage they buy and the premiums they pay," Olmstead says. "Select carefully."
48. Don't become complacent, even if you have insurance. Some property or liability lawsuits might not be covered. There are no insurance products available to cover against some exposures. In other cases, the cost of coverage may be too high. When this happens, manage risk by taking appropriate safeguards, such as training employees to work safely. You'll often get lower premiums and fewer losses if you take wise precautions to reduce even those risks that are insured.
49. Stay alert for new threats or possibilities you may not have considered. You might need additional coverage or other risk management. "If something is not covered by insurance--or even if it is covered--it can be catastrophic for a small business to experience a loss," Olmstead says. "One of the big concerns right now is that so many of our businesses in New Orleans are not covered by insurance. They had hurricane insurance, but not flood insurance. So many of those losses from the hurricane will not be covered as a result."
