There are many types of business coverages and employee benefits that are available to your business. In this section we will provide you with a general overview of the coverages. For detailed information we recommend that you contact your insurance agent/broker.
The following websites may be helpful in providing you additional information:
- Small Business Administration
- Insurance Information Institute
- National Association of Insurance Commissioners
- American Insurance Association
The information in this section will provide a general overview of the coverages that may be available to your business. The examples discussed in this section are for illustrative purposes only. Please consult the specific insurance policy for exact coverage, benefit determinations, and applicable terms and conditions. This general summary does not provide legal, financial, insurance, tax or accounting advice.
Business Coverages Introduction
Starting a new business or just updating your current insurance coverage? We have researched them for you and created short summaries of the many different types of coverages. Continue reading to learn the basics and to gain a new level of understanding regarding the protection that may be available to your business through insurance.
This type of policy generally covers damage to the building where
your business is located. It can also cover items inside your office,
such as furniture and inventory.
Potential Risk: Last night an electrical fire consumed over 50% of your inventory. It will cost thousands of dollars to replace the goods. Are you covered?
Commercial General Liability Insurance
This type of coverage normally
protects you in the event that someone or their property
is hurt and you are held responsible.
Potential Risk: A customer slipped on water that was accidentally spilled on the floor of your store. The customer is suing you for their medical expenses. Are you covered?
Business Interruption Insurance
Your employees and your family depend on you to be able to pay their bills each month. This type of policy generally makes sure your business continues to have income so you can pay others if your business is shut down or limited temporarily due to damage.
Potential Risk: A fire occurred in your building and your business has to shutdown for two weeks. Your employees still need to be paid and you need to pay your monthly expenses. Are you covered?
Business Owner's Policy (BOP)
Typically, these policies include property insurance, business interruption/continuation insurance and liability insurance. Sometimes it is cheaper to buy them together rather than individually, ask your insurance agent/broker for additional details.
Product Liability Insurance
Do you manufacture a product? In general, this type of coverage will
be needed if anyone were to get injured or hurt by your product.
Potential Risk: Your product was shipped without the suffocation warning on the plastic bags and a child was playing with one and suffocated. The family is suing you for damages because of your improper packaging. Are you covered?
Errors and Omissions Insurance
When you provide a service (consulting, financial advice, legal advice,
realtors, planners, shippers/movers, etc.) there is the potential that
something could be left out or wrong. You can help to protect yourself
from mistakes or neglect, by you or your employees that cause a customer
or client harm. This type of policy may pay for any judgment you are
found to be legally liable for and your legal defense costs.
Potential Risk: Your driver was supposed to deliver a time-sensitive shipment to a company in Washington DC, but they received the wrong address and went to Washington. The customer lost $125,000 by not meeting their deadline. Are you covered?
Umbrella Liability Policy
In general, this type of policy offers additional liability protection
with coverage limits between $1 million and $5 million, this type of
insurance may be beneficial for business owners who have large assets
or may be vulnerable to lawsuits.
Potential Risk: Your business is sued and you settle for $1 million. Your general liability coverage will pay $500,000, but you are still responsible for the other $500,000. Are you covered?
Commercial Crime Insurance
This type of coverage normally covers money and securities, stock and fixtures against theft, burglary and robbery. Incidents both on and off the insured premises and from both employees and outsiders can be covered.
Potential Risk: One of your employees has been embezzling money from your company. You have lost $45,000. Are you covered?
Many businesses use some form of transportation for their services or goods. Just like your personal car, your business vehicles (cars or trucks) typically need to be covered with both liability and collision insurance to protect you and your drivers. This type of coverage is usually required in most states.
Potential Risk: Your driver was making a delivery when he hit a pedestrian. The pedestrian was seriously injured. Are you covered?
It's the law in most states – there is no better reason to purchase this type of coverage. You may need to protect yourself from claims by employees who experience an injury or illness on your business property or due to your business operations. Commonly, this type of coverage can cover your employee's medical expenses, rehabilitation costs and lost wages.
Tip – Check with your state insurance department to determine their definition of an “employee.” State definitions range from people who work 40 hours to those who work significantly less.
Potential Risk: Your top pressman threw out his back while changing plates on the printing press. He won't be able to work for 2 months, has high medical bills and needs to keep feeding his family. Are you covered?
In this age of technology it is important to be prepared for hackers, viruses, denial-of-service attacks, copyright infringement, web content liability and other technology issues. This type of policy will generally cover you in the event of technology issues.
Potential Risk: A virus got into your system and the damage will cost quite a bit to get repaired. Are you covered?
Environmental Liability Policy
If your business transports, stores or uses toxic materials, you may be required by law to have this type of coverage in the event materials should be discharged accidentally into the water or leak onto the ground due to a covered peril like fire.
Potential Risk: Your dry cleaning business is found to have contributed to ground water contamination in your area. The local homeowners who sued you have won their claim totaling over $2 million. Are you covered?
Key Person Life Insurance
If the success of your business depends on one person then you should consider this type of coverage. Typically it will pay the business a benefit in the event of death of the key person.
Potential Risk: Your top salesperson died in a car accident. This salesperson was responsible for 75% of your sales so it will take you a while to get your revenue back up to this level, but you still have to pay your other employees and your monthly bills. Are you covered?
Employer-Paid, Contributory or Voluntary – What
does it all mean?
- Employer-paid coverages are fully funded by the business owner.
- Contributory coverages are partially funded by both the employer and employee.
- Voluntary coverages are fully funded by the employee.
Obviously employees would prefer to receive as many employer-paid coverages as you are able to offer, but you should not shy away from offering contributory or voluntary coverages. Employees may benefit due to decreased rates and guaranteed issue because it is a group policy; many will be grateful just to be offered the benefit and then they can decide if they would like to purchase the coverage for themselves.
Medical is extremely important to many employees and their families. This type of coverage can be a powerful recruiting and retention tool. Coverage options vary from extensive employer-paid to high deductible employee contribution plans.
Some states offer tax credits for small businesses with fewer than 50 employees that contribute to their employees' health plans or health savings accounts.
As a business you may be able to deduct the premiums they pay to qualifying health plans for their employees.
The key to healthcare cost savings tomorrow may be preventive dental care today. Help your employees improve their overall health and wellness by offering them access to group dental insurance.
The importance of good oral health continues to increase as research indicates the strong connection between oral health and general health. 1
1 ADA/AMA Oral and Systemic Health Exploring the Connection. February, 2006.
Short-Term Disability (STD)
Important coverage for your employees to have. Generally, STD policies cover a portion of an employee's salary for a short period, typically three to six months, but it will vary by policy. Many Americans do not have sufficient savings in the event of even a brief absence from work. Help your employees prepare for the unforeseen by offering them STD coverage.
In a year, one in 13 working people will suffer some type of temporary disability lasting one week or longer, caused by an accident, sickness or pregnancy complications. 1
1 Based on Union Security Insurance Company internal data, 2005-2006.
Long-Term Disability (LTD)
Coverage that generally picks up after short-term disability coverage ends. This type of coverage can be a financial safety net for your employees in the event of a disability that makes them unable to earn their regular paycheck. Remember that just because they are unable to work doesn't mean their monthly bills stop.
Nearly one in every three Americans will be disabled for three months or longer before reaching age 65. 1
11987 Commissioners Group Disability Table, Society of Actuaries.
It can give your employees peace of mind to know their families will be helped in the event of their death. Life insurance can help your employees or their families with the financial transition of losing a loved one.
Having a life insurance policy in place can help your family keep on living in the event of your death.
Long-term care insurance typically provides for someone who can no longer perform normal activities of daily living. Care may be provided in a state-licensed nursing home, in-home services or in an assisted living facility.
Today, the average nursing home stay can cost more than $50,000 a year. In some regions, it can easily cost twice that amount.1
1AHIP, A Guide to Long-Term Care Insurance, 2004.