Understanding business insurance can be almost as much fun as figuring out the apps on your new cellphone, except that proper insurance coverages ultimately could matter more to most business owners. Think, for example, about insurance that offers at least some protection if an employee sues after not being offered a promotion or when unhappy customers call their attorneys because their personal data were accessed when your files were hacked.
The type and amount of coverages you choose will depend on several issues, including budget and your own assessment of risk. What matters is having an insurance agent who will take the time to explain the various coverages and answer your inevitable questions.
Here, based on input from insurance adviser Tim Lavin, is a condensed list of coverages most small and medium-sized business owners should at least consider. Lavin owns The Lavin Insurance Agency, Schaumburg.
• General liability insurance. Suppose your employee goes to a client location to repair a piece of equipment -- but trips, falls and damages the equipment he went to fix or in some way causes bodily injury or business problems.
General liability insurance, coverage Lavin says startups tend to but shouldn't ignore, can help protect you if, for example, your employee takes out a client's entire system.
• Property insurance is a must if you own the building where your business lives, Lavin says. Fire, floods and windstorms are among the risks. Coverage can include equipment replacement and business interruption funds.
• Commercial auto insurance. Company-owned vehicles should of course be covered. But do you drive your own car to your client's location -- or to get office supplies? Do employees drive their vehicles to off-site work locations?
Lavin advocates coverage for accidents you or an employee might cause driving your own vehicles on company business.
• Workers Comp. It's a state requirement that kicks in with every employee. Requirements are somewhat different for new companies, but it's not a coverage you can duck.
• E&O. Errors and omissions coverage is potentially important for those whose advice is their profession, Lavin says. His list includes lawyers, real estate agents and IT consultants -- essentially any professional whose stock in trade is providing advice to others.
• Cyber liability. If you collect customer data and your business is hacked, you may wish you had cyber liability coverage. Many smaller businesses choose not to buy this type of insurance, Lavin says, assuming that hackers go after larger businesses. However, IT people warn that hacking attacks often are random, making smaller businesses equally vulnerable.
• Employment practices liability kicks in on harassment and similar issues -- or, Lavin continues, when an employee alleges he, or she, is passed over unfairly for a job.
There are other coverages you perhaps should explore. For example, some agents, including Lavin, provide pension plans that incorporate life insurance policies funded by banking institutions. The process is complicated -- but interesting and perhaps worth checking out.
• © 2017 Kendall Communications Inc. Follow Jim Kendall on LinkedIn and Twitter. Write him at Jim@kendallcom.com. Listen to Jim's Business Owners' Pod Talk at www.kendallcom.com/podcast.