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Small business insurance starts with the basics

By LISA MONTI

Most small businesses should have at least four basic types of insurance, according to the Insurance Information Institute industry group. Owners need property, liability, business vehicle and workers compensation insurance to protect them from a variety of circumstances.

For small businesses, Insurance Information Institute (III) said that property insurance compensates losses or damage to the property used in a business from common perils such as theft and fire. Coverage goes beyond the actual building where a business is housed; it also insures personal property such as computers, machines, raw materials, office furnishings and inventory that is vital to keeping the business operating.

Liability insurance, according to III, pays damages, attorney fees and other legal costs if a business is sued and found liable for a defective product, an error in service or disregard for another’s property. Medical bills for someone injured by a business also is covered.

Vehicle insurance pays for bodily injury or property damage caused by autos owned by a business. Coverage may include repair or vehicle replacement if a vehicle is damaged in an accident, stolen or other events.

Workers comp covers the medical costs and lost wages for an employee injured on the job no matter where the fault lies. In the case of death from work related injuries, the insurance includes compensation to the family of the employee, according to III.

So what should a business owner consider when selecting insurance for a small business.

“Business owners should first choose a reputable agent that they know and trust to handle their coverage needs. Independent agents are able to shop multiple insurance carriers to provide the best coverage at the most competitive rates,” said Brandt Galloway, a partner in Galloway-Chandler-McKinney. The agency is based in Columbus and also has offices in Amory, Aberdeen, Starkville and West Point.

Galloway said most businesses are going to have tangible assets that need to be protected, and property and equipment coverage provides protection for these assets against losses such as fire, windstorm and theft.  He said owners should also look to their property coverage to make sure business income is covered.

“In the event of a claim, property coverage provides coverage for the damaged building and/or equipment, but the loss of income due to the inability to operate is covered through business income coverage,” he said.

Businesses will also need liability coverage to cover their operations, said Galloway.  “There is liability associated with the operation of their premises, the product they make or sell, or a professional liability exposure if they are doing any consulting or advising.”

He said owners should purchase auto coverage to cover damage to their own vehicle and liability associated with the operation of the vehicle. Employers will also want to purchase worker’s compensation coverage that will cover any injury to an employee who is hurt on the job.  “Beyond the assets and liability, business owners may want to consider purchasing life insurance to cover the amount of debt owned on assets or to fund a buy/sell agreement with other partners,” Galloway said.

Even if not required by law, he said, some employers may also wish to provide a health insurance plan for their employees as an added benefit to attract and retain them. Depending upon the number of employees, the plan design and regulations may vary, he said. “Be sure to consult an agent who is well versed in the regulations and requirements contained in the law.”

How much coverage a small business should have is an important consideration.

“Business owners will want to insure their property for what it would cost to replace it in the event of a loss,” Galloway said. “Typical general liability and auto liability limits are $1million, but higher limits are available through the purchase of excess policies.”

Small business owners do have options to keep costs of coverage affordable.

“Properly managing and mitigating one’s exposure to loss is the primary way to control cost.  Beyond that, deductible structure and risk transfer measures can help keep costs down,” said Galloway.

Finding an insurance agent or agency is a serious consideration for small business owners.

“Unless there is a relationship already established with a current insurance agent, I always suggest dealing with a local agent that is qualified to handle your insurance needs.  The Independent Insurance Agents Association of Mississippi has a listing of all member agents.  You may also check with your own association to determine who they recommend,” Galloway said.

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