Your ultimate insurance guide


Obtaining Business Insurance

Think of business insurance as the copperand claims-made coverage. Occurrence coverage
solder that fuses a plumbing joint together;is more expensive but covers you based on
if the joint leaks, there can be majorwhen the loss happened, even if it was many
ramifications. The same holds true withyears ago. Claims-made coverage only covers
business insurance; if you don't have theyou while the policy is in force and the
coverage that a backflow preventionclaim is made. With occurrence coverage, as
contractor business really needs - you'lllong as you always have some policy in force,
watch those profits flow right down theyou will not have gaps in coverage. With a
drain. You personally cannot control orclaims-made policy, it is possible to have
eliminate every potential risk that threatensgaps  when  you  have  not coverage in force.
your livelihood, but business insurance can
provide the added protection against theseCommercial  Auto  Coverage
risks  ...  if  you  carry  the  right kinds.
If you use any vehicles in your business, you
Choosing the right policy with all of theneed commercial auto coverage. Personal auto
appropriate coverages can be a challenge whenpolicies generally exclude coverage if the
you are a backflow contractor/technician. Bobvehicle is used in business; be sure to read
Smart, commercial lines director of Compassyour policy or ask your agent. Otherwise,
Insurance in Highlands Ranch, Colorado,vehicles used in business need business auto
states: "Everybody wants to lump eachcoverage. The good news is that commercial
backflow contractor/tester/tech into theauto coverage is usually very competitive and
plumbing category, when in fact they are notcan even be cheaper in some cases than
all plumbers; that was my point of contentionpersonal auto coverage. As is the case with
with the insurance carriers. I explained toGeneral Liability, you should purchase at
Hartford [insurance carrier] that theleast  $1  million  in  limits.
backflow techs test the backflow apparatus -
then they make a report on the valve theyWorker's  Compensation
tested or they repair or replace the valve.
They are not going in and tearing out waterIf you are a backflow contractor that employs
lines  or  sewer  lines.other backflow techs in your business,
Worker's Compensation is insurance you will
"What Hartford did…was to cover thesewant to carry. It is surprising that this is
backflow techs under an engineering classoften the most misunderstood business
because it's obviously more about reports andinsurance coverage since it covers exactly
paperwork," he continues. "I had over 30what it says. This coverage reimburses
backflow techs insured through Hartford underworkers who are injured on the job for lost
this engineering class and never had onewages, medical and rehabilitation costs. It
claim." Hartford has since modified thisis required by law in virtually every state.
particular class of coverage with regards toGenerally, there are two aspects of this
backflow techs and currently does not covercoverage: the first covers the lost wages and
backflow techs that work on fire lines, i.e.,medical costs of the injured employee; the
sprinkler systems, suppression systems;second covers the employer's liability should
supplementary coverage is required or athe injured employee or his family decide to
different  class  should  be  selected.sue. In most states the worker's compensation
system is the sole remedy for an injured
Find  an agent who understands your business.worker. As a small business owner you will
likely have the option of excluding yourself
A key component in selecting insurancefrom worker's compensation coverage in
coverage for a backflow contractor/technicianexchange for a reduction in your premium.
tester is to make sure that your agent fullyWeigh this option carefully in light of your
understands what it is that you do and don'tpersonal medical insurance, which may have an
do in the course of your work day. "If oneexclusion  for  job-related  injuries.
agent wants to place you in the plumber class
- which can cost upwards of five times theBusiness  Interruption  Insurance
annual premium of let's say an engineer class
- find an agent who is willing to listen andAdditionally there is insurance business
really understand your business, " saysowners may also want to purchase to protect
Smart. "If all you do is test backflowtheir businesses from incurring the kinds of
apparatus, then you shouldn't be placed in alosses that can close their doors: Hurricane
plumber  class."Katrina is just one example of an unforeseen
natural disaster that could force you to
Regrettably, insuring your business is not assuspend your business operations; floods,
simple as insuring your car. Because thistornadoes, and wild fires are other examples.
business is unique, you'll need to draft aOr, on a more commonplace level, your
package of insurance that meets your businessbusiness could be the victim of vandalism or
needs and provides the level of protectiontheft. Business Interruption insurance
you're  comfortable  with.protects you from the loss of revenue
incurred when you're forced to close down. It
Your first decision is to decide which typesusually has an interesting deductible based
of insurance your business needs. Two typeson the number of days you are out of business
that all businesses need are property andrather than a dollar amount and will
liability  insurance.generally only kick in after your business
has been down X number of days. The premium
Property  and  Casualty  Coveragefor this coverage will be based on your
business income and reimbursement will be
Property insurance protects the assets yourmade  according  to  your  average of income.
business owns, including the building and
equipment, from destruction or damage. EvenUmbrella  Insurance
if you run your business out of your home,
you'll need to protect your business assetsIs it actually possible for you to buy an
with separate property insurance; yourinsurance policy that can save you money on
homeowner's policy will not cover businessother insurance policies? It is and an
equipment. There are two general types ofumbrella policy is a great example. An
property and casualty coverage: All Riskumbrella policy is a type of liability
Coverage and Named Perils Coverage. As thecoverage that protects you if there is a
names imply, "All Risk" will cover you forjudgment against you that is larger than your
almost any type of loss whereas "named peril"limits of coverage in your General Liability
coverage will only cover you for specificor Commercial Auto policy. The good news is
named causes of loss, such as fire. You needthat since the umbrella policy is secondary,
all perils coverage. Even with so called allthe premium can be very inexpensive. What is
peril coverage there will be exclusions. Makeeven better, it may be possible for you to
sure and review the exclusions in the policy.lower your limits on your General Liability
If there are exclusions in the policy thator auto policy to something less than $1
are important to you, you may want to trymillion, purchase a $2 to $3 million umbrella
another insurance company or purchasepolicy  and  save  money  overall.
specific coverage for the excluded
situations.Disability  Insurance
Property insurance is also written as eitherSince you're a business owner, you should
replacement cost or actual cash value. Thealso carry some kind of disability insurance.
first will cover the actual cost necessary toThere are various kinds of disability
replace the lost property (less theinsurance available that are tailored to the
deductible). The actual cash value policyneeds of business owners. All of them involve
will only pay you the depreciated value ofpaying premiums now to cover your lost income
the property -- almost never enough toif you become disabled or unable to carry on
replace what you have lost. Unless the costyour business. If your business is dependent
is prohibitive, you should purchaseupon the expertise or knowledge of particular
replacement cost coverage. Even withpeople in your company, you should also
replacement cost coverage you will need toconsider key person insurance. This type of
make sure you have purchased a high enoughplan helps to compensate a business for
limit. If your building and contents arefinancial losses due to the death or long
worth $1.5 million and you only have $1term disability of a key person. The
million in insurance, a total loss wouldinsurance provides additional funds to the
still  leave  you  $500 thousand in the hole.business until the key person can be
replaced, or until he or she returns to work.
To determine how much property insurance
you'll need, create an itemized list of yourBusiness  Owner's  Policy
business' assets and their individual dollar
values. Then decide which assets you actuallyProperly covering your business is a complex
want to insure and for what value, which willtask, involving multiple policies each of
determine the insurance premium. In somewhich has its own limits and exclusions. Many
cases, you may decide against insuring asmall business owners can satisfy many of
particular asset, because it just doesn'tthese through a package policy known as a
warrant the cost of the premium. In otherBusiness Owner's Policy or BOP. Often the BOP
cases,  the premium may be well worth paying.policy is priced very competitively and
allows some level of customization through
General  Liabilitypurchasing of additional limits and
coverages. It is only available for
Liability insurance is the other kind ofbusinesses up to a certain size - ideal for a
insurance no business should be without.small backflow contractor -- and varies from
General liability is just that -- verycarrier to carrier. You should ask your
general in nature and protects your businessagent.
from liability arising from negligence on
your part that may cause injury to others,Reading an insurance policy contract can be a
such as a customer or employee. It alsodaunting task. Their structure can be very
protects your company if someone is injuredconfusing and they are loaded with special
as a result of using your service. When youdefinitions. Despite this, it is critical
consider that the legal expenses, settlementthat you understand your coverages; your
or judgment expenses of a single lawsuitagent can help. However, when all is said and
could drive your business into bankruptcy,done, just like everything else in your
you'll see why this kind of insurance isbusiness, the final responsibility rests with
considered a "must-have". Also check whetheryou,  the  owner.
or not your general liability insurance
policy also covers product liability for theBeing a successful business person means
valves you may be replacing. If not, you'llbeing able to anticipate events and plan for
want to add this type of specific liabilitythe future. Business insurance is one way of
insurance to your package. You should includeensuring that you're in control of your
"Errors and Omissions" coverage whichfuture rather than being controlled by it.
protects you in the event you are sued as aUnfortunately, there is no generic plan that
result  of  a  mistake  in  your  work.will meet every small business person's
needs. You'll need to shop around, just as
What limits of General Liability should youyou would for any product, to get the
purchase? According to the Insurance Industrybusiness insurance that's most suited to you
at-large, the absolute minimum in this dayas  a  backflow  contractor.
and age should be $1 million; most businesses
should consider increasing this to $2 or $3Disclaimer
million. The good news is that insurance is
not priced on a straight line basis. SinceThis article is intended to provide general
smaller claims are much more likely thaninformation on commercial insurance for
large ones, the first $1 million in coverageeducational purposes only. The material here
will cost the most; an additional $1 to $2is not intended to provide specific
million will not cost double or triple therecommendations for any individual business
amount.or type of business. Insurance is regulated
in each state by that state's Department of
Different types of liability coverage haveInsurance. Only a licensed Insurance Agent or
developed over the years do address specificInsurance Broker in your state is qualified
business needs. When buying a liabilityto provide you with advice on your specific
policy, you should be aware that there arebusiness insurance needs.
two types of coverage, occurrence coverage



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