Obtaining Business Insurance

Think of business insurance as the copper soldercoverage, occurrence coverage and claims-made
that fuses a plumbing joint together; if the jointcoverage. Occurrence coverage is more
leaks, there can be major ramifications. The sameexpensive but covers you based on when the
holds true with business insurance; if you don'tloss happened, even if it was many years ago.
have the coverage that a backflow preventionClaims-made coverage only covers you while the
contractor business really needs - you'll watchpolicy is in force and the claim is made. With
those profits flow right down the drain. Youoccurrence coverage, as long as you always have
personally cannot control or eliminate everysome policy in force, you will not have gaps in
potential risk that threatens your livelihood, butcoverage. With a claims-made policy, it is possible
business insurance can provide the addedto have gaps when you have not coverage in
protection against these risks ... if you carry theforce.
right kinds.Commercial Auto Coverage
Choosing the right policy with all of theIf you use any vehicles in your business, you
appropriate coverages can be a challenge whenneed commercial auto coverage. Personal auto
you are a backflow contractor/technician. Bobpolicies generally exclude coverage if the vehicle is
Smart, commercial lines director of Compassused in business; be sure to read your policy or
Insurance in Highlands Ranch, Colorado, states:ask your agent. Otherwise, vehicles used in
"Everybody wants to lump each backflowbusiness need business auto coverage. The good
contractor/tester/tech into the plumbingnews is that commercial auto coverage is usually
category, when in fact they are not all plumbers;very competitive and can even be cheaper in
that was my point of contention with thesome cases than personal auto coverage. As is
insurance carriers. I explained to Hartfordthe case with General Liability, you should
[insurance carrier] that the backflow techs testpurchase at least $1 million in limits.
the backflow apparatus - then they make aWorker's Compensation
report on the valve they tested or they repair orIf you are a backflow contractor that employs
replace the valve. They are not going in andother backflow techs in your business, Worker's
tearing out water lines or sewer lines.Compensation is insurance you will want to carry.
"What Hartford did…was to cover theseIt is surprising that this is often the most
backflow techs under an engineering classmisunderstood business insurance coverage since
because it's obviously more about reports andit covers exactly what it says. This coverage
paperwork," he continues. "I had over 30reimburses workers who are injured on the job
backflow techs insured through Hartford underfor lost wages, medical and rehabilitation costs. It
this engineering class and never had one claim."is required by law in virtually every state.
Hartford has since modified this particular class ofGenerally, there are two aspects of this
coverage with regards to backflow techs andcoverage: the first covers the lost wages and
currently does not cover backflow techs thatmedical costs of the injured employee; the
work on fire lines, i.e., sprinkler systems,second covers the employer's liability should the
suppression systems; supplementary coverage isinjured employee or his family decide to sue. In
required or a different class should be selected.most states the worker's compensation system
Find an agent who understands your business.is the sole remedy for an injured worker. As a
A key component in selecting insurance coveragesmall business owner you will likely have the
for a backflow contractor/technician/tester is tooption of excluding yourself from worker's
make sure that your agent fully understandscompensation coverage in exchange for a
what it is that you do and don't do in the coursereduction in your premium. Weigh this option
of your work day. "If one agent wants to placecarefully in light of your personal medical
you in the plumber class - which can costinsurance, which may have an exclusion for
upwards of five times the annual premium of let'sjob-related injuries.
say an engineer class - find an agent who is willingBusiness Interruption Insurance
to listen and really understand your business, "Additionally there is insurance business owners
says Smart. "If all you do is test backflowmay also want to purchase to protect their
apparatus, then you shouldn't be placed in abusinesses from incurring the kinds of losses that
plumber class."can close their doors: Hurricane Katrina is just one
Regrettably, insuring your business is not as simpleexample of an unforeseen natural disaster that
as insuring your car. Because this business iscould force you to suspend your business
unique, you'll need to draft a package of insuranceoperations; floods, tornadoes, and wild fires are
that meets your business needs and provides theother examples. Or, on a more commonplace
level of protection you're comfortable with.level, your business could be the victim of
Your first decision is to decide which types ofvandalism or theft. Business Interruption insurance
insurance your business needs. Two types that allprotects you from the loss of revenue incurred
businesses need are property and liabilitywhen you're forced to close down. It usually has
insurance.an interesting deductible based on the number of
Property and Casualty Coveragedays you are out of business rather than a dollar
Property insurance protects the assets youramount and will generally only kick in after your
business owns, including the building andbusiness has been down X number of days. The
equipment, from destruction or damage. Even ifpremium for this coverage will be based on your
you run your business out of your home, you'llbusiness income and reimbursement will be made
need to protect your business assets withaccording to your average of income.
separate property insurance; your homeowner'sUmbrella Insurance
policy will not cover business equipment. ThereIs it actually possible for you to buy an insurance
are two general types of property and casualtypolicy that can save you money on other
coverage: All Risk Coverage and Named Perilsinsurance policies? It is and an umbrella policy is a
Coverage. As the names imply, "All Risk" willgreat example. An umbrella policy is a type of
cover you for almost any type of loss whereasliability coverage that protects you if there is a
"named peril" coverage will only cover you forjudgment against you that is larger than your
specific named causes of loss, such as fire. Youlimits of coverage in your General Liability or
need all perils coverage. Even with so called all perilCommercial Auto policy. The good news is that
coverage there will be exclusions. Make sure andsince the umbrella policy is secondary, the
review the exclusions in the policy. If there arepremium can be very inexpensive. What is even
exclusions in the policy that are important to you,better, it may be possible for you to lower your
you may want to try another insurance companylimits on your General Liability or auto policy to
or purchase specific coverage for the excludedsomething less than $1 million, purchase a $2 to
situations.$3 million umbrella policy and save money overall.
Property insurance is also written as eitherDisability Insurance
replacement cost or actual cash value. The firstSince you're a business owner, you should also
will cover the actual cost necessary to replacecarry some kind of disability insurance. There are
the lost property (less the deductible). The actualvarious kinds of disability insurance available that
cash value policy will only pay you the depreciatedare tailored to the needs of business owners. All
value of the property -- almost never enough toof them involve paying premiums now to cover
replace what you have lost. Unless the cost isyour lost income if you become disabled or unable
prohibitive, you should purchase replacement costto carry on your business. If your business is
coverage. Even with replacement cost coveragedependent upon the expertise or knowledge of
you will need to make sure you have purchased aparticular people in your company, you should also
high enough limit. If your building and contents areconsider key person insurance. This type of plan
worth $1.5 million and you only have $1 million inhelps to compensate a business for financial
insurance, a total loss would still leave you $500losses due to the death or long term disability of
thousand in the hole.a key person. The insurance provides additional
To determine how much property insurance you'llfunds to the business until the key person can be
need, create an itemized list of your business'replaced, or until he or she returns to work.
assets and their individual dollar values. ThenBusiness Owner's Policy
decide which assets you actually want to insureProperly covering your business is a complex
and for what value, which will determine thetask, involving multiple policies each of which has
insurance premium. In some cases, you mayits own limits and exclusions. Many small business
decide against insuring a particular asset, becauseowners can satisfy many of these through a
it just doesn't warrant the cost of the premium.package policy known as a Business Owner's
In other cases, the premium may be well worthPolicy or BOP. Often the BOP policy is priced very
paying.competitively and allows some level of
General Liabilitycustomization through purchasing of additional
Liability insurance is the other kind of insurance nolimits and coverages. It is only available for
business should be without. General liability is justbusinesses up to a certain size - ideal for a small
that -- very general in nature and protects yourbackflow contractor -- and varies from carrier to
business from liability arising from negligence oncarrier. You should ask your agent.
your part that may cause injury to others, suchReading an insurance policy contract can be a
as a customer or employee. It also protects yourdaunting task. Their structure can be very
company if someone is injured as a result ofconfusing and they are loaded with special
using your service. When you consider that thedefinitions. Despite this, it is critical that you
legal expenses, settlement or judgment expensesunderstand your coverages; your agent can help.
of a single lawsuit could drive your business intoHowever, when all is said and done, just like
bankruptcy, you'll see why this kind of insurance iseverything else in your business, the final
considered a "must-have". Also check whether orresponsibility rests with you, the owner.
not your general liability insurance policy alsoBeing a successful business person means being
covers product liability for the valves you may beable to anticipate events and plan for the future.
replacing. If not, you'll want to add this type ofBusiness insurance is one way of ensuring that
specific liability insurance to your package. Youyou're in control of your future rather than being
should include "Errors and Omissions" coveragecontrolled by it. Unfortunately, there is no generic
which protects you in the event you are sued asplan that will meet every small business person's
a result of a mistake in your work.needs. You'll need to shop around, just as you
What limits of General Liability should youwould for any product, to get the business
purchase? According to the Insurance Industryinsurance that's most suited to you as a backflow
at-large, the absolute minimum in this day and agecontractor.
should be $1 million; most businesses shouldDisclaimer
consider increasing this to $2 or $3 million. TheThis article is intended to provide general
good news is that insurance is not priced on ainformation on commercial insurance for
straight line basis. Since smaller claims are mucheducational purposes only. The material here is not
more likely than large ones, the first $1 million inintended to provide specific recommendations for
coverage will cost the most; an additional $1 to $2any individual business or type of business.
million will not cost double or triple the amount.Insurance is regulated in each state by that
Different types of liability coverage havestate's Department of Insurance. Only a licensed
developed over the years do address specificInsurance Agent or Insurance Broker in your
business needs. When buying a liability policy, youstate is qualified to provide you with advice on
should be aware that there are two types ofyour specific business insurance needs.