Minimizing the Risk of Operating a Small Business Insurance BUS 212 RM&I Insurance Spring 2006 copyright, SJH

Where to Start?? There are so many types of insurance that a business could go broke paying for the highest protection in all areas. The best place to start is to analyze the needs for your specific business. Annually perform a Risk Categorization Rx. If you are new to the industry, check the trade organization or associations for specialized checklists of needed insurance. Check with an Insurance Broker.

Insurance: The Must Haves There are three types of insurance required by all businesses by law: Social Security Unemployment Worker’s Compensation

Insurance or Taxes?? Social Security and unemployment are often viewed as taxes They are obligatory. Not paying these “tax insurances” greatly jeopardize your ability to do business (especially after the IRS puts a lien on your home)

Worker’s Compensation: California’s Nightmare Insurance? Provides income & payments for medical expenses to worker’s injured in job-related accidents. State law governs worker’s comp and in California there are no exemptions for small businesses. The amount of insurance is based on the “risk level” of the job (construction is higher than clerical). Costs are also determined by the “size” of your payroll and the company’s safety record.

Where to look for Workman’s Compensation Insurance Quotes Check first with the State of California. The State sets the rate for the specific industry. Check WorkersCompensation.com California workercomp.com Check with your Trade Industry to get industry standard quotes. Check with a private carrier.

Four General Categories of Business Insurance Property Liability Earnings Health/disability/ life

BOP: Business Owner’s Policy Many small business owner’s will buy a “BOP”…business owner’s policy. The BOP cover’s general property, liability and criminal coverage needed by the business. An advantage is the policy overall is generally less than expensive than if purchasing separate coverage for each area.

Property Insurance Property Insurance reimburses the company if your assets are damaged or destroyed. The most common types of property insurance include: - Vehicle - Fire Flood Earthquake Theft/Burglary/Robbery Fidelity Bonds Ocean Marine Insurance-Inland Marine Insurance

Fidelity Bonds: Are You Bonded? A fidelity bond provides coverage from employee dishonesty. Employee dishonest bonds guarantee that the bonded employees will handle their employers money and property with fidelity! There are normally two types of coverage: “blanket coverage” or “schedule basis coverage”- per employee or position Specific Common Fidelity Bonds Include: Janitorial Service Bonds Employee Dishonesty Bonds Pension-Trust Bond Forgery

Liability Insurance Regular liability insurance pays for claims that are brought against you because a customer was injured on the business premise. Regular liability insurance generally includes coverage for damage to property that you do not own (water leakage that damages an adjacent business).

Types of Liability Insurance Employee Liability- claims resulting from employee lawsuits charging discrimination or sexual harassment. Worker’s Compensation Officers & Directors –covers personal financial loss of officers & directors of corporations if sued for negligent decision making. Surety Bonds- common in construction. Covers the financial loss if contracts are not completed or on time.

More Liability Insurance Completed- operations damage to other’s property while completing a job. Premise & Operations – Financial Loss resulting from claims by customers, suppliers or other’s injured on your business property. Professional Liability- Financial loss resulting from malpractice claims Product Liability- Financial Loss from claims by customers because of injury caused by product This coffee is too hot!!! Do you have product liability insurance?

Earnings Insurance Earnings Insurance covers the loss of income and profits. Two-types of Earnings Insurance: Bad-Debt and Business Interruption Business Interruption covers the financial loss from a temporary closure of a business. Bad-debt covers financial loss from customer’s not paying for goods or services

Health, Disability, & Life Insurance Key Executive- Life Insurance that compensates the company for loss income or services if the owner or vital employee dies