06/ 03/ 2008
When it comes to business liability coverage, it's common to have too little coverage--and possible to have too much. Here's how to get it just right.
Kelly Coley, an agent at Coley & Lyles Insurance Co., tells her small business customers, regardless of their industry, to have at least $1 million of general liability insurance--for starters. But you don't have to break the bank to make sure you're covered. Use these tips to figure out how to pay the least for the most coverage you'll ever need.
Workers' compensation insurance: Control your premiums by making sure employees are properly classified according to their jobs. "This is a paperwork-intensive task, but it can pay off in the long run," Coley says.
One of Coley's clients--whose employees do different tasks throughout the day--installed a time clock so he could document how much time was spent on each task.
Professional liability insurance: Also called malpractice or errors and omissions insurance, this is most important for service providers, such as consultants, doctors, lawyers and financial planners--but all business owners should consider it. Professional liability insurance protects against human error and claims if the services you provided (or failed to provide) resulted in a financial, physical or emotional loss to your customers. The cost of this coverage is directly related to the risk associated with the work you do. Coley suggests working with your insurance broker to help determine the amount of risk for your small business.
Product liability insurance: If you sell or manufacture products, you should be protected in the event of a person becoming injured or sick as a result of using the product. As with professional liability insurance, the more dangerous your product could be, the more you'll pay for coverage.
Auto insurance: If you have a vehicle with commercial tags and signs, you should consider a commercial auto policy. Otherwise, you may be unpleasantly surprised if you expect your personal auto carrier to pay in the event of a claim.
When it comes to liability insurance, avoid having overlapping coverage. Not only is it expensive, but in the event of a lawsuit or accident, you may find yourself playing cat and mouse with two insurance companies, both of which claim the other one is required to pay for your loss.
