06/ 03/ 2008
by Megan Pacella
It's tempting to save money by skimping on insurance coverage for your business, but every small business owner should be prepared to face the unexpected, says Leroy Van Brunt, an insurance agent with Farmington, Minn.-based Miller-Hartwig Insurance.
You might think you've taken every precaution to keep your business around for the long haul, but running a company comes with risks you've never imagined. "Even if you can't afford a lot of coverage, some insurance is absolutely necessary—even if you think you won't use it," Van Brunt says.
Not sure how to start assessing your insurance needs? Read on to find out about the most common—and necessary—types of business insurance:
Key Person
What it is: Covers a valuable employee in case he or she falls ill, or worse. In the event that a vital employee becomes unable to work, key person insurance will reimburse your business for the lost profits that person would generate.
Rates: Depend on the overall health and salary of the insured, as well as the term period of insurance.
Who needs it: Any business that largely relies on one employee, like a top salesperson or experienced manger, for its success.
Business Property
What it is: Protects against physical damage to your property. Experts recommend investing in an all-risk policy that extends coverage to damage from hailstorms, explosions and other unexpected crises.
Rates: Depend on size of building, value of property and level of coverage.
Who needs it: Recommended to all business owners, especially those located near areas at risk of natural disasters.
Business Interruption
What it is: Covers loss of profits, payroll and outstanding bills if your business is forced to close for a period of time due to one of the covered causes.
Rates: Based on your company's income; the more money you make, the higher the rates.
Who needs it: Every business, especially those that could be affected by a disaster such as fire, flood, hurricane or terrorist attack.
General Liability
What it is: Protects you from being sued for any accidents or injuries that take place on your property.
Rates: Based on sales, payroll, location and type of business, and the risks associated with a business' product or service.
Who needs it: Everyone. In today's litigious society, you never know when the smallest mistake or accident could put you on the defendant's side of a lawsuit.
Umbrella Coverage
What it is: Added protection to your workers' compensation, business property, auto insurance and liability policies. Covers payments in excess of your existing coverage.
Rates: Premiums usually cost about $100 to $300 per $1 million of coverage.
Who needs it: Businesses that need more coverage but can't afford to increase their liability limits.
NFIB.com
For more information about updating your insurance coverage, check out the "insurance" section at www.NFIB.com/toolsandtips
