Minimizing the risk of operating a small business insurance

Minimizing the Risk of Operating a
Small Business
Insurance

BUS 212 RM&I Insurance
Spring 2006
copyright,


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
• Health
• Disability
• Key ExecutiveLife Insurance that
compensates the
company for loss
income or services if
the owner or vital
employee dies