Johnte’ Archer, JD is the owner and agent of record for J. Archer Insurance Group/Archer Commercial Insurance Group – a full-service risk management and independent insurance brokerage located in Houston, TX.
Business Insurance Checklist
7 Must-Have Insurance Coverages for All Businesses
Entrepreneurs and small businesses are the heartbeat of our economy. They are bold risk-takers that have bet it all on themselves and their capabilities. Whether it is an inherited family business with generational goodwill, or a dream finally realized and the culmination of years of planning, research, saving and hard work; only the strong survive as entrepreneurs.
Your business is more than just a business, it is your baby, and encompasses the gateway to all the dreams and plans you have for you and your family. If not for your business, you would not be who you were destined to be.
But what if it all ended today? Years of entrepreneurial blood, sweat and tears; wearing every business hat imaginable; sleepless nights, overcoming the noise of naysayers, grinding day after day until finally reaching the point of success, and then, in an instant, you lose it all.
Each day millions of business owners are at risk of losing everything they’ve built because of any accident, error, negligent act of an employee, contract breach, or act of nature, threatens the existence of your legacy via lawsuit or other financial loss.
The great news is that an experienced risk management advisor and the proper business insurance can defend you in the event of a lawsuit (even frivolous ones), minimize or eliminate potential threats, and provide financial damages to make your business whole in the case of business interruption or property damage/loss.
As an insurance advisor, I often tell business owners that if you cannot afford insurance, you cannot afford to be in business. I remember starting my insurance firm in 2009 knowing that as a licensed agent, I would not be able to get appointments with carriers without the proper Errors & Omissions coverage in place. Although I was new in business, it was not an option to go without insurance. You are never too small to secure insurance coverage. In fact, most insurance premiums largely factor the annual revenues of a business as the basis for annual premiums. Hence the smaller you are, the lower your premiums tend to be.
The moment your offer your service or product is the moment you are at risk for a lawsuit or other loss. Below are 7 common insurance coverages that most (if not all) small businesses need along with a short business insurance checklist to evaluate your business. You can also visit our website at www.archerinsgroup.com for a more in-depth look at specific industries and an expansive list of other coverages available to both individuals (including high net worth) and businesses.
7 Must-Have Insurance Coverages For All Businesses
General Liability protects you from third-party lawsuits in the event someone believes they have experienced injury, bodily damage, or property damage as a result of your business. In today’s litigious society, any small accident or incident could result in a lawsuit. Even the defense of a frivolous lawsuit could put most small businesses out of business. The average cost of litigation ranges between $3000 and $150,000 with the average time spent on litigation 8.7 months (according to a 2005 SBA report).
A general liability policy can potentially cover the costs of a lawsuit including legal fees, lawyer’s fees, settlements, judgments, and the cost of business interruption. Be prepared, lawsuits have closed the doors of millions of businesses, large and small.
Although Texas and some other states do not require you to have workers compensation coverage, if you have even a single part-time employee it is best to have workers compensation insurance.
Any accident, slip, and fall or physical injury while working can cause the employee to have medical bills and lost wages. If workers compensation is in place at the time of an injury, the policy will cover the worker for the statutory maximum provided by law. The worker will be unable to pursue your company for any additional compensation, which protects your business and the employee as it is a no-fault coverage. This means that the worker does not have to prove the injury was due to the employer’s negligence, it will pay regardless. In most states workers compensation is required by law. Be sure your agent is familiar with the compensation laws of each state in which you do business.
In the case of independent contractors, be sure that if these employees are truly independent. If they are misclassified (even if they have an independent contractor contract with you) and would otherwise be considered an employee, you may be responsible for their injuries. Work with your agent to ensure you are classifying your workers correctly, otherwise, it could be costly for your business.
Your personal auto coverage will NOT cover you if you or an employee of your business is involved in an accident while driving for work purposes. To put this in perspective, if an employee gets into an accident while picking up lunch for the office or meeting a client to pick up a check; your business may be held liable for damages. If you drive your personal vehicle for both personal and business use, there are policies that will provide coverage for both uses.
Whether you own your office building, or rent and need protection for the contents or the improvements within the building, property coverage is the only protection provided for your building or business personal property. If you have a landlord, they may require you to have liability insurance coverage (which most times will cover damage to rented premises) but this coverage will not protect your business contents such as furniture, fixtures, supplies, materials or products/inventory.
Remember that property coverage will replace or provide actual cash value (less depreciation) for damaged or lost property caused by fire, storm damage, theft, vandalism or other perils. Always make sure to review your policy with your agent to be sure of any exclusions. One of the most common misconceptions is that property policies include flood coverage – they do not. Make sure you have a separate flood policy in place to cover your property in the event of a flood.
Errors & Omissions/Professional Liability
Errors & Omissions (also known as Professional Liability) is commonly used to protect industries with a professional license or skill-set such as lawyers, doctors, engineers, architects and insurance agents. Additionally, if you are providing advice or a service, it also protects you from a client or customer who feels that your business failed to provide the promised service, made mistakes, was negligent, gave bad advice, or simply didn’t meet their standard.
Professional liability is the only coverage that provides coverage for financial loss to a third party. Many business owners believe their general liability can take the place of professional liability coverage, but it does not.
For example, an architect drew plans for a new private school. Later, those faulty plans proved to be the cause of a load bearing wall to fall down, causing injury to several children and teachers, and parts of the school building to collapse. During the time the school had to be rebuilt the school was forced to close for over six months resulting in losing all of their students/tuition revenue. Even though the architect did not physically build the school, his plans were the catalyst that ultimately caused the school to fall, hurt students/teacher and the school to lose revenues.
If the architect only had a general liability policy in place, there would be no coverage in place for his professional work as an architect or any financial losses to third parties. A general liability does not cover faulty or shoddy work, only bodily injury resulting from your products or completed operations. Since professional work such as architectural plans are generally excluded from general liability policies, the architect would have no coverage for any of the claims against him.
However, a professional liability policy will cover your legal and defense costs in the event your clients pursue a claim against you and pay for any financial losses incurred by them as a result of your work or professional advice.
In the age of technology, we will have no shortage of attacks on our data. Even large firms such as Target and Equifax have seen massive breaches in recent years. Certainly, cyber security should be top of mind when running a business. Large corporations have cybersecurity and data breach coverage because they are often targeted by hackers. However, small businesses have equal opportunity for data breaches to occur, especially if there are little to no operational processes to minimize these risks.
Client’s information including their banking or credit card information, addresses, social security numbers and other sensitive information, however, stored, can easily be mishandled or captured. A stolen laptop, a disgruntled employee, or even something as simple as throwing away a document with sensitive information on it, could lead to a claim against your firm. Cyber Security and Data Breach coverage can protect against the high financial risk associated with a hack, data breach, or losing sensitive customer information.
Storms, extreme flooding, and other natural disasters have caused some businesses to lose everything they’ve worked for. Starting over should not be an option, after all, you’ve done to grow your business. What if there was coverage that could sustain your business with continued revenues, payroll and even cover additional incurred expenses while you restore your business to normalcy? There is.
Business interruption and extra expense coverage do just that. Business and supply interruptions can be insurmountable. These claims are generally even higher than property damage claims, because you may still be forced to pay for rent, salaries, taxes, and loan payments without any revenue. The business interruption could cost millions of dollars out of pocket if there is no coverage in placed to cover these costs. If you have business interruption coverage, your cost could be as small as a deductible.
About a year ago, a popular Houston eatery since the 1940’s had to close its doors due to a devastating fire. After a year of rebuilding, the owner shared that the cafeteria was re-opening with the same staff as it had prior to the tragedy. Not only did insurance provide for the complete rebuild of the burned structure but the insurance policy provided for business interruption and extra expense coverage that provided payroll for each employee for the full year the business could not operate. For a business so rooted in tradition, family, and faith, the most difficult thing for the business owner to do is have to lay off committed employees. Insurance coverage ensured that this owner didn’t have to.
Now that you’ve familiarized yourself with the most necessary coverages, are your ready to get your business insurance in order? If you’ve discovered any gaps in coverage, it’s not too late to protect your business. Give yourself a pat on the back, you’ve accomplished so much and your business is a testament of the leader you are. You will not let your business suffer a loss that you can prevent with common sense protections that are readily available to you. So let’s get started.
Business Insurance Checklist:
- Interview and secure an experienced independent insurance agent/broker (with access to multiple carriers) who can act as a trusted risk management advisor for all your insurance needs.
- Review your business and potential risks with an agent.
- Implement agent’s recommended coverages.
- Expect a semi-annual & annual review of coverages and provide ongoing updates on changes in operations, revenues, payroll, assets etc.
- Allow time to review and discuss your policies with your agent – know exactly what is covered and what is not.
Proven. Precise. Protection.
Archer Insurance Group is a risk management and insurance brokerage headquartered in Houston, TX. Licensed across the US with access to place coverage anywhere in the world, they are a single source solution for individuals and businesses who seek custom comprehensive risk management services. www.archerinsgroup.com ~Ph: 281.501.8331 ~5252 Westchester Street, Houston, TX 77005