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Keep Your Coverage Current

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by Roy Solomon

The challenges of operating a business are many and seem to be increasing all the time. From higher office space rentals to changing tax laws, each year brings its own set of new rules and standards… and subsequent concerns about where to cut costs.

But inasmuch as all cost-cutting measures are not equal, maintaining dated insurance coverage or considering a decrease in coverage is not a good option when looking to reduce expenses.

The real question boils down to this – is the insurance coverage you had in 2006 enough to protect you in 2007? We may already be a couple months into the new year but it’s never too late to review your coverage, even if nothing within your operation appears to have changed.

The annual checkup approach ensures that you’re not caught off guard, particularly in the event of a natural disaster or fire. And it also makes sense if you’ve been fortunate enough to experience growth during the past twelve months. The liability insurance you took out when you first started your business a few years back won’t protect the multimillion dollar enterprise it may have become.

No question – you may be able to think of dozens of other ways to spend money on your business, but truth be told, without adequate coverage that business you have put your heart, soul and financial resources into could be jeopardized permanently in the wake of a disaster.

Adequate business property coverage will insure office equipment, inventory, the building you own and all tenant improvements made. The rule of thumb is to calculate the cost of getting your business back in action if interrupted by a fire or natural disaster. By determining the worth of your property, you establish the coverage necessary to bring it back from the ashes…sometimes literally.

On the subject of fires or any other situation that results in the interruption or suspension of your business – will you have enough money set aside should it take months or longer to reopen your doors? Business interruption insurance is one valuable element of coverage you might want to consider for 2007 and beyond.

What many smaller business owners don’t take into consideration is the importance of replacement cost coverage. The price tag on that office furniture and computer equipment purchased a few years ago is likely quite a bit larger today. In general, it pays in the long run to periodically review the limits of your insurance coverage. The last thing you want is to come up short when you need it the most.

Health insurance is an area that has unquestionably experienced skyrocketing increases. A little calculation will ensure that your expenses are up to date. You may have plugged in your payroll and expenses last year, but even a time period as short as a few months can translate into larger health insurance costs. You may have increased some of your benefits or taken on a couple more employees. It all adds up.

And don’t trim the budget on liability coverage. Covering everything from lawsuits resulting from accidents occurring on your business property to a product or service that causes damage to a client, liability insurance can pay for itself many times over should the unexpected occur. It also protects against a slew of other claims, including false advertising, libel and slander.

Umbrella liability protection is another “beyond the basics” coverage that makes the difference between your staying in or going out of business should a lawsuit verdict go against you, a sister company or separate location. In short, an umbrella will cover you should a verdict exceed the limits of your liability protection. Umbrella coverage kicks in when the top limit of your basic liability coverage is reached.

And while we’re addressing liability coverage, let’s take a quick look at employment practices insurance. A fairly new addition to the mix of coverage a business owner should consider, employment practices insurance is there to take care of legal defense and pay a settlement or damages should an employee sue your company for sexual harassment, wrongful termination, job discrimination or any number of other on-the-job indiscretions.

For those starting up a business this year, there are several factors to take into account. Have a comprehensive understanding of your state’s health care regulations – particularly in Massachusetts where new wide sweeping laws have not yet been finalized.

Also, be aware that insurance requirements on new leases are all general in scope and may vary from building to building. If you’re in the market for rental space, focus less on the dollar amount of the lease and more on whether its insurance requirements are reasonable. The advice of an attorney could come in handy when negotiating on a lease agreement.

And one last element to take into account – business owners, regardless of how small their operation may be – should never confuse personal coverage needs with their business needs. Make sure you’re working with a reputable agent who understands the constantly changing coverage requirements of your business.

(Editor’s note: Roy Solomon is a principal with Amity Insurance Agency, Inc., based in Quincy, MA. www.amityins.com. (800) 940-4010).