There are a number of coverages typically offered for a small business. We will briefly examine each one while providing some insight into the inner workings. The most common coverages are:
• General Liability (GL)
• Property
• Business Auto
• Workers Compensation
• Umbrella Liability
General Liability is the insurance foundation upon which your business exists. It provides for what is customarily $1,000,000 of coverage for things such as your “products and completed operations,” which is to say, your workmanship. Should a gift basket produced by you contain a contaminated food item and sicken your client, you and your food product vendor are very highly likely to be sued.
Other General Liability coverages provide for protection from slip and fall injuries on the property (medical payments) where your business is located, damage that you might be legally responsible for when leasing office space (damage to premises rented to you), and something known as personal and advertising injury which can be anything from a physical altercation, a spoken word, or advertising that a competitor might take exception to.
Property Coverage is intended to cover buildings, office space leased, and your business personal property (BPP). When a building is owned, the need for insurance is pretty simple. Coverage can be written on a replacement cost basis (R/C) or depreciated value which is known as actual cash value (ACV).
If you lease space to run your business, we must do a thorough review of the insurance requirements of the lease! Many landlords have “triple net lease” clauses which may require you to insure (and maintain) the building for full replacement cost as if you own the building, even though you do not. Some leases are fairly concise, while others are very poorly written with vague language that can be hard to decipher.
Your business personal property (BPP) is the coverage needed for equipment, tools, inventory, and office furniture, etc. Careful evaluation of the limits needed and locations to which coverage might be needed are warranted. Coverage for Business Personal Property of property that is off your premises or in transit must be considered if applicable.
Business Auto coverage is needed for vehicles that are titled in the business legal entity name, perhaps “lettered up” with the company name/logo, and used primarily for business use. Many small business owners have a “mixed use” vehicle which is often a personal auto used for more than business use. Very special consideration must be given to vehicles insured on a personal auto policy and used for business as a claim denial can easily result from a misclassification.
Personal auto insurance does not provide for true commercial use of a vehicle (deliveries as an example) by employees, and does not provide for the liability limits ($1,000,000) typically obtained with business auto insurance.
Workers Compensation coverage is typically mandated by the state in which you operate once you have one or more employees (not counting the owner). Coverage is obtained in order to protect the worker who becomes injured or otherwise unable to perform his or her duties in the event of worksite related illness or injury.
Umbrella Liability is sometimes referred to as excess liability and simply means that you can obtain $1,000,000 to $5,000,000 more liability coverage than that provided by general liability. In other words, a $1,000,000 Umbrella would typically provide $2,000,000 of GL and $2,000,000 of business auto liability.
As an independent insurance agency in Central Ohio, we represent up to thirty five different insurance companies all of which will offer these coverages in two primary forms. The first (and typically most expensive form) is called a CPP (commercial package policy). Think of it as ala carte whereby we pick and choose the pieces we want or need.
A more common option is the BOP (business owner’s policy) which is crafted by the insurers to bundle the needed coverages together, with reduced pricing. Many of these also contain endorsements which are bundles of coverage typically needed by certain classes of business (barbers, flower shops, main street retail, restaurants, gift basket providers etc.).
For more information or to schedule a consultation, I can be reached at 614-697-2020 or by visiting us at www.gesselins.com.
