CHICAGO — While paying insurance premiums is something that might feel like a waste for dry cleaners on a monthly basis, they’ll be glad they did when it comes time to make a claim. These proceeds might save that month’s bottom line — or might save the business entirely.
Paying too much, however, or not having the correct insurance, can be a common occurrence. To help business owners make sense of this sometimes-confusing field, California insurance agency owner Wallace Wong recently conducted a webinar titled “Insurance Needs for Small Business.”
The webinar was hosted by the Service Corps of Retired Executives (SCORE), an organization where Wong serves as a mentor.
In Part 1, we examined the general needs and specific cases where business insurance can save money or save a business, and today, we’ll continue by looking at what Wong says is the most critical type of insurance.
General Liability Policies
“First and foremost, you’re going to need liability insurance,” Wong says. “This is coverage for bad things that happen to other people because of you or your business. Whether you have a brick-and-mortar store or you work from home, it doesn’t matter — you are going to need a general liability policy.”
Wong says that this type of insurance covers bodily injury: “If somebody comes to your store and slips and falls, or if you have a home office where you meet people and they slip and fall, that is bodily injury.”
This also covers damage to other’s property. “If you go somewhere and you damage something,” he says, “that falls under general liability.”
The common limit is $1 million per occurrence and $2 million aggregate for the year, Wong says.
“The $2 million limit per year is, if you get sued twice for $1 million in a year, you’re going to be OK,” he says. “This is the de facto standard for general liability. This is the most basic coverage you can get for your business.”
Additions for Other Cases
There are riders and adjustments that business owners can add to a general liability policy to protect themselves from accidents or claims that might be more common for certain business owners.
“You can add things like medical expenses to a general liability if someone gets hurt,” Wong says. “This is usually easily accessible for medical bills around $5,000 to $10,000. If someone gets hurt while in your shop, the insurance can pay the medical bills. It’s like a peace offering, so they don’t sue you any further.”
Wong says another form of liability coverage is called employment practices liability insurance, or EPLI.
“It’s coverage from losses associated with hiring and firing practices within the workplace,” he says. “This is insurance to cover any kind of employee dispute — for instance, if they accuse you of discrimination based on nationality, disability, age, race, religion or things like that.”
Other protections of this type of insurance cover wrongful termination, sexual harassment, cases where the employee thinks the owner is retaliating against them, workplace harassment, or breach of contract. “If anybody has an employee, this is something to consider,” Wong says.
Cybercrime Protection
With the increasingly large role they play in the operation of a business, computer systems can also be a vulnerability — but one that can be insured against
“I’ve seen this more every year because of cyberattacks,” Wong says. “This insurance offers a package to cover your cyber liability costs. If you have a website that was hacked and you need to clean it and fortify it, that costs money. I have an IT friend who makes a lot of money doing this, but that money is coming from you — this covers that expense.”
User information that could be lost in a cyberattack is also a major risk for a business owner.
“This cybercrime insurance also covers any kind of data breach, where personal information is stolen,” Wong says. “That could be catastrophic. In some states, there are laws against that — you have to keep personal information secure, and if not, you could be in trouble. Cyber liability will help pay for the costs associated with that, in terms of a breach.”
Come back Thursday for the conclusion of this series, where we’ll explore the other three types of insurance business owners should investigate — property, workers’ comp and commercial auto. For Part 1 of this series, click HERE.
Have a question or comment? E-mail our editor Dave Davis at [email protected].
