Owning and operating a business involves great personal and financial investment, which requires adequate protection from damage caused by a fire or lawsuit. If you don’t have adequate or appropriate insurance to cover the costs of a loss, your business may very well be ruined.

Many people either forget to take out insurance or try to minimize their costs by taking out less coverage than what is needed in effect, underinsuring your business. It’s usually not until they are faced with the prospects of dealing with a loss that they realize they don’t have the financial support to get their business fully operational again.

A strategic risk management program, based on questionnaires, surveys, reports and advice from professionals can assist you to proactively protect your business. Insurance is a part of this program. It’s also the financial piece of the program for many businesses. It will give you peace of mind knowing that you will be able to get back to business in the event of a property loss or liability claim against your business.

Your insurance agent should provide services that include an annual client review, assistance in your claims to ensure fair, prompt settlement, and risk management services to help prevent and manage claims. If they are not doing these basic services, contact an insurance professional that will. Also, look for an agent/ broker that is current on industry issues and training.

One way to do this is finding an agent that has earned an industry designation such as CPCU, CIC, CRM, ARM. These designations require a commitment to continuing education and are a good indication that your agent is up to date with the industry issues.

How can I reduce my risk?
Exposure to risk is a part of everyday life. Risk management is the treatment of these loss exposures to your business through thoughtful planning and preventative actions in order to reduce the cost associated with injuries, lawsuits and other types of damage.
Effective risk management can be described as a series of systematic steps:

• Identifying and evaluating loss exposures facing your business.
• Selecting the technique or combination of techniques to be used to handle each exposure.
• Implementing the best strategies to deal with each exposure.
• Thoughtful planning and monitoring of the program is critical in the success of the entire program.

These steps will assist you in reducing the financial impact of everyday risks that you face during the operation of your business.

There are a number of techniques we can use to control the risks facing your business, including:

Retain the risk: This is appropriate where the costs of insurance or transferring the risk are higher than the cost of retaining the risk. Used as part of a complete risk management program, risk retention can be quite effective, where higher risks are transferred and lower risks retained. Retaining risk also encourages you to work towards minimizing its occurrence as a way of reducing potential costs.

Transfer the risk: You may choose to shift the responsibility for the risk to a third party, for example a lessor, vendor, subcontractor, competitor or even customer. Leasing business property and equipment, changing your delivery methods and using subcontractors instead of employed staff are all methods for moving the risk to another party to manage.

Control the risk: Implementing risk control strategies will encourage a safe and productive working environment for all staff. Good housekeeping practices, safety devices, and adequate training will all lead to reducing potential risks.

Avoidance of risk: Avoidance is also a risk management approach. One must still do the identification and analysis of the loss exposure in order to implement this common practice. Example: Staying out of the dynamite business if you want to avoid explosions or hazardous waste.

Insure the risk: This is a form of risk transfer where the burden for the risk is transferred to an insurance company. You should consider the costs of taking out insurance and the level of coverage you require. Insurance can have a positive influence on your cash flow and also provides tax incentives.

Let’s discuss Insurance

Since Insurance is the risk finance option most often used by small businesses let’s discuss the coverages that should get the most attention. Your insurance agent/ broker should be able to discuss these in much greater detail and help design the coverage options that best fit your business.

What coverage do I need?

There are many types of coverages designed to protect your business specific needs. These may be bundled together into coverage forms called Business Owners Policies (BOP’s) however we’ll discuss the specific groups or main areas of coverage that is most often needed.
The six main areas are:

• Property insurance
• General Liability insurance
• Employers liability or Workers’ Compensation – Stop Gap
• Auto insurance
• Employment Practices Liability
• Umbrella Liability Insurance

   Property insurance

Property insurance covers the costs associated with the repair or replacement of your building or personal property including equipment, furnishings, fixtures, inventory, computers, and business documents and records.

Fire & perils insures against destruction or damage to your business, including building and contents, from a specified insured event, including fire, theft, explosion, earthquake or water damage.

Business Income & Extra Expense covers your business financially if your operations are interrupted due to damage to your premises, from an insured event.

Burglary covers loss of business stock, contents, and machinery by theft following a forcible and violent entry into the business premises.

Equipment or machinery breakdown insures against the cost of breakdown of machinery, computers and electronic equipment owned and operated by your business.

Loss of money protects you against the loss of or damage to your business’ money from theft, armed hold-up or fire, either while the money is on your premises or in transit.

Goods in transit covers against loss or damage to your property whilst it is in transit. This is available for worldwide transit depending on your business needs.

Glass breakage covers accidental loss or damage to internal and external fixed glass.

Employee dishonesty protects against fraudulent or dishonest conduct of employees acting alone or in collusion with others. This mainly relates to theft or misappropriation of money or other items owned by you by your employees.

Electronic equipment covers specified equipment such as computers, faxes and electronic cash registers against accidental loss or damage including theft and breakdown.

General Liability

General Liability insurance policy provides comprehensive general liability coverage for commercial risks covering all liability exposures for all locations and causes of loss except those specifically excluded or limited either within the coverage form or by endorsement. Protection may be provided on either an occurrence type of policy or on a claims-made basis.

Employers Liability or Workers Compensation

Workers’ Compensation insurance is a mandatory requirement for all businesses that employs staff on a casual, part-time or full-time basis. It provides coverage for the costs of claims made by an employee for work-related injuries, disease, illness or even death. In the State of Washington, we pay into a state fund called Labor & Industry. It’s important that your agent offer you Employers Liability Stop Gap which provides protection for the employer for those injuries arising out of and in the course of employment which were not covered under the workers’ compensation statutes.

Auto Insurance

Auto Liability (Compulsory Third Party) insures your business against loss through legal liability for bodily injury or property damage, caused by accident, and arising out of the ownership, maintenance, or use of motor vehicles. Medical Payments coverage is an optional inclusion.

Comprehensive car insurance insures your business against loss of or damage to your vehicles due to a collision and other accidental damage, theft, fire.

Employment Practices Liability

Impetus for this coverage started with public interest in the allegations made by Anita Hill during the confirmation hearings of Supreme Court Justice Clarence Thomas, Changes in federal and state laws, such as the Americans with Disabilities Act and the Civil Rights Act of 1991, and increased consumer awareness of sexual harassment and discrimination in the workplace. Coverage is available for legal costs to defend claims involving sexual harassment, wrongful termination and discrimination including legal liability for such acts. Most policies provide limits ranging from as low as $25,000 per claim up to $1 million. Policies may cover employees as additional insureds.

Umbrella Liability Insurance is a form of liability insurance protecting your business for claims in excess of the limits of your auto or general liability policies. An umbrella policy may also include coverage for some claims excluded by their primary policies. Most commercial umbrella policies are subject to a deductible, which may range from $250 to $10,000. Excess liability insurance is more restrictive then umbrella policies.
Other coverage that you may need to discuss with your agent or broker include:

• Inland Marine — Property of premises such as contractor’s tools.
• Bonds
• Employee Benefits — Fiduciary responsibility
• Professional Liability
• Directors & officers
• Errors & Omissions
• Pollution
• Businesses buy/ sell agreements

   In summary, the reason why you need a risk management program and Insurance for your business is peace of mind and social responsibility. Putting a little time into protecting your business will pay dividends down the road. Don’t risk what you can’t lose.