Coverage of Insurance : A Small Business Need

Small business should not ignore the Coverage of insurance needs. Business that is under insured or without broad, proper and satisfactory coverage is taking unnecessary risks, which could eventuate in serious financial problems, including bankrupt. In a crisis, a business without insurance or which is under insured can be totally destroyed. Business owners must be systematically informed on what their insurance policies cover and what is expelled. A periodic review of insurance, therefore, is an absolute essential, along with updates and adjustments in coverage as situation change. This article will discuss the various types of insurance coverage available to small businesses and what you should do to best protect yourself against unsafe claims against your business.

Historical Penalty

In the wake of hot storms that ravaged New Orleans, Galveston, Houston and other hard-hit areas, limitless owners of small businesses were under insured,

or carried no insurance at all, for natural disasters such as hurricanes and flooding and were cruelly hurt. Many of these owners were either unaware that their companies were not covered by insurance, or decided not to buy storm-damage coverage because of a scarcity of cash. A number of owners were shocked to learn - when their insurance claims were denied that they were not covered for the damages they reported even when they thought they had bought the right policies. Another insurance issue that requires the vigilance of small-business owners is the expiration date of their policies. In most cases, the insurance company, agent or broker from whom a business owner bought his or her policies will inform them when their policies are about to drop or need to be converted. But the careful owner should make a note as to when a policy is about to expire, and then renewing it in advance so that there is no gap in coverage and no disappointment if claims are filed.

Coverage of Insurance Types

Insurance products are contract arrangements between the insured and the insurer. The contract spells out the following details:

What is insured?

The conditions under which a claim may be made

The cost of the insurance

The conditions of payment if the claim is honor

There is a large variety of insurance categories and degrees of coverage that both the startup business owner and the owner of an ongoing concern should examine. Deductibles and premiums vary in price. An insurance deductible is the amount of money the insured must pay toward a claim before the insurance company pays on the claim. Usually, higher deductible, lower premium cost of buying and maintaining the policy in force. Premiums may be paid on a variety of schedules, including annually the most common, quarterly or monthly.

Insurance of Small Business Owner

Owner of a business insurance policy offers universal protection against fiscal loss resulting from damage to the owner's property. The damage may result from fire, flooding and other disasters. The policy will spell out what is covered. The business owner's policy can also cover the legal liability of the owner for any physical injury suffered in any occurrence related to the business. An all-risk policy, in which complete coverage is offered, is preferable to a named policy, in which specific risks are covered. In an all risk policy, every eventuality is covered, except for specifically cited exclusions. The all-risk policy minimizes the possibility that some problem won't be covered and also minimizes the possibilities of overlapping and unnecessary coverage. Among the risks that may be covered in a business owner's policy are:

Theft

Flooding

Fire

Physical injury

Business interruption for specified reasons, with exceptions specified

Other sources of property damage

Liability of Product

This type of insurance, which may be obtain at additional cost, may be a requisite requirement if you sell a product that has the potential to injure a user. Even if you did not design, manufacture or distribute the product, if you sell it and it injures a user, you may have legal liability that should be covered.

Commercial Insurance

This policy may be required if your business is larger and more complex than a

simple single or partnership trade operation, or is a service-oriented business or an expert practice. An expert practice may require malpractice insurance, which is a sector whose business may require a commercial insurance policy include manufacturing, restaurants and commercial real estate. A commercial policy is typically more expensive than a business owner's policy, but the risks are correspondingly higher and potentially more costly to the under write, the insurance company which issues the policy.

Professional malpractice Insurance

Professions that give advice and/or provide services to consumers, in which errors of commission or omission may eventuate in significant liability, may require professional malpractice insurance. These can include such businesses as Medicine, Dentistry, Law, Accounting, Advertising, Financial Planning, Occupational therapy, Computer analysis, Journalism, Real estate. Premiums are calculated on actual data for risk, dollar damages and other factors and vary widely depending on the profession, its sub-specialties and the specific services or advice offered. Neurosurgery, for example, is a profession that carries a high premium for malpractice insurance. Coverage for a single-owner, private-practice accountancy would normally carry a smaller premium. Coverage for low-cost legal representation is another option offered by insurance firms. A professional of any specialty who practices without error or omission may still be the target of a malpractice suit, even if the claim is without merit.

Homeowner's Insurance

As a balance to business owner's insurance, a comprehensive homeowner's policy is also an essential, both for home-based businesses and for other business entities, such as partnerships and corporations that are not operated from a private residence. Homeowners insurance will protect a residence from non-business-related injuries or other legal liability. Because a business and the personal assets of a business owner are connected, the homeowner's residential insurance coverage is a necessity. Complete coverage is the policy most frequently written for homeowners, regularly referred to in the insurance business as "HO-3." Usual coverage includes:-

1. Home or personal-property damage caused by fire or storms, including lightning and wind 2. Medical costs of occupants' injuries caused by fire, storms, wind and lightning 3. Medical and legal expenses of persons accidentally injured in the insured home 4. Loss or theft of specified personal property, either in or away from the insured home

The Cash Amount of Coverage

The cash amount of coverage for property damage or loss should be consistent with the replacement cost of the properties covered, including your home. Over-insurance in this area can be avoided and is usually a needless expense. Minimum insurance requirements for a business are often imposed by the state in which the business is located. Your agent or state insurance commission can provide these figures.

Last Words

Discuss your insurance needs in detail with your insurance agent or broker and be completely forthcoming and candid in describing your business so that coverage is adequate. Make sure you understand what is covered and if your policies are void if you have employees or clients to your home. Shopping for competitive pricing is a good idea, especially in tough economic times, when companies eager for your business are willing to adjust their prices accordingly. And finally, be sure to include in your annual budget the cost of insurance. Hopefully, you will never file a claim or experience a claim against you or your business, but if and when either of these unfortunate circumstances occurs, you'll have adequate coverage. 

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Managing Your Small business Financial

Secure start-up costs

By managing your small business financial first first you secure start up cast. Most businesses require capital to start. Money is typically required to purchase supplies and equipment, as well as keep the business operational for the period before your business becomes profitable. The first place to look for financing is yourself. Do you have investments or savings? If so, consider using a portion to fund your business. You should never invest all your savings into a business due to the risk of failure. In addition, you should never invest money put aside for emergency savings (experts recommend having three to six months of income put aside for this purpose), or money you will need over the next few years for various obligations. Consider a home equity loan. If you have a home, looking to get a home equity loan can be a wise idea, since these loans are typically easily approved (since your home acts as collateral), and interest rates are typically lower. If you have a 401(k) plan through your employer, consider borrowing against the plan. Plans typically allow you to borrow against 50% of your account balance up to a maximum of $50,000. Consider saving ahead as another option. If you have a job, save a portion of your monthly income over time to cover your start-up costs. Visit a bank to inquire about small business loans or lines of credit. When doing this, always visit many providers to ensure you are getting the best rate.

Manage your running costs

Keep a close eye on your running costs and keep them in line with

your projections. Whenever you see something spent wastefully, like electricity, phone plans, stationery, packaging—look around and estimate how much you really need, and minimize or remove the cost in every way possible. Think frugally when you start up, including renting items instead of purchasing them and using pre-paid plans for services your business needs instead of locking yourself into long-term contracts.

Have more than the minimum

You may determine it will take $50,000 to start your business, and that's fine. You get your $50,000, buy your desks and printers and raw materials, and then then the second month arrives, and you're still in production, and the rent is due, and your employees want to be paid, and all the bills hit at once. When this happens, your only likely recourse will be to pack it in. If you can, try to have the reserves for a year of no income.

Pinch those pennies

Plan to keep purchases of office equipment and overheads to a

minimum when starting up. You do not need amazing office premises, the latest in office chairs and pricey artwork on the walls. A broom cupboard in the best address can be sufficient if you can artfully steer clients to the local coffee shop for meetings every time (meet them in the foyer). Many a business start-up has failed by purchasing the expensive gizmos instead of focusing on the business itself.

Decide how to accept payment

You will need to do something to get payment from your clients or customers. You can get something like a Square, which is great for small businesses since it requires the minimum amount of paperwork and the fees are minimal. However, if you feel uncomfortable with technology, you can inquire about a more traditional merchant account. A merchant account is a contract under which an acquiring bank extends a line of credit to a merchant, who wishes to accept payment card transactions of a particular card association brand. Previously, without such a contract, one could not accept payments by any of the major credit card brands. However, the Square has changed that, so don’t feel locked in or limited to this option. Do your research. The Square is a card swiping device which connects with a Smartphone or tablet and turns that device into a sort of cash register. You may have encountered this device in the businesses you frequent, as they are becoming common at coffee shops, restaurants, street food stands and other businesses (look for a postage-stamp sized plastic square plugged into a tablet or phone). Note that PayPal, Intuit, and Amazon all offer similar solutions. Make sure to look into all options before making a selection. If you are online business, services like PayPal offer an excellent way to receive payment and make transfers.

In the next we will discuss about “How to cover the legal side”.

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