Barbara H. James
Insurance protects you and your business from financial risks and losses. You need and are required by law and some lenders to have some types of insurance to financially protect yourself and others from loss by fire, theft, storm damage, and vandalism.
A common misunderstanding by owners of small businesses is that their home and auto insurance will automatically offer coverage for business-related accidents and losses. Unfortunately owners find out too late that home and auto insurance is not designed to cover business activities, and that business activities conducted in the home often jeopardize your homeowner's coverage.
Would you be protected in the following situations?
Recognize the potential risks for which you and your business are liable. This is an important step in securing adequate insurance coverage. When purchasing business insurance, include liability coverage to financially protect the business and yourself from damage or injury to customers, workers, or property. Remember, as the owner and operator, you have more exposure to liability and property loss than when your house was used only as a residence.
Review the liability portion of your automobile policy or homeowner's policy to verify whether it does or does not cover business pursuits or business inventory which may require additional insurance protection.
Discuss your business with your insurance agent to determine the changes needed in your coverage. Often, home business activities can be covered by adding a relatively inexpensive endorsement to your homeowner's and or automobile policy.
These five types of insurance are considered essential to the business:
Determine the types and amount of coverage you need, and then get proof of your coverage in writing.
Check your homeowner's policy to determine if it can be expanded to cover your business liability. In addition, you may need to purchase a general liability policy to provide coverage for bodily injury, personal property damage, and damages such as libel and slander.
When purchasing liability insurance, you are not protecting yourself from your own mistakes and from situations you have no control over. Example: You send out draperies to be pressed and they're returned damaged.
In many businesses, especially processing and manufacturing of foods and clothing, product liability insurance is a wise investment. You and your company need this liability coverage; it protects you if your product or service causes property damage or injuries.
Be certain your insurance will pay for attorney's fees and other costs of legally defending yourself.
If you hire an employee, the law says that you must cover that employee with Worker's Compensation Insurance. Employees must be registered with the Ohio Bureau of Worker's Compensation. Worker's Compensation covers job-related accidents or sicknesses and occupational diseases.
If you hire family members, including children, they must be registered with Worker's Compensation.
In a sole proprietorship or a partnership business, you are not required to pay Worker's Compensation on yourself or your partner. Once you incorporate, you are an employee of the corporation and subject to Worker's Compensation on yourself and your partner.
Direct your inquiries to: Ohio Bureau of Worker's Compensation, 30 West Spring Street, Columbus OH 43266 (614) 466-1000.
Here are some other types of insurance to consider: sign coverage, an errors and omissions policy, disability coverage, life insurance, health insurance, and a retirement plan. Key-person insurance compensates the business when any partners or persons essential to business becomes disabled or ill. Business-interruption insurance compensates for loss of earnings during a temporary halt in business caused by a major disaster, such as a fire.
How much insurance should you buy? Remember, the purpose of buying insurance is to allow you to continue your business and lifestyle if a misfortune occurs. List the things that might adversely affect you before buying any insurance. Identify the risks, then contact two or three insurance representatives for an evaluation and costs. Cover your largest loss-exposure first.
You may want to consult with several agents and your attorney to determine the insurance coverage that is adequate for you and your business. Your deductible should be as high as you can afford. Often, full coverage is not economical because of the high cost of covering the "first dollar" loss.
Avoid duplication in insurance. Also, consider "package" policies as a way for your business to get comprehensive protection at an affordable price.
Your insurance risks will change from time to time. You should regularly review your coverage and risks with your agent. For example, an increase of your supply inventory may increase your need for insurance protection.
Keep good records of your insurance policies, premiums paid, losses and loss recoveries. The information helps you discuss your needs with your agent, and it might help you reduce your insurance rates.
Take measures to reduce your risk, and you might lower your insurance premiums. For example, install a sprinkler system, add burglar alarms, or add stair rails.
The Small Business Risk Management Guide, Publication # MP-28, Cost $1.00 Small Business Administration, Call 1-800-827-5722.
Liability Insurance and the Family Day Care Provider, Bulletin #NOR 395. Call for current price.
Business for Profit: How to Insure Your Business, #PM 1149F Iowa State University Cooperative Extension Service. (515) 294-5247.
Ohio Worker's Compensation
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These publications were used as sources:
Business Insurance Teaching Outline, Paul Miller.
Insurance Checklist for Small Business, SBA.
How to Insure Your Business, Iowa State University CES.
All educational programs conducted by Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status.
Keith L. Smith, Associate Vice President for Ag. Adm. and Director, OSU Extension.
TDD No. 800-589-8292 (Ohio only) or 614-292-1868