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Overview

Small Business

For the more than half million U.S. entrepreneurs who start a business each month, making the right insurance moves can mean the difference between a first-anniversary celebration and an inaugural-year flop. Whether you have one or a few hundred employees, sell products or offer services, or command your operation from inside or outside your home, your insurance considerations as a small business owner are quite different from those of an individual consumer.

FAQ & Questions

Questions? We’ve got you covered.

What's a business owners policy?

A business owner’s policy - sometimes called a BOP - is a "package" product that typically includes property, business interruption/continuation and liability insurance. For many small businesses, purchasing a BOP can be a less costly option than buying individual policies. Many insurers also customize BOPs for specific types of businesses.

A home-based business or a company with only a few employees may start out with a BOP and then expand coverage as the company grows. However, a BOP typically does not include commercial auto insurance, workers’ compensation, health or disability insurance or liability insurance for claims of wrongful professional practices.

Not all businesses qualify for a BOP. For example, a factory or a jewelry store, because of the unique risks, usually require more customized coverage than what’s included in a standard BOP.

What's commercial auto insurance?

While the types of insurance coverage provided by personal and commercial auto insurance policies are essentially the same, there are important distinctions. Typically, commercial auto insurance policies have higher liability limits, for example $1 million. They also may have provisions that cover rented and other non-owned vehicles, including employees’ cars driven for company business.

What's general liability insurance?

If someone falls while visiting your business, or if a customer is hurt by a product you sell, you can be held responsible. That’s the risk business liability insurance covers.

In a survey by the National Federation of Independent Business (NFIB), 30 percent of small business owners ranked the cost and availability of liability insurance as their second most important insurance concern. (Health insurance ranked first; workers’ compensation ranked third.)

Liability insurance, also called commercial general liability (CGL), covers four categories of events for which you could be held responsible:

  • Bodily injury
  • Damage to others' property
  • Personal injury including slander and libel
  • And false or misleading advertising

CGL coverage pays for the injured party’s medical expenses. Coverage excludes employees as they should be protected by workers’ compensation insurance. Bear in mind even trespassers can sue if they are hurt on your business premises.

Does general liability cover legal damages?

CGL insurance typically covers three types of legal damages for which you may be sued:

  • Compensatory damages, financial losses suffered by the injured party and future losses they may suffer as a result of an injury;
  • General damages, non-monetary losses suffered by the injured party, such as “pain and suffering” or “mental anguish;” and
  • Punitive damages, additional penalties and charges assessed against you or your business to deter future bad behavior.

What does general liability not cover?

Standard CGL insurance does not protect your business against the following:

  • Claims of sexual harassment, wrongful termination of employees, failure to employ or promote, or race and gender lawsuits. These and other employee-related claims must be covered by employment practices liability coverage. The cost of employment practices liability insurance depends on specific factors such as number employees and whether the company has been sued in the past. These plans also cover legal fees associated with defending a related lawsuit.
  • Claims related to operating a vehicle. If your business owns vehicles, you will need separate commercial vehicle coverage to protect against accident-related liability claims.
  • Employee claims for work-related injury or loss. Such losses typically are covered by workers' compensation insurance. Note that business owners, independent contractors, domestic employees in private homes, farm workers and unpaid volunteers typically are exempt from workers’ compensation eligibility.
  • Professional liability for errors and omissions such as failure to provide appropriate advice, errors in the delivery of professional services causing harm and failure to meet professional standards of practice.

What are other types of business liability insurance?

Premiums for business liability coverage depend on the type of product or service provided and the perceived level of risk.

  • Professional liability or errors and omissions insurance, coverage for wrongful practices by professional service providers (e.g., healthcare providers, lawyers and consultants);
  • Medical professional liability insurance, sometimes called medical malpractice, which protects physicians and other licensed health care professionals from liability associated with wrongful practices resulting in bodily injury, medical expenses and property damage, as well as the cost of defending lawsuits related to such claims;
  • Crime insurance protection against burglary, theft and malicious damage, such as employee embezzlement;
  • Cyber liability insurance that covers web-based businesses for damages caused by computer hackers and viruses;
  • Intellectual property insurance, that covers copyright, trademark or patent infringement claims stemming from your company's operation.
  • Umbrella business liability insurance for extra protection above a standard CGL policy. Coverage limits typically range from $1 million to $5 million and are appropriate for business owners with large assets or who may be especially vulnerable to lawsuits.

What type of life insurance should the business offer?

When it comes to life insurance, small business owners must consider both the team and the individual. Group life and key person insurance are designed to help employers protect their most valuable assets — people.

Many small business owners offer group life insurance to employees either as a benefit paid for by the employer, or as a voluntary offering whereby the employee pays for the premiums.

For policies paid by the employer, the benefit often is equivalent to a full year’s salary, an amount not necessarily sufficient for most people. For this reason, employer-paid policies often are viewed as “supplemental” to coverage an employee is assumed to already possess. Employees interested in greater coverage amounts, i.e., double or triple annual salary, can purchase additional coverage through an individual plan.

What is group life insurance?

There are two basic types of group life insurance: term and permanent, or “cash value” life insurance.

  • Term life insurance pays a death benefit if the policyholder passes away within a specified time period. Term insurance is typically less expensive than permanent life insurance, especially in the early years. Most group life insurance coverage paid by employers is sold on a term life basis. Group policies are typically guaranteed issue, meaning no medical examination is required for eligibility. An employee with a serious medical condition may still be a part of the group, as long as he or she is an active employee. Employees out on disability leave are not eligible for group life insurance until they return to work unless the leave began after the policy was issued.
  • Permanent life insurance differs from term in several ways. There are four types of permanent life insurance — whole, universal, variable and variable universal. As the name implies, permanent life insurance remains in effect as long as the premium is paid. These policies also typically feature a cash value that increases over time, and allows the insured to borrow against that value. Before issuing a policy, permanent life insurers likely will require a medical exam to determine level of insurability based on health.

How does an insurance company determine the policy group rate?

To determine the group rate you will be charged to insure your small business, insurance companies weigh a variety of factors including:

  • Number of employees within the group
  • Average age of employees
  • Female to male employee ratio as women tend to live longer than men
  • Prevalence of smokers
  • Geography, specifically mortality and life expectancy rates where your business is located

Insurers also take into account special business-related factors that make one type of business more physically “risky” than another, i.e., marketing firm vs. roofing company.

What is key person life insurance?

In a small business, a few key people often are critical to the organization’s success. These individuals may be limited to the business’ founders or partners, or unique subject matter experts such as the senior marketing or sales manager, or in the case of a technology company, the chief engineer or software developer.

The death of any of these key people would likely have a serious negative impact on the business’ bottom line. That’s why businesses may choose to purchase Key Person life insurance. Should a designated key person die, as the policy owner, the small business becomes the beneficiary and receives proceeds from the policy.

How do you purchase key person life insurance?

Key Person life insurance can be purchased as part of a company’s group term life or permanent life policies.

Because the coverage is for a specific individual, several personal factors can affect key person life insurance premiums including:

Age and overall health including general medical history, pre-existing and/or chronic health conditions such as diabetes, heart disease, cancer, etc.;

  • Poor health habits such as smoking and excessive drinking within the past five years;
  • Dangerous hobbies such as skydiving, skiing or rock climbing; and
  • Driving record, specifically number of accidents, DWI/DUI citations, auto insurance claims and traffic tickets.

What is business property insurance?

Business property insurance, including business interruption and/or continuation insurance, protects small business owners from losses due to theft or damage to physical space or equipment. For insurance purposes, business property may include all of the following, owned or leased:

  • The actual building
  • Inventory
  • Furniture, equipment and supplies
  • Machinery
  • Computers and other data processing equipment
  • Valuable papers, books and documents
  • Artwork and antiques
  • Television sets, VCRs, DVD players and satellite dishes
  • Signs, fences and outdoor property not attached to a building

If you operate a business from home, other special considerations may apply.

Are there different kinds of business property insurance?

There are three types of business property insurance:

Basic form covers losses resulting from a catastrophic event such as fire, lightning, windstorm, hail and explosion as well as the cost of removing property to prevent further damage.

Broad form includes basic form coverage extended for other types of perils such as a roof collapse caused by snow or ice, riot and civil commotion, etc.

Special form includes basic and broad form coverage plus all other direct physical losses except conditions specifically excluded and listed in the policy.

Businesses can buy property insurance at either actual cash value, which reimburses the insured for the assessed value lost, damaged or stolen goods after depreciation, or replacement cost value which reimburses the amount needed to replace, rebuild or repair damages with materials of similar kind and quality without deductions for depreciation.

What is business interruption and/or continuation insurance?

Business Interruption/Continuation insurance can be added to a property insurance policy or purchased as part of a package. This insurance covers lost earnings resulting from an extended business shutdown due to circumstances covered by one of the property insurance plans above. Business interruption/continuation insurance covers expenses associated with running the business including payroll and utility bills. Coverage is based on the company’s financial records.

What are types of health insurance coverage?

There are several types of health insurance available for purchase within a group plan. Plans typically cover a comprehensive array of healthcare needs including doctor visits, prescription drugs and hospital care. Benefits are delivered in a variety of ways including:

  • Indemnity plan – This major medical plan typically carries a deductible – an amount the insured must pay before the insurance company begins paying benefits. After covered expenses exceed the deductible amount, benefits usually are paid as a percent of actual expenses. These plans usually provide the most flexibility in choosing where and from whom the insured can receive care.
  • Health Maintenance Organization (HMO) – This plan typically requires the insured to choose a primary care physician (PCP) from an approved list of network providers. The PCP is responsible for all healthcare decisions. If a patient needs care from a different healthcare provider, he or she must get a referral from the PCP. Medical treatment by out-of-network providers may not be covered by the HMO at all, or may be covered at a reduced level.
  • Preferred Provider Organization (PPO) – In this plan, the insurance company enters into contracts with selected hospitals and doctors to furnish services at a discounted rate. As a member of a PPO, if you choose to receive care from a doctor or hospital not listed as a preferred provider, you will likely pay a higher deductible or co-payment.
  • Exclusive Provider Organization (EPO) – This plan is similar to a PPO, but more restrictive. The insured must only use providers from the specified network of physicians and hospitals to receive coverage. Typically, except for emergency situations, there is no coverage for care received from a non-network provider.
  • Point of Service (POS) – The POS plan is a hybrid of the PPO and HMO models. The plan is more flexible than HMOs, but does require the insured to select a PCP. Like a PPO, employees may choose to receive care from an out-of-network provider and pay additional costs out of pocket. However, if a PCP refers the employee to an out-of-network doctor, the POS provider will likely cover the care.

What are health savings and spending accounts?

Small businesses also may offer special health savings and spending accounts to help employees offset out-of-pocket medical costs.

  • Health Flexible Spending Accounts (FSA). A Health FSA allows an employee to set aside a portion of earnings for qualified medical expenses. Money is deducted from an employee's pay before payroll taxes. Under new terms of the Patient Protection and Affordable Care Act (ACA), employees can carryover up to $500 in the account into the following year – you no longer forfeit funds not spent by year-end.
  • Health Savings Accounts (HSA) with High-Deductible Health Plans (HDHP). An HAS allows employees to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis. To open an HSA, the employee must be covered by a High Deductible Health Plan (HDHP). Sometimes referred to as a “catastrophic” health insurance plan, an HDHP is a less expensive health insurance plan that does not pay for the first several thousand dollars or more of healthcare expenses, i.e., the deductible, but covers health expenses after that.

Where can I purchase group health insurance?

Today’s business owner can choose from a wide variety of options when purchasing group health insurance:

  • Individual Health Insurance. A relatively simple solution for small businesses is to direct employees to their state’s health insurance marketplace or healthcare.gov to purchase individual health insurance. Eligible employees can access information about premium discounts and tax credits online. Employers may choose to offer a defined contribution allowance to reimburse employees for the unsubsidized portion of their premiums. This approach allows small businesses to offer health insurance as a benefit at whatever contribution the business can afford.
  • Private Health Exchange. Another type of defined contribution is the Private Health Exchange. These exchanges let small businesses offer employees a set financial contribution to use towards a set menu of plan options. Private exchanges offer insurance plans for individuals or groups.
  • SHOP Marketplace. The Small Business Health Options Program or SHOP Marketplaces are new state- or federally-run health insurance exchanges designed specifically for small businesses. Marketplaces offer group health plans for employers of 50 or fewer employees who meet certain requirements. Businesses with fewer than 25 employees who purchase insurance through a Marketplace may be eligible for special tax credits.
  • Health Insurance Cooperative (Co-Op). Health insurance co-ops promise small businesses the opportunity to increase their buying power by spreading health risks across a larger base. Each co-op is structured differently. A co-op’s competitiveness versus purchasing insurance on the open market or through a Marketplace depends on regional insurance laws and the co-op itself.
  • Private Group Insurance. Small businesses can still purchase group health insurance directly from an agent or broker. Businesses may choose this option to access more choices and carriers than the state Marketplace provides.

What is disability insurance?

When your livelihood depends on a few key people, making sure you have the resources to keep the business running in the event of a personal mishap is a must. Disability insurance is designed to replace income or other expenses if you or your employees are unable to work for an extended period of time due to a physical or mental illness or injury. Like other insurance, small businesses typically can save money by purchasing disability coverage within a group policy.

What are types of disability insurance?

  • Short-term disability insurance covers a portion of the policyholder’s salary for a short period, typically three to six months following a disability. The specific time period and percent of income replaced vary. According to the Small Business Administration (SBA), employers may specify a number of days of sick leave to be paid at 100 percent of salary. Employees can use specified sick days before short-term disability begins.
  • Long-term disability insurance coverage typically begins after the policyholder is unable to work for at least six months. Coverage can extend for a specified number of years or until the insured retires or reaches age 65 depending on the policy.

Note that most states require employers to purchase workers’ compensation insurance, not disability insurance to protect employees injured on the job.

What is workers' compensation?

Workers' compensation insurance protects a business owner from the employer's statutory obligation to provide coverage for its employees who experience a work-related injury or illness on business premises or due to business operations. Nearly all U.S. states require employers to purchase a workers' compensation insurance policy to cover employees. The law provides workers' compensation as the sole remedy for an injured employee. Check with your state insurance department to understand what is required for your specific business type.

What does workers' compensation cover?

Typically, workers' compensation covers an injured employee’s medical expenses, rehabilitation costs and lost wages. Workers' compensation insurance premiums are set by insurers. For a new business, premiums may be based on broad factors such as total company payroll, number of employees, earnings per employee and type of work performed. For an established business, workplace safety history also is a contributing factor to costs.

What is the Affordable Care Act?

Simply put, the Affordable Care Act (ACA) is a new federal statute created to help increase the quality and affordability of health insurance in the U.S. Officially titled the Patient Protection and Affordable Care Act (PPACA), the statute also is referred to as Obamacare, a reference to President Barack Obama who signed the mandate into law in March 2010.

How does the Affordable Care Act help small businesses?

  • Small Business Health Options Program (SHOP) The SHOP Marketplace is an online health insurance exchange featuring health plan options that specifically target small employers. SHOP is open to employers of up to 50 full-time employees. By pooling insurance risks for small groups, the exchange seeks to increase small business purchasing power, provide more choices and reduce administrative complexity.
  • Health Care Tax Credits Under ACA, many small businesses can qualify for tax credits to help offset the cost of providing healthcare coverage for their employees. The credits specifically target businesses that employee low- and moderate-income workers. Credits may be worth up to 50 percent of an employer's insurance premium costs.
  • Reporting and Notifications As a result of new tax provisions, the IRS has implemented new ACA-related reporting requirements to which small businesses must adhere. Some business owners may be required to report the value of the health insurance provided to each employee on W-2 forms. Additionally, all employers covered by the Fair Labor Standards Act must officially notify employees in writing about the new health insurance Marketplace.

Ask these questions before you buy.

Before You Start

  • Where will my business reside? Property insurance needs vary greatly depending on if you operate out of your home or from a leased or owned commercial building.
  • How will I handle business transportation? Even if you use your personal car to run business errands, you may need to consider commercial vehicle insurance.
  • Will my individual health plan still meet my needs after I'm a business owner? New risks associated with your business, and special provisions of the Affordable Care Act (ACA) make a small business health insurance check-up a must.
  • How can owning a business affect my life insurance needs? Protecting the irreplaceable roles small business owners and key executives play in the business requires special life insurance considerations.
  • How do I know if I need workers' compensation insurance? Contractors, part-time staff, interns. Make sure you understand who qualifies as a covered employee according to your state workers' compensation laws.

Commercial Auto Insurance

  • Who owns or leases the vehicle, you individually or the business as an entity?
  • Who drives the vehicle, you or your employees?
  • How is vehicle used most of the time, i.e., for transporting people, delivering documents or moving hazardous materials?

Tips & Tools

Be prepared before you start a business.

Insurance premiums are based on risk. Small business owners who take steps to minimize risk in the workplace can help keep employees and customers safe, and save money.

Basics

  • Maintain a good driving record, and insist that employees do the same.
  • Keep thorough and up-to-date records of business inventory, accounts receivable and equipment purchases. Keep one copy on-site and another in a different location.
  • Have employees keep wallets and other personal items in a secure place. And keep business cash and other valuables in a safe.
  • Maintain adequate lighting throughout your property. Keep electrical wiring, stairways, carpeting, flooring, elevators and escalators in good repair.
  • Install a sprinkler system, smoke and fire alarms and adequate security devices.
  • Whether you sell products, services or both, keep only a small amount of cash on-site.
  • Be sure you and your employees know how to properly lift heavy objects, and how to use all necessary safety equipment.
  • Finally, make sure your insurance agent is familiar with your business so he or she can confidently advise you not only on which policies to purchase but also on risk management techniques.

Commercial Auto Insurance

  • If your business owns or leases a vehicle, make sure its name is listed on the policy as the principal insured.
  • If you rely on personal auto or liability insurance to vehicles used for business, look closely at the provisions as business-related liability may be excluded.
  • If employees operate a company car, make sure they have good driving records and are trained properly.
  • Consider increasing insurance on your business vehicle to cover permanently attached items such as a generator or storage unit.
  • Premiums are linked to the type of vehicle driven. If you’re buying or leasing a new car or truck, check the insurance rates before you make your final choice.
  • Safety devices can help reduce premiums. If you’re buying or leasing a new vehicle, consider getting one with anti-lock brakes, side air bags, automatic seat belts and daytime running lights.
  • Adding anti-theft devices such as alarms, and global positioning systems (GPS) that help police locate your vehicle if stolen also may reduce premiums.
  • If you have access to an indoor garage or locked parking lot, places that decrease the likelihood of theft, you may qualify for lower premiums.
  • The region in which your business operates affects premiums. For example, insurers in areas prone to extreme weather such as hail, wind storms and hurricanes, or high-traffic, high-theft locations typically charge higher rates.
  • A high past-claims history can increase insurance costs, while choosing a plan with higher than average deductibles can lower premiums.
  • If you use your personal vehicle to conduct business, you may want to consider a higher liability limit. Premiums likely will be higher, but having additional coverage to protect both business and personal assets will be beneficial in the event of a lawsuit because of an accident.
  • Adding telematic devices to your vehicle(s) can communicate useful information about drivers, schedules, locations and deliveries.

General Liability

  • Liability insurance premiums are typically linked to a business’ sales and payroll estimates provided prior to policy inception. If actual salse or payroll amounts are higher than when the policy has been issued, the business owner may be required to pay an incremental premium. If amounts are less than estimated, the insured may be entitled to a refund.
  • The type of business greatly influences liability premiums. For example, a toy manufacturer might be assessed premiums of as much as $3 per $1,000 in sales, or $30,000 on $10 million in annual revenue. But a company in a less risky business such as a florist may pay only $1.50 per $1,000 of sales, or $15,000 in premiums.
  • The amount of risk assigned to a business for liability coverage is based on numerous factors, including number of claims filed within an industry or probability of a claim for a similar type of company; the financial stability and longevity of the business; state laws; business products and/or operations; and the business’ approach to preventing risks.
  • Businesses with solid, documented safety practices in place may be assessed lower risk and charged lower premiums.

Group Life Insurance

  • Shop around. Group life insurance rates and packages differ from one insurance company to another. To save money and simplify paperwork, consider purchasing all group insurance packages, i.e., health, disability, etc., from the same provider.
  • As your business grows, review your group plans regularly. Your company’s group life insurance needs and premiums may change as your company adds employees, products or capabilities.
  • If you plan to offer voluntary group life insurance, be sure the policy allows the employee to keep the plan should they change jobs. Look for additional flexibility in the policy such as a waiver of premiums when a worker is on disability leave.

Key Person Life Insurance

  • If possible, investigate Key Person life insurance when the company is formed. Doing so early helps mitigate the degree of business risk and the likelihood a serious health issue later in life will make insurance more expensive.
  • To determine what size policy to purchase, consult your accountant or financial adviser to determine which individuals in your company are critical to financial success, and the annual monetary contribution each key person makes. Think beyond company founders or partners to include others who add significantly to the company’s bottom line.
  • Align coverage amounts with the projected financial impact the key person’s death would create. Common approaches include coverage as a multiple of pay, i.e., five times’ annual current salary, or coverage in the amount needed to train a replacement or to buy-out of the deceased’s share of the business from his or her heirs. Don’t forget to account for downtime to find a new hire and get him or her up to speed.
  • Of course all purchase decisions should take into account what the company can consistently afford to pay.

Property and Business Interruption Insurance

  • Have your business property value assessed before you buy, and periodically after you purchase insurance.
  • Keep copies of receipts for equipment, furniture and other valuables in the event your premises are destroyed. It’s best to keep physical photos in a different location as well as digital pictures stored on your computer or with a Web service.
  • High-value specialty items such as antiques and artwork also should be assessed by a reputable appraiser before you buy property insurance. These items usually are only covered for an amount agreed upon before a policy is written. It is important to specifically tell your agent about these specialty items so the correct coverage is provided.
  • If you lease your building or office, do not rely on your landlord to provide coverage for your business property. The building typically is insured only for the basic structure and common areas. Read your lease carefully, as there may be other requirements or penalties in the fine print. Check to see what is and is not covered so you are fully protected if something happens to your property and equipment or if someone sues for damages caused by you or your employees.
  • A business property insurance policy generally includes a statement specifying the limit of liability. The limit of liability is defined as the maximum amount an insurer will pay for a covered loss. Typically, the insurer will bear responsibility up to a certain limit stated in the policy and the policyholder will be liable for amounts above that limit.
  • Costs for business interruption coverage are tied to the type of business you operate. Less business interruption coverage is needed following a fire at a travel agency than at an art gallery as it will likely take more time for an art gallery to recover from damages.
  • Even if you purchase business interruption coverage, make sure you have sufficient funds to tide you over the first few days of a business shutdown. Interruption coverage typically does not kick in for a specified time period after a disruption occurs.
  • Review all insurance policies annually and note any changes that may affect your coverage costs. Premiums could be impacted by the addition or reduction of employees, clients product offerings or inventory; alterations to your building; or changes in state or local building codes.
  • Businesses may be allowed to take a tax deduction for fire, casualty and burglary insurance premiums.
  • Read individual policy terms carefully to ensure you are not paying for double coverage. This type of policy examination also helps ensure you are not missing crucial coverage in other areas.
  • To expedite claims processing, document all business assets and keep detailed records of all insurance policies, premiums paid and other documents concerning losses and recoveries.

Group Health Insurance

  • Group health plans typically are required to treat all eligible employees equally regardless of individual health.
  • In some states, there are legal limits on the amount an insurer can raise the premium when a health policy is renewed (e.g., a maximum of 15 percent per year due to claims experience).
  • Compare the costs of equivalent coverage from several insurers to be sure you get the best deal for your business.
  • Ask about premium cost increases over the past 5 years.
  • Talk to other small business owners to find out about their experiences with different kinds of health plans and insurers.
  • Before you decide, ask lots questions. If you’re not getting the answers you need from one insurer, contact others.
  • Choose the right coverage for your team. For example, if most of your staff is young, married and planning children soon, pregnancy-related coverage will be extremely important.
  • Pay close attention to the type of health plan you select. HMOs are typically less expensive than PPOs; both often are less expensive than indemnity plans.
  • Specific benefits levels also affect costs. For example, higher deductibles typically equate to lower premiums. Similarly, choosing a higher co-payment – the out-of-pocket amount the employee must pay towards a doctor visit or medical services – can reduce premiums.
  • Pay attention to coverage limits. Lifetime medical is the maximum amount your insurance provider will cover per individual over the course of his or her life. Some medical plans also have a maximum out-of-pocket limit the employee can expect to pay for healthcare in each calendar year. Once the limit is reached, the insurance company typically will cover all costs at 100 percent.
  • Many group health plans include prescription drug, dental, vision and other benefits for a small additional cost.
  • Educate your employees. The more they know about how premiums are shared between them and the company, and exactly what is and is not covered, the better you can manage costs. Be sure employees understand any pre-admission provisions in your plan. And especially for complicated procedures, encourage employees to ask doctors about fees up front, and not to be afraid to seek a second opinion.
  • Encourage employees to engage in healthy habits. Provide information about exercise, weight loss, smoking cessation, etc
  • Make sure you understand insurance portability laws where you live. The Federal Consolidated Omnibus Budget Reconciliation Act (COBRA) requires employers with 20 or more employees to offer their employees (and their dependents) the option to continue membership in your group plan at their own expense after they leave their job.
  • Be wary of health discount cards that offer reduced fees for doctor visits or other medical services. These cards are NOT health insurance plans, and are therefore not regulated by the state insurance department. If you have questions, contact your state insurance commissioner.

Disability Insurance

  • If you choose to offer disability insurance to employees, be sure you understand all the implications. Regardless of who pays the premium, group disability insurance rates generally are less expensive than individual policies. If the employer pays the premium, benefits payout could be taxable to the employee. Benefits from disability coverage paid by the employee typically are tax-free.
  • When a group disability policy that covers all employees is not an option, some small businesses choose to purchase individual coverage only on key employees. Since the company pays the premiums and is listed as beneficiary, if a key person is disabled the company can use insurance payouts to cover related costs until the employee can return to work or a replacement can be hired.
  • For one or two-person companies, another option may be to add a business overhead insurance rider, or amendment to a personal disability policy. This type of provision covers standard business expenses such as payroll, utilities, rent, etc., while the business owner recovers from a disability. Note that most overhead insurance does not cover the business owner’s salary.
  • Companies also may offer voluntary, employee-paid disability coverage via payroll deduction.

Sharing Economy

  • For insurance purposes, once you begin earning income from renting out personal property, you're probably considered a home-based business. Make sure you understand all relevant legal and regulatory requirements.
  • Before sharing a vehicle or residence, make sure auto and homeowners' insurance policies provide the protection you need.
  • When lending goods and services, be sure to set a security deposit that is sufficient to cover losses. Capture photos and other information about your property in a home inventory. Be mindful that for some items, you may not be able to locate an exact replacement.
  • Take advantage of the sharing platform's screening, verification and ratings tools. And don't be shy about monitoring a potential borrower's Facebook and Twitter profiles.

Workers' Compensation

  • New businesses typically can secure worker’s compensation insurance through any insurance agent or broker who handles business insurance, or through a direct writer of insurance. For information about specific providers in your state, contact your state insurance commissioner.
  • Many states require business owners to carry workers’ compensation insurance on all employees including family members and on themselves if they are considered company employees. This requirement may apply regardless of the number of hours worked.States often have exeptions for very small businesses or corporate officers. Be sure to check with your state insurance department to be sure you are in compliance.
  • Make sure you understand the definition of “employee.” In some states, the workers’ compensation definition of an employee is as broad as “every person in the service of another under any contract of hire, express or implied, oral or written." Exceptions to this definition may include salesmen who work on commission, drivers who lease their vehicles on a fee basis, independent contractors, private-home domestic workers, farm workers and unpaid volunteers. However, home-based business owners should be aware there are instances in which you may be held liable for a contractor injured while working on your property.
  • If your company does not carry workers’ compensation and an employee is injured on the job, your business may be liable for all related expenses. You also may face fines and penalties for noncompliance. You would also lose the protection from a lawsuit specified in the workers compensation law.

Working from home? We can help.

Small business owners who assume their personal insurance policies for home, auto, life and health will automatically protect their business interests may be in for a few surprises.

Basics

  • Since business property coverage is limited and professional liability insurance is not included in standard homeowners' or renters' insurance policies, check with your agent to see if your business qualifies for a homeowners' policy endorsement that modifies the standard policy to meet your specific needs.
  • To reduce net out-of-pocket health insurance costs, ask your state insurance commissioner if you can participate in a Health Flexible Savings and Spending Account (FSA).
  • Home-based business owners interested in disability insurance may want to negotiate for a shorter payout waiting period after the onset of disability. Note that a shorter waiting period will likely result in a higher premium.
  • If your business involves transporting people for any reason, you should consider commercial auto insurance to take advantage of higher liability limits and special provisions and avoid any unwelcome surprises.
  • When considering key person life insurance, be sure to think about staff beyond the business owner. This type of coverage typically focuses on any person without whom the business would cease to exist.
  • New businesses typically can secure worker's compensation insurance through any insurance agent or broker who handles business insurance. Premiums may be based on broad factors such as payroll and type of work performed.
  • Be wary of health discount cards that offer reduced fees for doctor visits or other medical services. These cards are NOT health insurance plans, and are therefore not regulated by the state insurance department.
  • To simplify decision making, consider a business owner's policy (BOP), an insurance "package" that typically includes property, business interruption/continuation and liability insurance. For information about specific providers in your state, contact your state insurance commissioner.

Home

Homeowners' or renters' insurance policies are rarely adequate to cover the unique needs of a home-based business. Most individual policies limit coverage for business property losses or damages to $2,500 in the home and $250 away from home. These policies tend to exclude business-related liability claims from persons injured on your property, and provide no protection to sustain the business during downtime associated with a property loss. To close these gaps, owners may want to investigate the purchase of a business owners policy or general liability, business property and business interruption/continuation insurance.

Auto

While all auto insurance policies are similarly structured, there are important distinctions between personal and commercial vehicle coverage. Typically, commercial vehicle insurance carries higher liability limits, and includes special provisions for rented and other non-owned vehicles, including employees' cars driven for company business. If you own or lease a vehicle almost exclusively for business use, make sure the business name is listed as the principal insured. You also may consider increasing coverage to protect permanently attached items such as a generator or storage unit.

Life

Since home-based businesses often cease to exist once the proprietor dies, life insurance is most often viewed as a personal, non-business concern. This approach may present significant risks if your home-based business is a partnership. One way to help secure the organization's future is Key Person life insurance. This type of policy names each partner in the business as beneficiary on the other's policy. If a partner dies, the other can use the life insurance payout to buy out the deceased partner's heirs, pay off outstanding loans or other obligations, or continue operations until a replacement employee is hired and trained.

Health

For small, home-based businesses, finding affordable health insurance for you and your employees used to be a challenge. But without health insurance, it is conceivable that one catastrophic event could dissolve the business.

Today, small and home-based businesses have a variety of sources for purchasing HMOs, PPOs, EPOs and other popular health insurance plans at group rates. And under the Affordable Care Act (ACA), business owners and the self-employed who purchase coverage through new healthcare marketplaces may qualify for premium tax credits and subsidies. Failure to purchase appropriate health insurance could result in a tax penalty.

Workers' Compensation

New business owners may be surprised to learn that most states require you to purchase workers' compensation insuranceeven if you have only one employee. These plans protect the business from claims by employees who experience a work-related injury or illness either on business premises or during business operations. Payouts typically cover medical expenses, rehabilitation costs and lost wages. If you don't have workers' compensation when an incident occurs, your business may be liable and you will lose the limitations on an employee's ability to sue you specified in the workers compensation law.

 

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