Insurance is probably the least understood area of law for the small business owner. However, it is both an essential “risk management tool” and source of legal mandates.
From the standpoint of small business, “Insurance Law” address three main areas: Required and recommended insurance policies and coverages; the handling of insurance claims; and compliance with laws like the Texas Workers’ Compensation Act, the Texas Unemployment Compensation Act and the Affordable Care Act.
As your small business’ lawyer, I’ll examine your insurance policies to make sure they are designed to prevent predatory practices, including worthless or diminished value coverages. I’ll also help you steer clear of policies that could mislead you to believe that you are buying one type of insurance but actually getting another. And, I’ll make sure your policies have reasonable provisions for cancellation, disclosures and delineations of insured and uninsured events.
When you have to make a claim, I’ll help make sure that your insurance company responds in a timely manner and properly addresses the claim. And, I’ll help prevent the insurance company from unreasonably denying the claim. I’ll also help prevent the insurance company from canceling your policy simply because you made a claim.
Running a small business involves a significant investment and, depending on the structure of your business, personal risk. Business insurance protects your investment by minimizing financial risks associated with unexpected events, such as the death of a partner, an injured employee, a lawsuit, or a natural disaster. Unless you are an employer, borrower or tenant, business insurance will generally not be required; however, it is “smart business” to purchase insurance to cover your assets against an analysis of reasonable risks presented by your operation. If your business is an LLC or a corporation, your personal assets are protected from business liabilities; however, neither business structure is a substitute for liability insurance, which covers your business from unexpected losses.
I can help you choose the right kind of insurance for your small business.
Insurance coverage is available for every conceivable risk your small business might face. Cost is generally proportionate to coverages and coverage limits. I’ll review your business’ activities with you and your insurance agent or broker to help put together a comprehensive program to cover your small business’ risk and your exposure, as owner.
Business Owner’s Policy
Most small businesses should at least have a Business Owner’s Policy (BOP). It protects your small business in much the same way a homeowner’s policy protects your home and personal possessions. It does this by combining three basic insurance coverages that most every small business needs:
- Business Liability – Helps protect your business from lawsuits alleging injuries or property damage that occur as a result of your business’ operations.
- Business Property – Helps protect the premises where you do business operations and the things you use to conduct your business, like furniture and equipment.
- Business Income – Helps cover the loss of income when you can’t operate your business because of covered property damage.
As we build a custom insurance program for your small business, we’ll look into alternatively utilizing one or more of these types of insurance coverages:
General Liability Insurance
Insurance to cover losses due to an accident, injuries and claims of negligence.
Product Liability Insurance
If your small business manufactures, wholesales, distributes or retails a product you may be liable for consumer safety. Product liability insurance protects against financial loss as a result of a defective product that causes injury or bodily harm.
Professional Liability Insurance
Small business owners providing services should consider obtaining professional liability insurance (also known as “errors and omissions” insurance). This type of liability coverage protects against malpractice, errors and negligence in provision of services to your customers.
Commercial Property Insurance
Property insurance covers everything related to the loss and damage of business property due to a wide range of events such as fire, smoke, wind and hail storms, civil disobedience and vandalism. The definition of “property” can be broad to include lost income, business interruption, buildings, computers, company papers and money.
Home-Based Business Insurance
Homeowners’ insurance policies do not generally cover home-based business losses. However, depending on the nature of your business operations, you may be able to add riders or endorsements to your homeowners’ policy to cover home-based business risks, such as property damage. Nonetheless, homeowners’ policies can only go so far in covering home-based businesses and you may need to purchase additional policies to cover other risks, such as general and professional liability.
Commercial Auto Insurance
Commercial auto insurance protects a company’s vehicles. You can protect vehicles that carry employees, products or equipment. With commercial auto insurance, you can insure your work cars, SUVs, vans, and trucks from damage and collisions. If you do not have company vehicles, but employees drive their own cars on company business, you should have non-owned auto liability to protect the company in case the employee does not have insurance or has inadequate coverage. Many times, non-owned coverage can be added to the BOP policy.
Worker’s compensation provides insurance to employees who are injured on the job. This type of insurance provides wage replacement and medical benefits to those who are injured while working. In exchange for these benefits, the employee gives up his rights to sue the employer for the incident. Workers’ Compensation is not mandatory in Texas, except under limited circumstances.
Directors and Officers
This type of insurance protects the directors and officers of a company against their actions that affect the profitability or operations of the company. If a director or officer of your small business is found legally liable as a direct result of actions on the job, this type of insurance can cover your costs and damages.
If your small business stores sensitive or non-public information about employees or clients on computers, servers or in paper files, you are responsible for protecting that information. If a breach occurs either electronically or from a paper file, a Data Breach policy will provide protection against the loss.
Key Person Insurance
Key person insurance is life insurance on a highly valuable person in a business. In your small business, this could be yourself as the owner, the founder or an important employee. “Key” people are crucial to a business – the ones whose loss would sink the company.
Small business owners may need additional financial protection, on top of the insurance policies and the coverage limits already in place. This is where umbrella insurance comes into play. This type of insurance extends limits beyond already existing insurance policies and can cover different kinds of policies at once, including personal policies.