First you need to know the players involved. Direct writers are employed by a specific firm and may have a specific specialty in the field of insurance. Though tied to one firm, the insurance representative can still handle any number of insurance lines: auto, home, health and life. The commission paid to the salesperson should be somewhat lower since you buy the insurance right from the source.
An agent is an independent businessperson who usually deals with a variety of different coverages and handles any number of different insurers. This interaction with many firms and policies increases the agent's scope and awareness of cost-effective coverage. Though the commission for an independent agent is generally higher, as an entrepreneur, the agent may strive to give you the best service possible.
An insurance broker makes it his or her business to negotiate with different insurers for different types of policies. The broker represents you, the insurance buyer, not the insurance company, in dealing with a variety of insurers. They're particularly adept in business dealings and thus their costs may be higher.
Determining which professional to use can be frustrating. The insurance companies' true area of expertise is underwriting. The direct writer may not be as knowledgeable as the field agent in customizing an individual package for your company within a specialized field. In any case, an experienced, thorough, conscientious agent has the time and the incentive to take a generic insurance policy and give you exactly the coverage you need. Finding an insurance representative whom you can trust and who will keep your business information strictly confidential is the key. You need a concerned insurance representative who is interested in you and your business, and will be with you for the long run and will structure deductibles that are suitable for your budget.
I HAVE A SERVICE BUSINESS, SHOULD I GET INSURANCE IN THE EVENT SOMEONE SUES ME?
Before you start shopping for Errors and Omissions (E&O) insurance, answer this question: How real is your need for E&O insurance? Does the type of work you plan to do entail much potential for liability? If technology is involved--like being responsible for multimedia arrangements at sales presentations--then we would say yes. But some types of businesses allow you instead to create a client agreement that protects you, making the client assume the risk. If, on the other hand, contracts in your industry require E&O coverage, provide a warranty or guarantee, or have clauses that require you to indemnify or hold harmless your clients, you need to start shopping.
The cost of errors and omissions, also known as professional liability or malpractice, insurance, depends on a number of factors. Often, trade and professional associations offer the best buys in E&O insurance, so look into joining those first.
WHAT ARE SOME COST-CONSCIOUS WAYS TO GET HEALTH INSURANCE NOW THAT I'M SELF EMPLOYED?
Many self-employed individuals find that the best way to keep their health insurance costs within reason is to get into a group plan, such as those offered through industry associations and professional organizations. The first task is to find a group that offers quality health insurance at a reasonable price. Be willing to look far and wide for the largest groups possible. You may find that your local chamber of commerce has arranged a group plan for its members. National business organizations also offer health insurance.
In addition, some self-employed individuals find health insurance through their college alumni associations, and some through unions. If you've incorporated your business or if you have employees, another possible way to get group coverage is to lease your employees, including yourself, from an employee leasing company. You can identify these companies by occupation or state at the National Association of Professional Employer Organizations website .
I HAVE AN INSURANCE CLAIM THAT MY INSUREE REJECTED, WHAT DO I DO ?
Start with a written explanation from the insurer. Insurance companies normally provide this automatically, but if they don't, insist on it. You can also ask that a supervisor review the claim decision. Take the denial letter to your insurance agent and see whether he agrees with the carrier's decision. Sometimes, a knowledgeable agent will know if the claims adjuster has made a mistake. If the agent agrees with the denial, and you are satisfied with his explanation, the case is closed. If he doesn't, he may contact the carrier on your behalf or you may decide to consult an attorney. If it turns out your claim was denied because you didn't have the coverage you thought you did, you may need to review your policy and examine your relationship with your agent.
HOW DO I PROTECT MY BUSINESS IN THE EVENT OF A DISASTER ?
When a hurricane or earthquake puts your business out of commission for days--or months--your property insurance has got it covered. But while property insurance pays for the cost of repairs or rebuilding, who pays for all the income you're losing while your business is unable to function? For that, you'll need business interruption coverage. Many entrepreneurs neglect to consider this important type of coverage, which can provide enough to meet your overhead and other expenses during the time your business is out of commission. Premiums for these policies are based on your company's income.
HOW DO I PROTECT MY BUSINESS IF I DIE OR BECOME DISABLED?
It's every businessperson's worst nightmare--a serious accident or long-term illness that can lay you up for months, or even longer. Disability insurance, sometimes called "income insurance," can guarantee a fixed amount of income--usually 60 percent of your average earned income--while you're receiving treatment or are recuperating and unable to work. Because you are your business's most vital asset, many experts recommend buying disability insurance for yourself and key employees from day one.
There are two basic types of disability coverage: short term (anywhere from 12 weeks to a year) and long term (more than a year). An important element of disability coverage is the waiting period before benefits are paid. For short-term disability, the waiting period is generally seven to 14 days. For long-term disability, it can be anywhere from 30 days to a year. If being unable to work for a limited period of time would not seriously jeopardize your business, you can decrease your premiums by choosing a longer waiting period. Another optional add-on is "business overhead" insurance, which pays for ongoing business expenses, such as office rental, loan payments and employee salaries if the business owner is disabled and unable to generate income.
In case of a death in the company, including your own, you should consider life insurance. The life insurance policy should provide for the families of the owners and key management. If the owner dies, creditors are likely to take everything and the owner's family will be left without the income or assets of the business to rely on.
Another type of life insurance that can be beneficial for a small business is "key person" insurance. If the business is a limited partnership or has a few key stockholders, the buy-sell agreement should specifically authorize this type of insurance to fund a buyback by the surviving leadership. Without a provision for insurance to buy capital, the buy-sell agreement may be rendered meaningless.
The company is the beneficiary of the key person policy. When the key person dies, creating the obligation to pay, say, $100,000 for his or her stock, the cash with which to make that purchase is created at the same time. If you don't have the cash to buy the stock back from the surviving family, you could find yourself with new business partners you never bargained for--and lose control of your business. In addition to the owners or key stockholders, any member of the company who is vital to operations should also be insured
WHAT IS WORKERS' COMP INSURANCE?
Workers' compensation, which covers medical and rehabilitation costs and lost wages for employees injured on the job, is required by law in all 50 states. Workers' comp insurance consists of two components, with a third optional element. The first part covers medical bills and lost wages for the injured employee; the second encompasses the employer's liability, which covers the business owner should the spouse or children of a worker who was permanently disabled or killed decide to sue. The third and optional element of workers' compensation insurance is employment practices liability, which insures against lawsuits arising from claims of sexual harassment, discrimination and the like
DO I NEED LIABILITY INSURANCE FOR MY PRODUCT?
Comprehensive general liability coverage insures a business against accidents and injury that might happen on its premises, as well as exposures related to its products. The catch is that the damage cannot be due to poor workmanship. This points out one difficulty with general liability insurance: It tends to have a lot of exclusions. Make sure you understand exactly what your policy covers...and what it doesn't.
You may want to purchase additional liability policies to cover specific concerns. For example, many consultants purchase "errors and omissions liability," which protects them in case they are sued for damages resulting from a mistake in their work. A computer consultant who accidentally deletes a firm's customer list could be protected by this type of insurance, for example
WHAT IS AN UMBRELLA POLICY?
In addition to the four basic "food groups" of worker's compensation, general liability, auto insurance and property/casualty coverage, many insurance agents recommend an additional layer of protection called an umbrella policy. This protects you for payments in excess of your existing coverage
WHAT HAPPENS IF AN EMPLOYEE GETS IN AN ACCIDENT ON THE JOB OR WHILE DRIVING A COMPANY VEHICLE?
If your business owns a company car, there's no way around buying a commercial auto policy, which is meant to protect your business's assets in the event of an accident. This is an absolute must.
The gray area comes in when your employees use their personal vehicles for business purposes--even for something as simple as trips to the post office. If they get into an accident, their personal insurance will kick in, but anyone involved in the accident can also come after your business
You need a hired and non-owned policy in this situation. It not only protects your business if your employee is involved in an accident on the way to a sales call, for example, but it will make your employees less apprehensive about using their personal cars for business, since they won't be held personally liable in case of an accident (and their personal auto policies won't be at risk). This type of policy will also cover cars rented for business use.
Does my homeowners' insurance cover my homebased business?
Many entrepreneurs mistakenly believe they're covered by their homeowners insurance, but most homeowners policies limit loss of business property to $2,500, don't cover losses away from the home, and exclude liability coverage for business-related activity. As a homebased business owner, two types of insurance cry out for your checkbook: liability and property damage. Liability protects you against someone getting injured on your premises or by one of your products. Property damage protects against damage to a host of things, from computers to carpets
