Business Start-Up

Business insurance, like many types of expenditures is one of those items that business owners typically do not like to pay. You must remember that sufficient insurance can be as critical to the success of your business as a good product or service. Without proper insurance you could lose all of the money, time and effort you put into your company. The types and amounts of coverage you purchase must be evaluated on a cost-benefit basis like any other commodity that you purchase. Your accountant and insurance agent can help you review the amount of coverage you may wish to purchase for various purposes. Usually, you will want to insure against risks that could have significant detrimental impact on your business. This normally would include such items as fire, storm damage, theft, general and product liability. Depending on the nature and size of your business it is often a good idea to self-insure for all or a portion of certain losses. Self-insurance can be accomplished by not buying coverage for incidental risks or increasing the deductions on policies that you do buy. Often, raising the deductible can have a very favourable impact on policy premiums. The administrative cost to the insurance company to process small claims is quite high, consequently the rates typically go down substantially if they are relieved of this expense by insuring for losses in excess of a sizeable deductible amount. An insurance broker can provide you with comparative costs for various types of coverage with varying degrees of deductible amounts.

Very little insurance coverage is mandatory. The only insurance coverage typically required by law is public and employers liability. Your insurance agent can explain the required coverage, the rating systems, and help you purchase a policy.

You must also be aware that the terms of your building, office lease or mortgage may require you to carry certain kinds of insurance coverage in specified minimum amounts. If you have leased equipment or have borrowed money from a bank or other lenders, there will usually be insurance requirements in the agreements relating to these transactions. There are many other types of policies that you may wish to consider. The specific coverage provided by each and a qualified insurance broker can explain the related costs in depth.

Some of the types of insurance coverage that you might consider for your business are listed below:

Commercial Liability Insurance

There are many types of liability your business may need cover for. "Liability" refers to your legal obligation to pay compensation and costs awarded against you in respect of loss or damage sustained by a third party. Types of liability you may want to consider:

· Public Liability This will protect you from any liabilities from a Third Party (other than your employees) bodily injury or damage to their property that may occur during the normal operation of your business.

· Employer’s Liability If you employ anyone outside your immediate family, you are required by law to purchase employer’s liability insurance. This insurance offers you protection for any liability arising from injury or illness sustained by employees while they are working for you.

· Product Liability This will protect you from any liabilities from a Third Party (other than your employees) for bodily injury or damage to their property that may occur from products you sold or supplied.

Public Liability is used to protect businesses in the event that they are sued by a member of the public. Public liability insurance is set into force to protect you if you are sued by a member of the public claiming that they have suffered a loss as a result of negligence.

Key man insurance allows you to cover key members of your staff or management team whose disability or death could cause harm to your company.

Key man insurance is a type of insurance which few medium and small companies have in place, while many large companies have key man insurance in place but only for directors - i.e. the real key players in the company have not been identified

If you rent your property to tenants then you will need a specialist landlord’s insurance.

As a landlord you face the risk of having to fork out the costs in the event that your property is damaged and you are not insured.

Life insurance can be a useful policy to have for small business owners who are looking for increased peace of mind over the security of their family and business if they were to die.

Many large companies also offer benefits packages which include life insurance - the self employed need to be in a position to negotiate their own cover and a life insurance policy should be one of these insurance types.

Product Liability covers you if any products that you sell or provide are faulty or defective.

In the event that you provide a product and it is defective and someone suffers a loss as a result of that product, they are entitled to pursue you for compensation. For example, if you supply a television and it blows up causing damage to someone’s property they will be entitled by law to sue you for compensation.

Products, Sales and Servicing Indemnity is a packaged cover that is usually provided with employer’s liability and public liability insurance. PSSI consists of three different covers:

Products Indemnity will cover you in the event that you are pursued for selling defective goods.

Sales Indemnity has the same purpose as products liability but it kicks into effect with second hand goods and ones which fall outside the manufacturer’s warranty; it is usually associated with used car dealers

Servicing Indemnity will cover you in the event that you are pursued for defective workmanship. For example if you were a car mechanic and forgot to re-attach the brakes properly and the client had an accident as a result of the brakes not working.

This coverage, as the name implies, covers the loss of revenues your business would generate if you were forced to shut down for reasons beyond your control. While this is obviously valuable insurance, the policy premium must be carefully considered relative to the potential profits your business might lose during a short shutdown of operations.

This type of insurance typically covers the risk of loss from theft by employees. If your business deals in large amounts of cash, negotiable securities, or similar types of assets, you may be well advised to consider this coverage. Certain industries are required to carry this insurance by Regulatory Authorities.

This type of insurance covers losses above and beyond the limits of other policies that you carry. Umbrella policies usually pertain to liability of various sorts and are usually valuable if your business, or you, has a net worth that requires protection in the event of a catastrophic loss.

Insurance is like any other product that you purchase. Before purchasing it you should consult with more than one broker as to your needs for protection. You should discuss insurance needs with acquaintances in the same or related business as yours. Before buying coverage you should check out the reputation of the company that is underwriting the policy.