Business Insurance FAQs

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I'm just getting my business started. Do I need insurance right away?

Yes, because the chance that you could suffer a loss begins with the first day of business. You can't get coverage after the fact. If you suffer a loss and have no insurance or have improper or insufficient coverage, there is very little, if anything, that can be done. You must be prepared for the risks that are inherent in any business, and the losses that can occur.

I don't have any major business assets. Why do I need insurance?

Generally, there are two types of insurance: property and liability. Property insurance covers damage to or loss of the policyholder's property. If someone sued for damages caused by you or your possessions (other than a vehicle covered by your auto insurance policy), the cost of the suit, both defending and settling it, would be covered by your liability insurance.

Is insurance coverage different for each business?

Yes. Your Hickok & Boardman Insurance Group agent can help you decide which policy or policies are right for your business.

What types of property do I need to insure?

Any property that has value to your business should be insured. This may include: buildings, inventory, stock, furniture, fixtures, equipment, signs, fences, and any other tangible item that would cause a financial loss if it were lost or destroyed.

Everybody seems to be suing everybody else these days. What if someone sues my business?

No business can afford to be unprepared for a lawsuit. Liability insurance protects your business assets when the business is sued for allegations that something the business did (or failed to do) contributed to bodily injury or property damage of someone else. Liability coverage extends not only to paying damages but also to attorneys' fees and other costs involved in defending against the lawsuit.

What is business income coverage?

Business income insurance can reimburse you for ongoing expenses such as utility bills, rent payments, and even payroll while your business is closed due to a property loss. This coverage also provides your loss of net income that you would have earned if a covered cause of property loss had not occurred. This coverage may also cover losses due to down time or extra expenses needed to restore operations (such as additional property rental expense).

Will I need to protect my employees in the event they are injured on the job?

Yes, and in most states there are legal requirements that must be met and for which you may be responsible. State laws vary, but most states require that you carry some form of Workers' Compensation Insurance. This protects the employee and also offers you, as the business owner, some immunity from a lawsuit by an injured employee.

I keep one auto strictly for business. Do I need a separate policy?

Yes. Whether you have one vehicle or several, you will need a business automobile policy. Such a policy covers any motor vehicle used in your business including cars, vans, trucks, and trailers pulled by trucks, and offers coverage if they are damaged or stolen. It also covers liability if the business vehicle is in an accident. Businesses that have a fleet of vehicles will have different needs than a business with only a few, and their policies will reflect these differences.

My business requires that I store gasoline and other potential pollutants on the premises. Do I need special insurance?

Yes, if your business transports, stores, or uses toxic materials, you are required by law to have a special environmental liability policy. If these materials should be discharged accidentally into the water or leak onto the ground due to a covered cause of loss, the cost of extracting the pollutant from the business premises is covered up to the dollar amount set forth in policy.

What is fire legal coverage?

Fire legal coverage provides coverage for you if you rent a business space and are held responsible for fire damages to that rented space. It does not apply to all business risks.

What if the products I manufacture are damaged in shipment? Who reimburses me?

Shipping companies often carry insurance to cover their losses. However, the shipping company's insurance may be too low or you may have difficulty collecting on a claim after signing for the shipment. Therefore, "property in transit" insurance is available to cover your property being transported by truck, rail, ship, or other means of shipment. Also, the firm you hire to transport goods and the contract you sign with them may affect your need for coverage.

I work out of my home. Will my Homeowners' Insurance cover my business?

To some extent, but on a very limited basis. Loss of business property is usually reimbursed up to $2,500 in the house and up to $250 for business property damaged or lost away from the premises. Even if your work is a side business such as a craft studio, these limits may be too low to cover all the equipment and materials you have accumulated. It's also important to know that no business liability coverage is included in a standard Homeowners' policy. Your Hickok & Boardman Insurance Group agent can help you decide what, if any, additional coverage you need. This additional coverage may be added to your Homeowners' policy or found in a separate commercial policy.

What is coinsurance in property insurance?

Most business policies include a coinsurance clause stipulating what percentage of the total value of your property must be insured to be fully reimbursed for a partial loss. If you insure for less than that amount, the insurance company may impose a coinsurance penalty and reduce your claim payment. This encourages insureds not to under-insure their property.

Can I do anything to lower my insurance premiums?

The answer is complicated and requires individual analysis, but there are steps any business owner can take in order to reduce their premiums. However, before getting started, it’s important to consult with one of our insurance professionals. They may talk with you about making sure you have the right limits, deductibles, and coverage, as well as whether or not you are with the right insurance carrier. As an independent agent we have access to many different insurance carriers, and we can help find the carrier that is the best fit for your business.

Who keeps an eye on the insurance companies?

Insurance is a heavily regulated industry. Every state has a department that regulates and monitors every insurer operating within the state's borders. In addition to approving rates, your state's insurance department is involved in all insurance matters on behalf of private citizens and businesses. It also issues operating licenses to insurers and agents, based on their ability to meet the state's requirements for conduct and knowledge about insurance issues.

What should I look for in an agent?

At the most basic level, any agent should be able to answer all of your questions about insurance, provide you with a thorough assessment of your insurance needs, and offer you a choice of insurance products to meet those needs. Also, any insurance agency should provide you with prompt, excellent quality service in the event of a claim.

Just as important is the level of professional confidence and personal comfort you feel with the agent. Many people stay with the same insurance agent for decades, even generations. It helps to find an agent you can get to know and trust.

Why do I need certificates of insurance from sub-contractors?

It is important that any subcontractors you may hire have their own active insurance. This helps protect you in the event of a claim where they may be at fault. A Certificate of Insurance is a way of verifying that they have coverage in place. Furthermore, an audit may require you to show proof that sub-contractors have their own insurance coverage. The sub-contractors' certificates of insurance will prevent you from being charged for their exposure.

What is a surety bond?

A surety is the insurance company that provides the guarantee (surety bond) that the principal (someone hired to perform work) will perform as expected or complete their contract. A surety bond is not an insurance policy; it guarantees the principal will carry out the work as specified in a contract, or that someone will make an agreed upon payment to another party (the obligee).

What do I need to do to set up a bonding relationship with a surety?

In order to set up a bond line (like a line of credit) with a surety company, you must first provide various documents (typically: CPA prepared financial statements, bank line letter, references, resumes of key employees). Upon review and acceptance, the surety company will determine what bonding limit they are willing to provide for you.

Why must I furnish so much financial data to get a bond?

Since a bond is not an insurance policy, you must pay back any amounts the surety might have to pay out as a result of your failure to perform. The surety needs to make sure you are financially sound so they feel secure that you will be able to pay them back in the event that you do not fulfill the contract.

How long does it take to get a bond?

Depending on the size and complexity of the bond, if the bond line is already established, new bonds can be issued here in our office within four to forty-eight hours. Establishing an initial bond line with a surety may take anywhere from three to thirty days, depending on your situation.

How are bonds underwritten?

Complex performance bonds and financial guarantees (Surety Bonds) are underwritten using many of the same criteria used by commercial bankers when making corporate loans. Detailed financial and operational data must be assembled to clearly demonstrate to the surety that your company has the financial and operational resources and experience to fulfill its obligations.

What is a bond claim?

This is also known as “calling in the bond.” This is a demand from the obligee for payment from the surety company. It usually means that a job is not going according plan and there is a claim that you, as the principal, are not performing as guaranteed. If the surety company makes a payment to the obligee, they will then turn to you to pay them back.