|
LAW OFFICES |
|
This website is provided as an educational service not as legal advice (see important legal notice). Except as otherwise indicated, all contents copyright ©2000 and thereafter by Alexander L. Ullenberg. All rights reserved worldwide. |
|
ULLENBERG |
|
Law Office |
|
101 Camelot Dr., Ste. 2b Fond du Lac, WI 54935
Phone: (920) 924-9878 (877) 924-9878 Fax: (920) 924-9895 E-Mail: info@UllenbergLaw.com |
|
General Information
Business Services:
Buying a Business Selling a Business Custom Contracts Annual Records / Reporting
Litigation (i.e. Lawsuits):
Being Sued / Suing
Other Issues of Interest:
Wills, Trusts, P.O.A.s
|
|
ULLENBERG |
|
Types of Common Business Insurance.
Businesses face numerous risks to their operations on a daily basis — from the risk of employees being hurt on the job to customers being hurt while visiting the business’ operations.
To manage this risk, most businesses purchase insurance to hedge against the potential financial loss associated with these risks. Some forms of insurance (like worker’s and unemployment compensation insurance) are mandated by local governing authorities; others (like general liability, health, and life insurance on key employees) may make good business sense.
Even if insurance is not mandated, a business may still need to carry some forms of insurance to avoid having its owners being accused of operating in a reckless or careless manner justifying the imposition of personal liability upon the business owners for any damages caused by the business.
Business owners and entrepreneurs must decide the forms and amounts of insurance that are mandated and also advisable for their business operations. There are many different types and options of insurance — too numerous to explain here. A qualified, licensed insurance broker is instrumental in making this determination, and a successful business owner has an established relationship with one.
Commercial Liability Insurance.
Business Owners’ Policy. Some insurance companies bundle all the “essential” liability insurance policies together under a comprehensive Business Owners’ Policy (BOP). The BOP usually includes property insurance, loss of business income insurance, extra perils insurance, and an expanded commercial liability insurance. It generally does not include health insurance or worker’s compensation insurance.
The BOP is usually only available to small businesses in certain industries and the terms vary among insurance companies. If your business does not qualify for the BOP, then you will have to purchase insurance separately:
Property Insurance. Property Insurance insures the businesses property against loss or damage by certain causes (called perils). Businesses should insure all buildings and contents (including personal property that is owned and leased, such as a leased copier, etc.).
Commercial Liability Insurance. Commercial Liability Insurance insures a business against claims made against it when the business or its assets cause injury or property damage to someone else. It covers the claims plus the legal costs (i.e. attorney fees) of defending against those claims.
Business Interruption Insurance. Business Interruption Insurance covers damages resulting from loss of use of a business property or asset as a result of a peril. It generally covers loss of profits during this period and payment of expenses that continue (i.e. mortgage payments, salaries, taxes) during the period of lost use. Some forms of this insurance also cover the additional expenses incurred in temporarily relocating operations to a different facility during the business interruption.
Health Insurance.
Health Insurance reimburses employees for medical expenses they incur for injury or sickness (whether or not it occurred in the course of their employment). Although not required by law, many businesses provide group health insurance coverage to their employees in an effort to attract good employees. The variety of health insurance policies is seemingly endless, and continues to change and evolve. In addition, some plans (such as health savings accounts) are available only to small businesses.
Worker’s Compensation Insurance. (Required.)
Worker’s Compensation (WC) insurance provides financial and medical benefits to employees and their dependents for injury and death occurring in the course of employment regardless of whether the employer is at fault. The employer obtains the WC policy through an authorized insurance company and pays a defined premium based upon total payroll amounts, the employer’s industry, and employer’s claim experience rate. The WC Policy reimburses affected employees and their dependents for medical expenses, death expenses, lost wages, and temporary and permanent disability.
For further information on Worker’s Compensation Insurance in Wisconsin, contact the Wisconsin Department of Workforce Development.
Disability Insurance.
Disability insurance provides monthly benefit payments for temporary or permanent disability. Many small business owners maintain personal disability insurance over themselves to pay their personal and business expenses should they become temporarily or permanently disabled. Some businesses also purchase group policies providing this coverage to their employees as well. Disability insurance differs from Worker’s Compensation insurance in that it covers disability resulting from any cause — not just that occurring in the course of employment.
Unemployment Compensation Insurance. (Required.)
Unemployment Compensation Insurance provides benefits to employees who are terminated from their employment through no fault of their own during the period that they remain unemployed. Employees who quit their employment or are terminated because of misconduct are not eligible for benefits. Unemployment Compensation Insurance is funded through a percentage tax paid by the employer on all wages. The percentage varies upon the employers’ time in business, industry, and incidence of claims, and can range from 0.2% to 15+%.
Special Insurance.
Business Automobile Insurance. Some businesses require employees to operate company-owned or their own personal vehicles in the course of their work duties. In these situations, the business should maintain automobile insurance coverage over all business-owned vehicles, and separate liability coverage for the employees use of a vehicle for work.
Licensing or Fiduciary Bonds. Some business licenses require the business to furnish a fiduciary bond to the Government insuring the business’ compliance with licensing laws. This insurance
Employee Dishonesty Insurance. This insurance covers loss suffered by a business due to employee theft, embezzlement, or fraud.
Flood Insurance. If your business is located in a flood plain, you will need flood insurance to cover any damages associated with flooding. See the National Flood Insurance Program of the Federal Emergency Management Agency.
Key-Employee Life Insurance. Some businesses maintain life insurance on the owners and key employees of the business. The proceeds of the policy are designed to help the business deal with the losses caused by the unexpected departure of the owner or key employee — I.e. loss of income, costs to recruit and train successors, etc.
For further information on insurance in Wisconsin, contact the Wisconsin Commissioner of Insurance.
Tips When Shopping for Insurance.
1. Understand What is Covered and What is Excluded. While insurance policies can be rather “boring” to read, it is important that the business owner understand the limitations of the insurance. Oftentimes the insurance agent will be able to explain the limitations; however, sometimes the business owner will actually have to read the policy.
2. Evaluate deductibles. The premium for a policy is related to the amount of the deductible the business agrees to pay for each loss claim. While a $0 deductible policy may appear attractive, the premium for such a policy is often equally unattractive. Insurance exists to spread the risk of catastrophic losses among several businesses, therefore some sort of deductible is always appropriate.
3. Do not underestimate the costs of replacing your business property. To save insurance costs, some business owners underestimate the value of their business assets. However, this is rarely a good idea. In the event of a insured loss (such as a fire), the business owner will only receive compensation up to the maximum values stated on the policy — if this is inadequate to replace all the business assets, there will be problems for the business’ continuing operations. Some policies now have an automatic escalation clause for insured values; and some cover replacement value versus actual value (i.e. price of used copier). A business owner and his insurance agent must make sure the coverage secured will actually benefit the business in the event of a loss. |