To prepare myself to write this article, in addition to slightly more serious research, I spent a few minutes scrolling through business insurance cartoons on the internet. One included a mustached man that was speaking to a woman sitting at a computer. He asks, “What happens when we have a fire…I mean IF we have a fire?!” Another included two men sitting at a desk, one presumably the agent with a paper in his hand speaking to the other. He says, “I think you misunderstood. The million dollar umbrella policy only covers you for claims involving an umbrella.” A favorite was a pig sitting at a table looking distraught talking with his agent. The agent says, “Your policy does cover wind damage, but not from huffing and puffing.”
On a spectrum of silly to cruel, they were nearly all negative regarding the insurance industry. Like many jokes, there is some truth to them, but they are mostly exaggerated. In reality, there are many reasons that business insurance is a good idea. They may include regulatory requirements, entities at high-risk (think doctors), and situations where an insurable situation could destroy the hard work you put into building your business. Not many small businesses could survive litigation that can easily span hundreds of thousands of dollars.
The next question generally is, “what kind of business insurance do I need?” Insurance coverage is often something you don’t know is adequate or not until you need it. How do you know if it’s adequate? One great place to start is with a good insurance broker, someone you trust to be straight with you while looking out for the needs (both now and in the future) of your business. If you own your business, the broker could also understand you personally and know how to cover those needs as well. To add value to this article, I reached out to the insurance broker for the National Wood Flooring Association (NWFA).
Our broker first called attention to an article on the U.S. Small Business Administration’s website, sba.gov. The article, “What Kind of Business Insurance Do You Need?” is a short and easy read that includes several helpful nuggets of information including the fact that forming a Limited Liability Company (LLC) will not protect you personally from all business risks. The example they used was a business that inadvertently breaks intellectual property laws or is sued by an employee.
Another significant point in the article is that often a client will request evidence of your certificate of general liability before doing business with you. This is especially true in our industry where workers are entering homes to work on client’s floors. The client wants to see it to feel better about their liability in case something goes wrong in addition to the wood flooring professional needing coverage for protection. I have heard many stories from the best of the best in our industry. Bad things happen to good people all the time. Good people that are working hard, mastering their craft, and have all the best intentions. Don’t assume taking the high road will protect you.
Our broker also provided a bulleted list of basic coverage you may consider purchasing. The list is broken down into two categories, property and casualty insurance, and health and related insurance.
Property and Casualty Insurance
Unlike health insurance, which protects people, property and casualty insurance covers the business – the owner, the business site, liability protection, and the physical assets that are vital to the success of your business.
- Workers’ Compensation Insurance: If you or your employees become disabled due to an on-the-job injury or illness, workers’ compensation insurance allows you to provide wage replacement and medical benefits to the affected employee while protecting you and your business from costly liability litigation.
- Business Insurance: These plans include several policies that protect your business from circumstances that could negatively affect your operations. Policies include property, casualty, liability, commercial auto, and more.
- Cyber Insurance: It’s estimated that half of small- to medium-sized businesses have been hacked or had their systems compromised in the last 12 months. New types of coverage are available that protect your company’s digital assets in the event of a cyber attack.
Health and Related Insurance
Group and individual health insurance are about people – you and your employees. In the case of an accident or illness, these plans can help pay for qualified medical care for the policyholder and their dependents.
- Group Health, Accident, and Life Insurance: These plans give yourself and your employees access to coverage including medical, dental, vision, life, and short- and long-term disability insurance.
- Voluntary and Supplemental Insurance: Voluntary insurance allows your employees to help determine their own insurance benefits, which they pay for out-of-pocket. Voluntary insurance may be used to establish your company’s benefits package or supplement your current group benefits.
- Individual Medical Insurance: Individual medical insurance can help keep rising health care costs in check through health, vision, dental, life, and short- and long-term disability plans for you and your family.
Think about the inherent risks of your business and who you want to be covered. Take those thoughts to your broker so they can understand the story of you and your business and help you determine your insurance needs. One important thing to keep in mind is that if you take care of your employees, you are more likely to earn their loyalty. Investments in things like insurance for the benefit of an employee are typically valued greater by them than the relative cost to the business. In addition to the intangible benefits of feeling like your employer cares about you, most employees cannot secure comparable insurance at the costs available to businesses. You get what you give and paying insurance premiums can give more than just a safety net when used strategically.
Bree Urech-Boyle is Chief Financial Officer at the National Wood Flooring Association in St. Louis. She can be reached at bree.urech-boyle@nwfa.org.