Business Insurance Info:



A. There are six broad areas of business (insurance) exposure:

  1. Property Insurance
  2. Time Element
  3. Crime Insurance
  4. Automobile Insurance
  5. Liability Insurance
  6. Workers Compensation Insurance
Not every business will have exposures in every area, which is why an analysis must be done. The State requires Workers’ Compensation insurance if there aren't any employees.

Contractual agreements that enable your business to operate, such as leases, merchandising, and finance contacts, may obligate you to insure beyond your immediate concern. Review them, with your agent.

Insurance Policy Premiums:

The insurance premium may be based on, square footage of the floor area or, more frequently, payroll or sales receipts. In any case, your cooperation for access to your books, records, and/or premises is expected. Policy periods are generally annual. Payment is due when coverage starts or as agreed upon. Premium financing is usually available, but be aware of the interest rate you will be paying as well as the authority given to the financing organization and how any disruption in your payments will affect your coverage.

Workers Compensation Insurance:

An employee who has suffered an injury or illness resulting from employment is entitled to workers’ compensation benefits. California Labor Code Section 3700 requires that every employer in California either buy workers’ compensation insurance from a licensed insurance company, or obtain a certificate of self insurance from the California Department of Industrial Relations. Failure of an employer to follow this law may result in imposition of both civil and criminal penalties. Because of the complexity of the issues involving this insurance, it is recommended that business owners review to Workers’ Compensation brochures available from the Department of Insurance and the Department of Industrial Relations.

Fleet Car Insurance

Commercial auto insurance largely parallels private auto insurance. You should read your policy and understand the terms proper and conditions. Whenever you transport a client or move property by a motor vehicle, you should have an understanding of how your commercial auto insurance will work. You should also consider how non-owned autos, newly acquired vehicles, or changes in drivers affect your coverage.
Business Plans
Business insurance may cover property of all types that you own or maybe in your “care, custody, and control”. Such property may be buildings, personal property, equipment, inventory, goods in transit, earnings, etc. The nature of your business may also require you to protect other people’s property as well.
Casualty Insurance Coverage
Property insurance coverage is addressed from two sides of the same idea. “Named Perils” names each peril to be insured against; such as fire, explosion, aircraft damage, windstorm, etc. Other perils may be added along the way. “All Risk” starts from the other side, assuming all perils are covered except those named in the “Exclusions” of the policy. Obviously, the exclusions are an important part of the All Risk policy. Perils often excluded are: flood, and earthquake. Since the All Risk policy affords better protection, it is more expensive to purchase than the Named Perils policy. Remember, your agent is there to help you to understand your coverages. Insurance of property is based on its value. There may be “co-insurance” penalties for failing to insure to value. These penalties may be applied to a loss settlement. Determination of value is important for calculating the premium and settling for a loss. Some terms often used are: “actual cash value” meaning fair value market, “replacement cost”, “selling price” for unsold inventory, and “business interruption”.

Claims Large deductibles, although they afford a reduction in premium, can have a critical affect on your cash flow if you are operating with or have access to very little capital. You cannot rely on insurance to always or completely cover your losses. A frequency of claims will have a definite affect on the insurer’s willingness to continue to insure your business. Although business-owners generally purchase replacement cost coverage, insurers often limit their initial settlement for the loss to actual cash value until such time as the owner has replaced the items lost.

Liability insurance - In general, liability insurance protects you from claims presented against your business for unintentional negligent acts. Additionally, this coverage provides a defense if a lawsuit is filed against your business. Example:

1) someone slips and falls on your business premises;
2) your covered truck is involved in an auto accident.

In order to protect the assets of your business, it is very important to purchase both adequate coverage and limits of liability insurance when you purchase your business insurance. You should discuss liability insurance in detail with your insurance agent.

Coverages Major types of business liability insurance you should be familiar with are: premises/operations, lessor’s risk, contractual, products/completed operations, personal injury, non-owned auto, and professional liability.

Insurance Premiums Different exposures generate premium in different ways. Offices where no customers visit are one kind of exposure, factories with blast furnaces are another. Some factors that determine premium are: square footage, payroll, sales, expenses for independent contractors, number of employees, etc. You should know how your premium is derived. You should also be aware of how much you are committing to deposit premiums and what effect audits and changes in your business activities will have on your premium. Where possible, get complete explanations of premium terms and coverages in writing.

How do I go about obtaining business insurance?

A. The first step in obtaining proper business insurance is to find and contact a reliable insurance agent or broker. Business contacts can often refer you to someone that they have had good experience with. When looking through the yellow pages, look for specialization in commercial insurance, and membership in one of the professional agents or brokers associations. When dealing with the agent initially, they should do their own analysis or survey of your exposures, and then ask to review any present coverages. To do otherwise could perpetuate any errors, gaps or overlaps that may exist in your present program. What kind of insurance do I need?

Can any exposures be reduced or eliminated?

A. You can request an inspection by a Loss Control Engineer to uncover hazardous conditions. Recommendations from this report can benefit you by helping to reduce premiums and making your business more attractive to insurers.


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