Commercial Property

Property coverage in small business insurance can be structured several ways, and the premiums you pay are based on how comprehensive your business insurance coverage is.

If you don't own your building, you'll simply need contents coverage. In the most basic policies, property insurance for small business contents covers furniture, fixtures, inventory, office equipment and other supplies stored at your facility or off-premises. You may insure those items for replacement cost (which means you'll receive a settlement based on how much it will cost to replace the items at today's market prices) or for actual cash value (ACV), which pays only for the depreciated value of the property. While replacement cost small business insurance policies have higher premiums, they may help your business recover from a loss faster, since you can replace all of the lost or damaged property with new items. For this reason, we recommend buying property coverage insurance for small businesses on a replacement value basis. Also, if you lease some of the equipment at your facility, your leaseholder may require that you insure the property at replacement value. However, if your business owns its own equipment and could easily purchase any equipment it might lose at the depreciated market value, the lower premium of an ACV policy might be a better value.

• Protection to insure that if your building is destroyed and it costs more to demolish and rebuild it to code than its current value.

• Full glass coverage.

• Full sign coverage.

• Coverage in the event of equipment breakdowns caused by power surges, mechanical malfunctions, and boiler explosions.

• Protection if your accounts receivable records are ever damaged or destroyed by a covered loss.

• Coverage for any physical loss or damage to your computer hardware, loss of data, and computer software.

• Other popular industry-specific options, including coverage for contractor equipment and tools, installation, peak season, transit insurance, and valuable papers, among others.

General Liability

In today's litigious society, even small mishaps can result in large lawsuits. That's why general liability insurance, alon with property and worker's compensation insurance, are essential for most companies. Liability insurance protects the assets of a business when it is sued for something it did (or didn't do) to cause an injury or property damage.

How General Liability Works

Under a general liability insurance policy, the insurer is obligated to pay the legal costs of a business in a covered liability claim or lawsuit. Covered liability claims include bodily injury, property damage, personal injury, and advertising injury (damage from slander or false advertising). The insurance company also covers compensatory and general damages. Punitive damages aren't covered under general liability insurance policies because they're considered to be punishment for intentional acts.

General liability insurance policies always state a maximum amount that the insurer will pay during the policy period. Usually these policies also list the maximum amount the insurer will pay per occurrence. For example, if a company has a $1 million occurrence cap in its liability policy and it's successfully sued for $1.5 million, the insurer would pay $1 million and the business would be responsible for paying $500,000.

To cover these types of situations, many companies purchase umbrella liability insurance, which picks up where their general liability coverage ends. Umbrella liability covers payments that exceed their other policy's limits, and provides additional coverage for liabilities not covered in a standard liability insurance policy.

Most insurance companies require their policyholders to report as soon as possible any accidents that could lead to a liability claim. The insurer may then require the business owner to document the situation, forward all summonses and legal notices, and cooperate fully in any investigations.

Taking precautions before an accident can help keep your liability and insurance rates down. All businesses can take certain steps to lower the chance of a liability insurance claim:

• Set a high standard for product quality control

• Make sure all company records are complete and up-to-date

• Be sure employees are properly trained

Business Automobile

All motorized vehicles, whether used for personal or business purposes, need auto insurance. Automobile liability insurance – required by most states – covers medical expenses for injured persons and damages to the property of other individuals as a result of a motor vehicle accident caused by the insured’s negligence.

While the types of coverage provided by personal and commercial auto insurance policies are essentially the same, there are important distinctions. Typically, commercial auto insurance policies have higher liability limits, for example $1 million. They also may have provisions that cover rented and other non-owned vehicles, including employees’ cars driven for company business.

Several factors related to ownership and use of vehicles determine whether a personal or commercial policy is appropriate. These include:

• Who owns or leases the vehicle – you individually or the business as an entity

• Who drives the vehicle – you or your employees

• How the vehicle is principally used – for example, transporting people, delivering packages or carrying hazardous materials

You might also want to consider the purchase of collision and comprehensive (other than collision) coverage to protect yourself against damage to your vehicle.

Considerations Concerning Commercial Auto Insurance

• If your business owns or leases a vehicle, make sure its name is listed on the policy as the principal insured.

• If you are relying on either a personal auto insurance or personal umbrella liability policy to provide you with protection for your company’s use of vehicles, look closely at the provisions, as business-related liability may be excluded.

• If your employees operate a company car, make sure they have good driving records and are trained properly.

• Consider increasing insurance on your business vehicle to cover permanently attached items, such as a generator or storage unit.

The following factors can affect the cost of your insurance premiums:

• Premiums are linked to the type of vehicle driven. So if you’re buying or leasing a new car or truck, check the insurance rates before you make your final choice.

• Anti-theft devices, such as an alarm system and global positioning system – so that your vehicle can be located if stolen – can help reduce your premiums.

• The community where you park your vehicle can impact premiums.

• The number of claims you have previously filed can impact your insurance costs.

• The coverage limits you choose affect the premium – the higher the coverage amount, the higher your premium. If you’re using your vehicle to conduct business, you may want to consider a higher liability limit so that coverage protects both your business and personal assets if you are sued due to an accident.

• The usage of your vehicles will determine the premiums charged.

• The cost of your insurance is directly linked to your policy’s deductible amount. The deductible is the amount of money that you agree to pay as part of a claim, before your insurer pays the remaining amount toward that claim. The higher the deductible, the lower the premium.

Workers’ Compensation and Employer’s Liability

Workers' compensation benefits provide coverage for medical expenses as well as reimbursement for lost wages when employees are injured on the job. Workers' compensation coverage includes two types of protection: workers' compensation and employer's liability. The workers' compensation portion of the policy pays for claims made by employees, and the employer's liability portion pays the cost of defending lawsuits filed against the company by an employee or an employee's family.

Workers´ compensation insurance may not be at the top of your list of things to think about, but it should at least be on that list for three reasons:

• Workers' compensation insurance is required by law in all 50 states.

• Workers' compensation insurance can protect your business from lawsuits. Without the right coverage, an injured worker might sue your business to recover medical costs, disability costs and damages.

• If you understand how the system works, you can take advantage of simple ways to reduce workers' compensation costs.

Getting Covered

In Massachusetts you can buy coverage through the State-run assigned-risk pool or directly through a private insurer. Several factors come into play when determining in what market your business can be insured.

• Years your business has been operated

• The type of business ( what operations your employees perform)

• Claims history

Cutting Workers' Compensation Costs

Workers' compensation premiums depend upon the nature of your business, the jobs your employees perform and the number of hours they work. Each job type is assigned a classification code. Riskier work is classified as such and assigned a higher premium.

• Review your classifications to make sure you're using the proper codes.

• Check your payroll. Massachusetts does not require you to include overtime in the payroll numbers used to compute your premiums. Make sure you don't figure in overtime.

Stay out of the Pool

Find out why you're in the pool. If the problem is your firm's safety record or loss history, you should take steps to improve safety and reduce the chance of accidents in your workplace. Enhancing workplace safety will improve your workers' quality of life as well as your bottom line. Consider some of the following ideas:

• Conduct regular inspections of the facility to identify and correct hazards such as poor lighting, unsafe warehouse conditions and ergonomically incorrect workstations.

• Communicate to employees the importance of safety in the workplace. Award and recognize safe operations.

• Write safety procedures and distribute them to anyone who drives a vehicle for your business.

• Keep detailed records of all accidents and set quantifiable goals for improvement.

• Provide protective equipment. Goggles, helmets, gloves and other safety gear make sense in many situations.

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