Money Management - July 2004

Planning for Insurance Needs

Important for New Business Owners

by David Dahan

Starting a new business can be a frightening challenge, as you find yourself buried under an avalanche of business licenses, financial reports and legal documents. While sifting through these necessities, it’s important not to forget about the types of insurance required to keep your new business and its employees secure.

New business owners need to place "obtaining proper insurance" high on their priority list. Think of your new venture as an entity to care for in itself – it should be as well-protected as your very own health.

The types of insurance needed will depend on your type of business and the number of employees it has. Certain types of insurance may be required before you are even permitted to open the doors. It is also advisable to have your place of business "audited" for potential risk exposures by a Loss Control Engineer. He or she will survey the company and offer recommendations to help reduce certain hazardous conditions, thus lowering potential premiums.

Property insurance, for instance, will cover damages to the actual place of business, its equipment and goods. You can purchase a total risk package or business interruption insurance, which compensates the owner for work stoppage due to an unforeseen crisis, including natural disasters or terrorist attacks. A lesser package only covers the more day-to-day occurrences. Although business interruption insurance is more expensive, it is usually better to be safe than sorry when risking your livelihood.

Liability insurance, which protects the owner from potential litigation by an outside party, is growing ever more popular. Business owners can now also purchase employee dishonesty bonds and business services bonds. A business owner can also obtain coverage that will keep the company up and running in the event of his or her death.

Workers’ compensation, life and health insurance are also key for the welfare of your employees. Employees are entitled by law to compensation if injured on the premises. Failure to properly insure and compensate employees for work accidents can result in criminal and civil penalties.

Also, if your company requires vehicles to transport goods or employees, you may want to consider securing commercial auto insurance. Circumstances such as changes in drivers and transporting non-employees can affect on your coverage, so review all aspects of this type of insurance with your broker.

Selecting the proper agent or broker to represent your company’s needs is as crucial as the insurance coverage itself. You want to find an agent who has expertise in business exposures and the commercial insurance market. Ask friends and fellow business associates for referrals to initiate your search. Depending on your industry, affordable insurance may be available through industry groups and associations. Try to sign with a company that can underwrite all of your insurance needs – this will save time and money.

Compare comprehensive insurance packages from a few companies to make the best decision. It’s also imperative to discuss with your insurance agent any and all insurance policies relevant to your industry. Be aware of the way your premiums will be determined and expect to maintain an "open-door policy" in terms of record-keeping.

One item to keep in mind is your contracted deductible. While a high deductible ensures a lower premium, it can be unrealistic when matched with your company’s funds. When compared to your company’s other financial obligations, can you really afford to pay out a large sum for a deductible? An experienced agent can help you determine a premium profile that will cost you as little loss as possible when filing an insurance claim.

David Dahan
David Dahan is CEO of Orgill/Singer & Associates Investments & Insurance, an independent, full-line insurance brokerage headquartered in Las Vegas.