OBJECTIVE: Insurance is not only important to you in your business, but in your other business relationships as well. In this session you will discover the many types of insurance coverage available for small business, and which types will fulfill the requirements for your business in your location.
Insurance Coverage For Small Businesses
Besides your attorney and accountant, another professional you will need to bring into the start-up process will be your insurance agent. It may be helpful to have one agent who can handle all of your insurance needs. There are policies available that are specifically designed to cover small businesses that, in one package, will cover most of your insurance needs.
Insurance is not only going to be important to you but it will be important to your other business relationships. For example, if you choose to lease office space, the landlord will typically require that you furnish a certificate of insurance or be listed as an additional insured on your policy as assurance that your business will not disappear overnight in the event a loss occurs.
Here are some of the risks that should be protected by insurance:
Business property insurance
Property insurance should include a broad form of coverage to protect you from a wide variety of losses. Your insurance should include:
Keep in mind that an all-risk policy can be structured to cover all of your equipment, including computer hardware and software, plus your valuable records. A properly written policy will include loss of income that might result from breakdowns, as well as loss of income from other hazards that would temporarily close down your business.
A Comprehensive General Liability (CGL) policy is designed to provide coverage to third parties for the following:
On occasion, some policies will exclude Products and Completed Operations and/or Personal Injury and Advertising Coverage depending on the services your business provides. In these instances, a Professional Liability, Malpractice, or Errors and Omissions Policy might be available for your type of operation that will cover the errors and omissions that might result in suits against your company. This is particularly true of professions that are held to a higher degree of care or standard, for example, attorneys, engineering consultants, insurance agents, realtors, doctors and dentists.
Worker's Compensation Insurance
If your business has employees, Worker's Compensation insurance will be mandatory. Startup operations typically find that the State Compensation Fund can accommodate their needs. As the business grows, you can then "shop" for better prices for the coverage. In addition, some worker's compensation insurers provide additional services such as risk management and loss control services that may be beneficial to your business operation. These services are typically helpful in holding down claim costs over the long term. Do not confuse risk management with your taking part of the risk. The insurance company should assume 100% of the worker's compensation insurance risks.
Excess Liability Coverage
These are liability limits available over and above the maximum limit your carrier of choice may write and can be accomplished in two ways:
SOMETHING TO KEEP IN MIND: Your carrier of choice may offer lower limits, which may look attractive from a premium standpoint. But savvy business owners should contemplate liability limits of at least RWF1 million. The additional cost is usually affordable and, in today's litigious environment, makes good sense.
Employment Practices Liability Coverage
Employment Practices Liability insurance is a coverage that is starting to be carried by more companies, with premiums exceeding RWF2,000 annually for RWF1 million of coverage. While employment practices are rarely encountered in a small operation, the threat of wrongful termination or sexual harassment lawsuits, which are excluded under most business policies, becomes more prevalent as the size of your organization grows.
As mentioned earlier, if you have a partner, your buy-sell agreement can be funded by life insurance in the event of the death of a partner. As your business grows this insurance can be increased.
Top Ten Do's and Don'ts
Business Plan for the Session "Insurance"
We heartily recommend that you download the individual business plan template for this session Business Plan Template Document 5 and complete it now.
Instructions on filling in the business plan template:
We suggest that you fill in each section of the business plan
The template for all sessions 1-15 can also be downloaded into your computer as a single document:
Include sufficient research findings and background materials. Make it interesting up by the use of background data, your biography, charts, demographics and research data. When your business plan is completed, print off and assemble the 15 sections.
Many other business plan formats are available in libraries, bookstores and software.