SMALL BUSINESS INSURANCE & RISK MANAGEMENT GUIDE

The following is a list of helpfull publications from the Small Business Administration.  I am attaching a copy of the SMALL BUSINESS INSURANCE & RISK MANAGEMENT GUIDE.  You might download any of the other publications at the SBA website, sba.gov

 

1. PROBLEMS IN MANAGING A FAMILY-OWNED BUSINESS MP-3:   Specific problems exist when attempting to make a family-owned business successful. This publication offers suggestions on how to overcome these difficulties.

2. BUSINESS PLAN FOR SMALL MANUFACTURERS MP-4:   Designed to help an owner/manager of a small manufacturing firm, this publication covers all the basic information necessary to develop an effective business plan.

3. BUSINESS PLAN FOR SMALL CONSTRUCTION FIRMS MP-5:   This publication is designed to help an owner/manager of a small construction company pull together the resources to develop a business plan.

4. PLANNING AND GOAL SETTING FOR SMALL BUSINESS MP-6:   Learn proven management techniques to help you plan for success.

5. BUSINESS PLAN FOR THE SMALL RETAILER MP-9:   Business plans are essential road maps for success. Learn how to develop a business plan for a retail business.

 6. BUSINESS PLAN FOR SMALL SERVICE FIRMS MP-11:   Outlines the key points to be included in the business plan of a small service firm.

7. CHECK-LIST FOR GOING INTO BUSINESS MP-12:   This is a must if you’re thinking about starting a business. It highlights the important factors you should know in reaching a decision to start your own business.

9. COMPUTERIZING YOUR BUSINESS MP-14: Helps you forecast your computer needs, evaluate the alternatives and select the right computer system for your business.

10. BUSINESS PLAN FOR HOME-BASED BUSINESS MP-15:  Provides a comprehensive approach to developing a business plan for a home-based business.

 12. INSURANCE OPTIONS FOR BUSINESS CONTINUATION PLANNING MP-20:  This publication discusses the life insurance needs of a small business owner and how important business life insurance is when planning for the future of business.

13. INTRODUCTION TO STRATEGIC PLANNING MP-21:   This best seller helps you develop a strategic action plan for your small business.

14. INVENTORY MANAGEMENT MP-22:  Discusses the purpose of inventory management, types of inventories, record keeping and forecasting inventory levels.

  15. SELECTING THE LEGAL STRUCTURE FOR YOUR BUSINESS MP-25:   Discusses the various legal structures that a small business can use in setting up operations. It identifies types of legal structures and the advantages and disadvantages of each.

16. EVALUATING FRANCHISE OPPORTUNITIES MP-26:   Evaluate franchise opportunities and select the business that’s right for you.

17. SMALL BUSINESS INSURANCE & RISK MANAGEMENT GUIDE MP-28:   This guide can help you strengthen your insurance program by identifying, minimizing and eliminating business risks.

18. HOW TO START A QUALITY CHILD CARE BUSINESS:  This comprehensive manual developed by child care professionals in both private and public sectors, explains the business and academic dimensions of operating a child care center.

19. CHILD DAY-CARE SERVICES MP-30:   An overview of the industry, including models of day-care operations.

20. HANDBOOK FOR SMALL BUSINESS MP-31:   Handy information for getting started – in a new publication developed by the SBA’s Service Corps of Retired Executives (SCORE).

21. HOW TO WRITE A BUSINESS PLAN MP-32:   What you need to know to write a good plan at the start. It can save your business down the line.

Life in a Nutshell

45,000-plus Valley properties remain in foreclosure

(The Arizona Republic) Thomas Kelly explains the foreclosure process to those outside the banking industry by likening it to a tube.

“You get put in the tube when you’re 90 days late, and you might come out the other end of the tube six months later,” said Kelly, spokesman for JPMorgan Chase & Co.

What Kelly’s analogy doesn’t explain is how, for the past three years, thousands more Phoenix-area property owners have been entering the tube each month than coming out of it.

At present, the system is backed up with more than 45,000 “pending” foreclosures, up from about 2,300 in June 2006, according to a historical analysis by the Information Market, a Phoenix research firm.

Most experts expect pending foreclosures to increase even more before leveling off sometime within the next 12 months.

There has been much speculation among real-estate professionals about reasons for the apparent backlog of houses and condominiums headed toward foreclosure.

There’s a widespread belief that banks are purposely limiting the flow of foreclosure homes onto the market, which helps prevent home prices from sliding even further but could prolong the market’s long-term recovery.

Likewise, some say lenders are dragging their heels on repossessing and selling extravagant homes, and to a lesser extent commercial properties, including raw land, because the demand for big-ticket real estate is too low and because selling off large assets at sharply reduced prices could cause some smaller banks to fail.

Lenders have been relatively quiet about their strategies for working through pending foreclosures, which has only fueled various theories.

But Kelly said such theories give the banks too much credit.

“We’ve got such an enormous portfolio of homes to deal with, we don’t have time to say, ‘Let’s do this with this one, and let’s do that with that one,’” he said.

Monthly foreclosure totals have risen and fallen a number of times since the housing market peaked in 2006, although the general trend has been upward.

However, the number of pending foreclosures, properties on notice for a trustee sale but not yet sold, has increased steadily without exception since April 2006. In the past year, it has climbed by anywhere from 500 to 5,000 properties each month.

As of Friday, there were 45,709 total pending foreclosures in Maricopa County , according to the Information Market. Those are in addition to the roughly 73,000 foreclosures completed during the past three years.

Also as of Friday, the county was on track to reach 5,000 foreclosures by the end of this month, which would be the second-highest monthly total on record, having reached a high of 5,240 in February.

Even if 5,000 properties complete the foreclosure process this month, an even greater number will enter it.

As of Friday, lenders had served pre-foreclosure notices on 5,700 additional properties, a net increase of at least 700 in pending transactions for the month.

Actual foreclosures in the past three years total about 73,000, according to the data.

Some Valley foreclosures may be taking longer than the usual 91 days from notice to sale because the borrowers are attempting to work out a loan-modification or “short sale” agreement with the lender.

In Maricopa County, short sales have increased in the past year but still account for less than 5 percent of property sales.

 

Modifications help

 

Colleen Gunderson, Tempe-based Century 21 All Stars owner and designated broker, believes banks have intentionally slowed the release of foreclosure properties onto the market at the behest of the federal government, which provided many banks with bailout funds.

“There is a process in place to sort of warehouse these properties until a time when it’s more beneficial to place them on the market,” she said.

It’s the right approach, Gunderson added, because dumping 45,000 foreclosed-on properties onto the market all at once would deliver the knockout punch to a real-estate economy already leaning against the ropes.

New, standardized loan-modification guidelines issued by the Obama administration in March appear to be doing a better job of keeping some borrowers out of foreclosure than modifications made in 2008, according to two federal bank regulators, but it’s still too early to know for sure.

More than half of loan modifications negotiated before the Treasury Department launched its $75 million Making Home Affordable program in early March were back in default within six months, according to a study conducted by the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.

Those same officials said in May that the rate of re-default fell by about 12 percent among those borrowers whose monthly payments were reduced.

However, the number of loans headed toward foreclosure has risen significantly despite better modifications.

In March, the Investigative Reporting Workshop at American University in Washington, D.C., conducted a study of the nation’s roughly 8,000 banks with online-news service msnbc.com and reported finding a 150 percent increase in loans at risk of foreclosure compared with a year earlier.

Kelly said job losses are one likely reason for the continued high volume of foreclosures, in addition to people walking away from mortgages even though the payments are affordable because they owe far more than the home is worth.

 

Commercial is next

 

Although most Valley foreclosures thus far have involved residential property, commercial-property owners and lenders are preparing for apartment, office and retail foreclosures to rise sky-high in the coming months.

Selling those properties back to the market could take years in some cases, analysts said, because there is little interest in new office and retail space, even at the low-rent end.

Craig Henig of commerical real estate brokerage CB Richard Ellis in Phoenix said banks aren’t in any rush to foreclose on commercial real estate because it forces the lender to adjust the property’s book value to today’s considerably lower market price.

Significant write-downs on a few multimillion-dollar commercial loans could put a small or financially stressed bank out of business, he said.

“I don’t know how they could sustain the amount of markdowns,” Henig said.

However, Kelly said the holding costs associated with thousands of foreclosed-on properties outweigh any benefit the bank might realize from waiting to sell them.

He also noted that the value of commercial real estate and high-end homes is still on the decline, which means waiting is likely to cost lenders even more.

“The goal is to get that asset back earning money for you,” he said.

Is the job market really turning around?

Experts say the employment picture will start to improve soon. Workers say the proof is in the pink slip.

NEW YORK (CNNMoney.com) — According to some recent headlines, conditions are finally starting to improve for the unemployed.

Some indicators are showing positive signs in the job market for the first time since the credit crisis caused job losses to soar last fall. But for the growing number of unemployed workers in the U.S., macroeconomic statistics aren’t worth much.

After peaking in January, the pace of job losses has slowed dramatically , according to the Labor Department. Employers cut 345,000 jobs from their payrolls in May — 32% fewer than the previous month. And the number of Americans filing for continuing claims for unemployment insurance fell last week for the first time since early January.

But for those unemployed workers pounding the pavement, jobs are still hard to come by.

That’s because even though job cuts have slowed, employers have not started hiring just yet. According to the Job Openings and Labor Turnover Survey from the Bureau of Labor Statistics, the number of new hires remains near an all-time low.

“In general, companies have been in a wait-and-see posture,” explained Dr. Jane Goldner, a human resources expert and author of “Driven To Success: A 10-Point Checkup for Achieving High Performance in Business.” “There’s some level of confidence coming back,” but in terms of hiring, “I don’t think we’re there yet,” she said.

Many unemployed workers agree.

Ann Fry made a good living as professional speaker and executive coach in New York until last fall. Now the companies that hired her in the past have cut back and individual clients signed off.

“I completely rely on whether conferences are happening and whether they are hiring speakers,” she explained. “What I notice is that companies are reluctant to pay for ‘extras’ like corporate training and coaching,” she said. “Also, the professional associations I speak for nationally are cutting their budgets way back.”

With fewer clients and fewer gigs this year, Fry, 63, has had to tap into her savings in recent months to make ends meet. As a self-employed professional, there is no safety net such as unemployment insurance to fall back on, but she’s hopeful that business will pick up again.

“I think we’re already seeing some signs of improvement,” Fry says of the economic environment. “Do I see it turning around yet?” she asked of her own employment status, “no, not yet.”

“For the job seeker it’s probably not necessarily obvious right now that things are improving,” said Jennifer Schramm, the manager of workplace trends and forecasting for The Society for Human Resource Management.

Although anecdotal evidence suggest that hiring expectations will improve in the second half of the year, “we have to wait a few months to see if this is a trend,” she said.

Once companies stop decreasing headcount, it could still take time before hiring plans take hold, and even longer for there to be a noticeable change in workers’ attitudes.

Chuck Jentlie has been through this before. His career as a recruiter for the tech industry was rocked by the dot-com bust earlier in the decade. Since then the 52-year-old went back to college at Arizona State University to get a degree in architecture.

But once a growing industry, architectural services has steadily lost jobs since the beginning of the year. Now a large percentage of architects are out of work, including recent graduate Jentlie.

“None of us can find a job,” he said of his classmates.

Although the industry as a whole could bounce back quickly once the economy improves, “a lot of the reports seem like wishful thinking,” Jentlie said.

“I’m definitely not seeing [employers] saying ‘yeah we’re looking for workers,’” he said. “Realistically I think we’re probably looking at another year.” 

Sonia Sotomayor has varied record in business cases

Posted On: May. 31, 2009 6:00 AM CST

Judy Greenwald / BUSINESS INSURANCE

Business-related cases in which U.S. Supreme Court nominee Sonia Sotomayor has been involved as both a federal district court and appeals court judge include: 

In her 1995 opinion as a district court judge in National Labor Relations Board vs. Major League Baseball Player Relations Committee Inc. and the Constituent Member Clubs of Major League Baseball , Judge Sotomayor issued a temporary injunction that restored terms and conditions of employment provided under an expired collective bargaining agreement, which effectively ended the 232-day baseball strike.  

In her 2002 decision in George and Judy King vs. American Airlines Inc. , Judge Sotomayor wrote an opinion stating that the Warsaw Convention pre-empted a lawsuit filed by a black couple contending they had been bumped from an overbooked flight because of their race.  

In Shadi Dabit vs. Merrill Lynch, Judge Sotomayor ruled in 2005 that federal law did not pre-empt a private securities fraud class action in state court. The U.S. Supreme Court subsequently decided unanimously to overturn the decision.  

In her 2007 Riverkeeper Inc. vs. U.S. Environmental Protection Agency decision, which a divided U.S. Supreme Court subsequently overruled, Judge Sotomayor wrote for the majority in saying the Clean Water Act prohibits the EPA from conducting a cost-benefit analysis in establishing the best technology available to preserve aquatic organisms. 

In 2008′s Rajkumar Singh vs. the City of New York , she ruled that even though fire alarm inspectors are required to carry inspection documents during commutes, they are not entitled to be compensated under the Fair Labor Standards Act for their commuting time.

In Frank Ricci vs. John DeStefano , Judge Sotomayor joined a three-judge panel last year in upholding the decision by New Haven, Conn., to reject fire department promotion tests that failed to pass minority candidates. A U.S. Supreme Court decision in the case is pending.

Are Your Property Transfers and Acquisitions at Risk?

Over the past several years, exclusions for mold, microbial matter and lead-based paint have consistently appeared on general liability policies to create substantial coverage gaps.

As a result, uncovered claims can be significant. Take, for instance, the discovery of mold in an apartment community in the State of Delaware. A leaking kitchen sink was the verified cause of discoloration and foul odor in a bedroom ceiling as well as the dark-rimmed holes in the bedroom ceiling.

Despite repeated complaints, building management was slow to respond resulting in health-related issues for the two women living in the apartment. During the law suit, the women demonstrated that the owners rarely performed repairs beyond cosmetic patchwork. After two weeks of testimony, the jury awarded $1.04 million to the complainants for personal injuries.

Another example of catastrophic loss occurred at a condominium complex in the Northeast. It included the sickening of two people as well as the death of a 50-year-old woman who contracted Legionnaire’s Disease. The resulting effects included evacuating the entire complex, disinfecting the water system and a significant law suit.

As the above-mentioned situations show, habitational property owners have significant environmental worries.

Other environmental risks commonly associated with habitational real estate may include, but are not limited to:

• Contaminants from known and unknown historical usage/operations or neighboring properties
• Construction debris containing hazardous materials
• Sick Building Syndrome i.e. carbon monoxide, mold, or bacterial air releases from faulty heating, ventilation or air conditioning systems
• Hazardous chemical storage (such as maintenance degreasers, pool chemicals, pesticides and herbicides used both indoors and outdoors)
• Lead, asbestos, polychlorinated byphenols (PCBs)
• “Midnight dumping” on vacant land parcels
• Leaking underground or aboveground storage tanks or piping.

Managing the risks

Despite the obvious challenges, environmental liabilities needn’t be an obstacle to property transfers and acquisitions if they are proactively identified, managed and mitigated.
In recent years, habitational real estate developers and owners alike have mitigated their environmental exposures through contractual means, the use of environmental insurance or the combination of both. This trend is also likely to continue due to the ever-increasing need of financial institutions to protect their loans in today’s economic climate and the desire of sellers, who would prefer to be free from potential claims related to unknown legacy issues.

At the top of the ($2.5B annual premium) environmental insurance market are the five leading environmental liability insurers of AIG, XL Capital, Zurich, ACE USA, and Chubb, which account for approximately 90 percent of the total premiums written. However, the remaining 10 percent of the environmental liability insurance market is growing with a number of very solid insurers providing at least some form of environmental liability insurance. These markets include Liberty, Markel Underwriting Managers, American Safety, Freberg Environmental/Endurance and Great American.

Available coverages

Each environmental liability insurer offers its own manuscripted coverage forms. To complicate matters even more, each insurer also offers a portfolio of environmental liability coverage forms, with the largest offering up to 15 different coverages totaling over 100 forms in the marketplace.

Among these is Premises Environmental Liability/Pollution Legal Liability (PLL), which provides coverage for pollution conditions or events on, at, under or migrating from a covered location(s). Coverage is afforded for third-party bodily injury, property damage, clean up costs and legal defense expense. A unique feature of many PLL policies is their ability to offer various and different coverage parts under one policy form. This includes, but is not limited to:

• New pollution conditions
• Existing pollution conditions
• On site clean-up coverage
• Transportation coverage
• Non Owned Disposal Site (NODS) coverage
• Business interruption including Loss of Rental Income
• Mold liability coverage and clean-up
• Legionella coverage
• Fines and Penalties and Punitive Damages where allowable by law
• Natural Resource Damages.

PLL is an effective risk management tool for commercial real estate since it helps to fill the “environmental gap” left in most general liability policies. It also helps reduce the uncertainty about environmental liability associated with the property and provides simple asset protection from potentially catastrophic environmental events associated with day-to-day operations.

In today’s environmental insurance market, available programs can even be tailored to address the diverse needs of each property and then structured to meet a variety of requirements that include regulatory obligations, contract requirements, lender requirements, landlord obligations, and business objectives. Another important aspect of coverage offered under PLL is that it can be structured to provide coverage for contamination, even if it is known certain environmental conditions already exist on site.

Fortunately, the environmental insurance marketplace is continually adapting to keep pace with the growing risk management demands of real estate owners and lenders—demands that are not likely to subside in the near future due to the costly nature of environmental liabilities.

Insuring your home-based business success

Tamsyn Burgmann
SPECIAL TO THE STAR

It wasn’t until a valued customer called, freaked out by a rogue bumble bee she found resting dead in her loose leaf tea, that the risks of running a home-based business dawned on Hatem Jahshan.By then, Jahshan and his wife Tonia had been operating their tea party consultancy, Steeped Tea, out of the converted basement and two-car garage of their Hamilton home for a full year.

Though he also runs a fast-food restaurant, Jahshan knew zilch about protecting his home-based business.

“In fact, it felt like you didn’t even have to worry about insurance when you start your home business. As a business person, I like to hang out with business people, and nobody’s got insurance. It’s a very, very quiet issue that nobody talks about,” he said. “Usually, you start thinking about insurance when bad things happen.”

Facing added premiums can be daunting for the small business owner, but insurance shouldn’t be a dirty word, say the experts. No matter whether you’re running a full-scale taxidermy outfit or typing data into a single laptop, protection is integral to a savvy business plan.

“The worst case scenario is that you could be financially ruined if you don’t have insurance,” said Peter Warner of the Insurance Bureau of Canada.

“A policy will cover anything pertaining to running your business.”

As soon as doing business from home enters your mind, set up a meeting with your insurance broker, agent, or the company that insures your home, he said.

They’ll listen to the particulars, asses whether you’re underinsured and offer options to ease the nerves.

In many cases, the company providing your home or “property” insurance can add an extension to your homeowner’s policy, protecting you against common business risks.

Standard property insurance rarely protects anything business-related. Should fire rip through your home, compensation won’t be offered to replace computers, printers, fax machines, samples and paper records. And it won’t protect you from a lawsuit.

Generally, “home-based business” or “home business” insurance provides three areas of coverage: business property; business interruption; and legal liability.

The first protects property kept on or off the home premises, including inventory, samples, supplies, tools, filing cabinets, computer equipment and software.

If disaster strikes the home, rendering office space unfit for use, business interruption coverage pays the cost of your temporary office relocation, thus insuring your products and services are delivered to customers.

Legal liability coverage – usually set at $1- or $2-million – becomes a lifesaver if your company’s products or services cause harm to a customer. If Steeped Tea’s frazzled caller had alleged trauma or an allergic reaction to the pesky bee (which likely slipped into the mix when the tea was being dried in India’s fields before export) this coverage would have paid for legal defence or compensation ordered by the courts.

A classic example of legal liability involves a delivery person who slips on a piece of ice while carrying a package up your front steps; falls and breaks a leg; then sues.

“The liability portion of your home insurance doesn’t protect you, because the activity was directly related to your business,” Warner said.

Insurance providers calculate premiums based on exposure to risks – the possibility of loss – receipts and how much income you’re making from the business. The lower both are, the lower the premium. Knitting sweaters and selling them online is likely to be considered less risky than running a massage clinic that brings clients into the home.

Premiums are likely to run several hundred dollars a year – usually not more than $500, according to the Insurance Brokers Association of Ontario. But if your business liability is higher than that for your property policy, it will probably be boosted to the same level, potentially costing you more.

Most insurers keep lists spelling out what is or isn’t likely to fall under their home business insurance. The tricky part of the equation arises with vastly increased exposure. The line blurs between where home business insurance ends and commercial insurance begins.

To assess whether obtaining a heftier policy might be wise, look at how often clients, or consumers, visit your home and also, whether you run the risk of “professional” exposure. The latter occurs when a business person provides advice or expertise to a client who later might theoretically allege it caused them financial or other harm – for instance, an accountant.

There are no hard and fast rules when it comes to navigating home-based insurance coverage. When in doubt, call a broker – who represents multiple insurers rather than a single provider – suggests Bryan Yetman, IBAO president-elect.

“You can have a candid, honest conversation with your broker. They’ll give you a true evaluation and then you decide,” he said.

“Shop around,” agreed Catherine Swift, chair of advocacy organization Canadian Federation of Independent Business, adding the biggest complaint mounted by members is around insurance costs and short notice of cost increases.

Every business presents risks, but someone who buries his head in the sand could be making the riskiest move of all, the experts agreed.

“(Insurance) brings me peace of mind now,” Jahshan said. “Once you have insurance you can remove fear out of the way and you can actually focus on bettering your business.”

FARMERS INSURANCE FINANCIALLY STABLE DURING RECESSION

(Dallas Business Journal) While most of the United States is in the midst of an economic recession, the Farmers Insurance Group of Companies^® continues to grow its business and attract new customers just as it has since its founding in 1928. Farmers Insurance is playing up these facts in a new advertising campaign, which touts the company’s financial solvency, stability and strength.

The advertising campaign includes 60-second radio commercials now running on stations nationwide. The message is also in several online venues, including Yahoo.com, CNN.com, MSNBC.com and WSJ.com. Farmers Insurance is currently one of the fastest growing, multi-lines insurance companies in the United States.

“Our new ads speak to Farmers’ history of solvency during the Great Depression; the wisdom of our conservative investment strategy; and our recent upgrade in financial-strength ratings,” said Kevin Kelso, Executive Vice President and Chief Marketing Officer for Farmers Insurance. “We want our customers and prospective customers to know that when it comes to Farmers Insurance, we are a silver lining in today’s dark, gloomy economic storm clouds.”

In the Farmers Insurance radio ads, reference is made to the Great Depression when Farmers Insurance was just starting out in the business of selling insurance. “During the Great Depression, while some insurance companies were paying claims with IOUs, Farmers was paying its customers’ claims with cash,” said Kelso. “The Farmers Insurance proud tradition of financial stability and industry leadership continues today.”

The new campaign is the first developed by Farmers new advertising agency, The Richards Group of Dallas , Texas . To learn more about the products Farmers Insurance Group has to offer, visit any Farmers Insurance agent or the Farmers Web site at www.farmers.com.

DIFFERENT TYPES OF COMMERCIAL INSURANCE

The most common types of commercial insurance are property, liability and workers’ compensation. In general, property insurance covers damages to your business property; liability insurance covers damages to third parties; and workers’ compensation insurance covers on-the-job injuries to your employees. Depending on your business, you may want additional specialized coverages. Listed below are some of the different types of business insurance.

PROPERTY INSURANCE Property insurance pays for losses and damages to real or personal property. For example, a property insurance policy would cover fire damage to your office space. You can purchase additional coverages for business property, including:

Boiler and Machinery Insurance Boiler and machinery insurance, sometimes referred to as “equipment breakdown” or “mechanical breakdown coverage,” provides coverage for the accidental breakdown of boilers, machinery, and equipment. This type of coverage usually will reimburse you for property damage and business interruption losses. For example, this coverage would cover fire damage to computers.

Debris Removal Insurance Debris removal insurance covers the cost of removing debris after a fire, flood, windstorm, etc. For example, a fire burns your building to the ground. Before you can start rebuilding, the remains of the old building have to be removed. Your property insurance will cover the costs of rebuilding, but not of removing the debris.

Builder’s Risk Insurance Builder’s risk insurance covers buildings while they are being constructed. For example, a Builder’s risk policy would cover losses if a windstorm takes down your partially constructed condominium complex.

Glass Insurance Glass insurance covers broken store windows and plate glass windows.

Inland Marine Insurance Inland marine insurance covers property in transit and other people’s property on your premises. For example, this insurance would cover fire-damage to customers’ clothing from a fire at your dry cleaning business.

Business Interruption Insurance Business interruption insurance covers lost income and expenses resulting from property damage or loss. For example, if a fire forces you to close your doors for two months, this insurance would reimburse you for salaries, taxes, rents, and net profits that would have been earned during the two-month period.

Ordinance or Law Insurance Ordinance or law insurance covers the costs associated with having to demolish and rebuild to code when your building has been partially destroyed (usually 50 percent). For example, your three-story building is 100 years old. A flood destroys the basement and first two stories. Because more than 50 percent of your building has to be rebuilt, a local ordinance requires that the building be completely demolished and rebuilt according to current building codes. Property insurance covers only the replacement value, not the upgrade.

Tenant’s Insurance Commercial leases often require tenants to carry a certain amount of insurance. A renter’s commercial policy covers damages to improvements you make to your rental space and damages to the building caused by the negligence of your employees.

Crime Insurance Crime insurance covers theft, burglary, and robbery of money, securities, stock, and fixtures from employees and outsiders.

Fidelity Bonds A bond company covers losses due to a bonded employee’s theft of business property and money.

LIABILITY INSURANCE Liability insurance covers injuries that you cause to third parties. If someone sues you for personal injuries or property damage, the cost of defending and resolving the suit would be covered by your liability insurance policy. A general liability policy will cover you for common risks, including customer injuries on your premises. More specialized varieties of liability insurance include:

Errors and Omissions Insurance Errors and omissions (“E & O”) insurance covers inadvertent mistakes or failures that cause injury to a third party. The act must actually be an inadvertent error, and not merely poor judgment or intentional acts. For example, an E & O policy would cover damages arising from an insurance agent failing to file policy applications, or a notary forgetting to fill out notarizations properly.

Malpractice Insurance Malpractice insurance, or professional liability insurance, pays for losses resulting from injuries to third parties when a professional’s conduct falls below the profession’s standard of care. For example, if a doctor makes a mistake that other doctors of his specialty would not have made, his patient might sue him. A malpractice policy will pay his defense costs and any judgment or settlement. Malpractice insurance is available for doctors, dentists, accountants, real estate agents, architects, and other professionals.

Automobile Insurance Commercial automobile policies cover the cars, vans, trucks and trailers used in your business. The coverage will reimburse you if your vehicles are damaged or stolen or if the driver injures a person or property.

Directors’ and Officers’ Liability Insurance This type of insurance is generally purchased by corporations and nonprofit organizations to cover the costs of lawsuits against directors and officers.

WORKERS’ COMPENSATION INSURANCE Workers’ compensation insurance covers you for an employee’s on-the-job injuries. Businesses with employees are required by various state laws to carry some type of workers’ compensation insurance. In most cases, workers’ compensation laws prohibit the employee from bringing a negligence lawsuit against an employer for work-related injuries.  

Source: Findlaw.com

Insurance Industry Advises Small Businesses Not to Skimp on Coverage

By Joyce Rosenberg / Insurance Journal.           

Insurance coverage is an expense that many small business owners might be tempted to cut back on or even forgo as they try to cut costs during the recession. They’re making a bet that they won’t need the coverage, but it’s a bet they could lose.

Spring floods aren’t too far off in the future, to be followed inevitably by tornadoes and the hurricane season. And there are the more mundane disasters that can also threaten a business — fire, theft, power outages, even someone being injured on the premises.

Loretta Worters, vice president for communications of the Insurance Information Institute, a New York-based trade group, said insurance may seem like a lower financial priority for some small business owners right now.

“They’re facing all these challenges today: rents are rising, financing hard to get,” she said. “Things are daunting to them, but one thing they have to think of is the whole issue of being underinsured.”

An underinsured business doesn’t have adequate coverage for disasters or incidents like fires, thefts or accidents. But even companies that aren’t cutting back their coverage might be unwittingly uninsured. Worters noted that a business might have made improvements to its building or bought new equipment, and if an insurance policy isn’t adjusted upward, payments could fall well short of the replacement costs.

At the same time, she noted, real estate values have fallen and so it might make sense for some companies to reduce coverage.

Still, an owner uneasy in this economy might decide to play the odds and either cancel a policy or cut it back too far. Or, make a mistake out of ignorance, by buying insurance to cover damage from forces such as wind, rain, hail and fire, and not checking to see what isn’t covered. For example, damage from flooding or earthquakes isn’t covered in such policies. That coverage has to be purchased separately.

Some owners might also decide against business interruption insurance, which is available in what’s known as a business owner’s policy, or BOP , which also includes property coverage. Business interruption insurance makes the coverage more expensive, but it can mean a company’s survival when it can’t operate because of a disaster; this type of policy covers a company’s expenses and lost profits.

Many workers who have been downsized over the last year have decided to start businesses out of their homes, and many are likely to be underinsured because they mistakenly assume their homeowners coverage will protect them. The same can apply in the case of a vehicle used for both business and personal purposes.

Worters said some homeowners or standard auto policies may include a small amount of business coverage. For example, she said, someone who does freelance writing at home might not need an additional policy. But, the important thing is to check — nobody wants to find out there is no coverage when a client coming to visit, trips over the family dog and falls.

And, Worters said, the additional coverage may come in the relatively inexpensive form of an endorsement to your homeowners’ policy.

Owners of businesses in certain industries should also be aware of policies tailored to their line of work — for example, restaurant owners might want to take out policies to cover food spoilage.

The Insurance Information Institute has information on its site, http://www.iii.org/individuals/business. It explains different kinds of general business coverage such as businessowners’ policies and business interruption insurance. It also has sections describing the insurance needed by specific industries such as retailing, manufacturing, farming, food service and lodging.

The National Association of Insurance Commissioners, which represents state insurance officials, also has a Web site, called Insure U for Small Business at http://www.insureuonline.org/smallbusiness.

Information about flood insurance can be found at the federal Web site www.floodsmart.gov .