Operating A Small Business

No matter how well you plan, operating a business comes with an element of risk and unpredictability.  Your commercial insurance policy should be able to provide some peace of mind, as long as you understand what you have purchased.  The following questions may help you in discussions with your insurance advisor.

1.         What kind of insurance do I need?

Depending on whether your business is run from your home or rented premises, you may or may not require building coverage in the event that an insured loss causes damage.  However virtually all businesses need stock or equipment coverage to help replace or repair damaged property.

Other considerations are: Extra Expense, Business Interruption and Liability insurance.

2.       Are there perils for which I can’t buy insurance? 

Wear and tear cannot be insured, acts of terrorism are unlikely insurable and pollution coverage may not be available depending on your business.

3.       Are there any circumstances under which water damage would be covered? 

Water damage is one of the major causes of loss.  Different options may be available.  Inventory destroyed by water gushing from a broken pipe or water entering from openings caused by an insured peril such as wind, may be covered.  Sewer backup insurance can be purchased to cover damage from water or raw sewage backing up through your drains.

4.       Do I have to take what’s offered? 

No.  speak with your advisor to ensure all possible avenues for coverage have been explored.

5.       Will my homeowner’s policy cover my home business? 

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6.       If my business is home based, do I need Liability coverage? 

Yes.  Liability is perhaps the greatest risk with a home business.  A courier may slip and be injured on your icy walkway while delivering a parcel addressed to your home business.  While your homeowner’s policy regarding personal liability will not cover such an event, commercial liability insurance would cover most damages awarded against you and would pay the legal cost defend you in a lawsuit.

7.       What does Errors & Omissions insurance cover?

If you are paid to give professional advice, you need E&O insurance.  If a professional gives inaccurate advice and the clients business suffers as a result your insurance will cover the damages and defence.

8.       What is business interruption insurance? What does it cover and do I need it?

 Business interruption insurance covers what your business would have earned during the period of shutdown following an insured loss plus continuing expense.  If your garage business shuts down because of an insured loss you would collect the income you would have expected from repairing cars during that period.  Expenses you no longer have to pay while your business is closed would be subtracted.

9.       What is a deductible and how does it affect my premium? 

The higher the deductible (the portion of a claim that you have to pay), the lower the premium (the cost of your insurance).  Compare premiums with different deductibles then decide whether the lower premium is worth the higher amount that you would have to pay out of pocket if you had a claim.

10.    What can I do to keep my insurance costs down? 

Choose the highest deductible that you can afford. Manage your risks for potential losses.  If you are a professional, keep your credentials and skills up to date.  Ask for inspections of your premises to help identify any exposures to damage or theft.  Protect your computer hardware, software and files by ensuring you have current virus protection software on your email system and a firewall to block hackers.  Have a back up plan in case of a power failure.  Keep back ups of records and files in a location outside of your business.  If appropriate, consider installing sprinklers, an alarm system and a control for handling cash