Insurance helps reduce uncertaintiesand fulfill legal responsibilitiesof a business. Therefore, insurance coverage should be carefully considered to ensure that a business can continue in operation should a loss occur. The importance of different types of insurance coverage variesaccording to the nature of the particular business. The Florida Department of Insurance prepares a Small-Business Owner’s Insurance Consumers Guide that is helpful in understanding insurance options. Access your copy via the Internet at myfloridacfo.com/consumers or call the Insurance Consumers Helpline at (800) 342-2762.
Following are explanations of some property, casualty and employee benefit coverages. This listing is in no way representative of all coverages available. Each business owner should contact an insurance agent or agenciesto evaluate which coverages meet his or her particular needs.
Commercial Property Insurance covers losses to real and personal property caused by an insured peril. Examples of perils are fire, lightning, windstorm, hail, smoke, explosion, vandalism and malicious mischief, and theft. Special form coverage offers the broadest available coverage. In some areas, Wind policies must be purchased separately and often have a percentage (of value) deductible.
- Glass and Sign Insurance can be purchased to cover loss to glass and sign exposures.
- Bailee’s Insurance affords coverage when a bailee has a legal obligation for the safekeeping of goods left in his or her care, custody or control, as in the case of a dry cleaner, repair shop or warehouse.
- Business Income and Extra Expense Insurance covers loss of income the business may experience and extra expenses the business may incur in the event of a covered loss. This insurance pays expenses such as continued rent payment when the leased property is unusable, moving expenses, expediting expenses to replace damaged property, etc.
- Flood Insurance affords coverage in the event of a flood and almost always must be purchased as a separate policy.
General Liability Insurance, other than automobile, is for protecting the firm from financial loss due to claims of bodily injury (to third parties only—not injuries to employees—See Workers’ Compensation) or property damage in connection with business operations for which the insured is found legally liable. If your exposures increase significantly throughout the policy term, you may end up owing additional premiums.
Automobile Insurance encompasses both liability coverage (Bodily Injury and/or Property Damage to Third Parties by use of a vehicle) and/or physical damage coverage (damage to vehicles owned by the company). The State ofFlorida also has mandatory coverages such as Personal Injury Protection. Business owners are encouraged to purchase Employers Non-Ownership coverage, which is liability coverage that protects an employer in cases where an employee uses his or her own vehicle for business purposes. Under certain circumstances, the business can be held legally liable even though it does not own the vehicle.
Workers’ Compensation Insurance pays an employee for time lost because of injuries incurred on the job. For non-construction companies, this insurance must be carried by all employers with four or more employees. Corporate officers may request exemption from coverage. Sole proprietors and partners meeting the criteria outlined by the State ofFlorida can also request exemption from coverage. For construction companies, workers’ comp insurance coverage is required for all businesses with one or more employees. Only officers of a corporation or LLC who own at least 10 percent of the stock of the corporation will be eligible to request exemption from coverage. Sole proprietors and partners are no longer eligible to request exemption.
Workers’ Compensation Insurance covers medical expenses, lost wages, rehabilitation and/or death benefits to employees injured on the job. Rates for workers’ compensation insurance vary based on employer classifications. Rates are per $100 of payroll, and if payrolls increase significantly throughout the policy term, premiums will also go up.
New employers can receive assistance and an information packet from the Workers’ Compensation Customer Service Center at (850) 413-1601 or email@example.com. Claim-related questions may be directed to the workers’ comp toll-free hot line by dialing (800) 342-1741. The Workers’ Compensation Bureau can be accessed via the Internet at Myfloridacfo/wc/.
Bonding guarantees that the bonded business will perform a specific action. Performance bonds are required in many different types of construction and service contracts. Bonding is NOT insurance, however, and if the bonding company has to pay out on behalf of the company being bonded, the company being bonded usually has to reimburse the bonding company.
Commercial Crime Insurance covers losses caused by: 1) employee dishonesty; 2) forgery or alteration; 3) theft, disappearance and destruction; 4) robbery and safe burglary; 5) premises burglary; 6) computer fraud; 7) extortion; 8 ) premises theft and robbery outside, and; 9 ) robbery and safe burglary of money and securities.
Business Life Insurance takes many forms. Mainly, this coverage protects a business or family from the financial loss resulting from the death of a person associated with the business. Business life insurance, although very similar to personal life insurance, solves much more complex problems dealing with legal, financial, tax and technical areas of the business. This insurance is custom-tailored to the business’ needs. Types of business life insurance include:
- Key-employee protection to reimburse the firm for loss or provide replacement in the event of the death of a key employee.
- Partnership insurance to retire a partner’s interest at death, providing fair market value to deceased partner’s heirs while, at the same time, providing full ownership to the surviving partners.
- Corporation insurance to retire a shareholder’s interest at death.
- Proprietorship insurance to provide for maintenance of a business upon the death of a sole proprietor.
- Decreasing term insurance to aide a firm’s credit status, covering the owner or key employee during the period of a loan or the duration of a mortgage on property held.
- Insurance on the business owner’s life, payable to his or her family upon death, to provide family members with ready cash and to aid in liquidating the deceased’s interest in the business.
Retirement Income for the self-employed and their employees is eligible for an income tax deduction when funds are used for insurance plans and annuities approved under the Employers Retirement Income Security Act of 1974 (ERISA). Several new plans have been developed over the past few years for the very small business.
Employee Health and Life Insurance provides workers and their dependents with financial benefits in case of illness or death. Under the Small Employer Health Care Access Act, no group is too small to qualify for group benefit policies, and carriers are required to offer coverage on a guaranteed basis, regardless of pre-existing conditions.
(For more information on available coverage, see the Small-Business Owner’s Insurance Consumers Guide.)
Disability Insurance is available to replace the lost income of disabled workers. This insurance replaces the income of workers who suffer short-term or long-term disability not related to their work. Disability Buy-Out Insurance may be used in a partnership or corporation to buy out a disabled owner’s interest in the business. Business Overhead Expenses Insurance can be purchased to cover business overhead and personnel replacement costs for the period of an owner’s temporary disability.
Purchasing adequate insurance coverage for a business is an important decision which should be carefully considered by the owner/insurance buyer. Even though insurance coverage may be discussed with more than one insurance agency, if possible, all business insurance policies should be purchased through one agent. This helps strengthen the business owner’s bargaining position, reduces the chance of a gap in coverage, and should result in more personalized service to the business.