3 Factors That Influence Your Business Insurance Coverage Needs

While it's recommended that you consult your business insurance broker when looking into obtaining and maintaining the proper type of business insurance coverage, it's also a good idea to educate yourself somewhat on the topic. It's not only important to have the proper types of business insurance but to also maintain the correct amounts.

As your business changes, coverage amounts may also need to change, so it's a good idea to revisit your coverage every year or two. Having too little insurance could leave you in the lurch if you were to suffer a major loss without adequate coverage. Having too much coverage for your specific needs is a waste of premium dollars.

Factors that Influence Your Business Insurance Needs

With the numerous financial risks confronting every business, it's important when deciding on your exact business coverage package to consider the different variables. Here are some of the factors that should guide your decisions:

1. Risk levels – different types of businesses have different risk levels. If your company makes child car seats, potential liability claims are much higher than if you're running a travel agency. Your level of liability coverage should be greater. If you have a sole proprietorship and someone sues you, you stand to lose a lot more personally than if your company is incorporated because then only the business assets are at risk of being seized. As a sole proprietor you could be totally responsible for paying any judgments.
2. Legal requirements – certain states may require that you carry specific types of insurance and at certain minimum levels, depending on your business type. In addition, your landlord or mortgage lender may require minimum levels of property insurance. In North Carolina, businesses with three or more employees are required by law to carry Workman's Compensation insurance (or qualify to become self-insured). Any company vehicles will also be required to be covered by a commercial auto insurance policy.
3. Business valuation – the value of your business is also a major factor in determining your insurance needs, whether value is figured on the amount you've invested, the amount you could expect if you sold the business or what it would cost to replace everything in your business should it be totally destroyed by fire or hurricane.

Keep these factors in mind when purchasing or updating your coverage. Make sure to have your broker explain every detail and explore all contingencies.     

  

What Can Happen If I Let My Homeowners Insurance Lapse?

There's a long list of reasons your home should be covered by a quality homeowners insurance policy, besides the fact that it's absolutely required by your mortgage lender. Even if you own your home outright and have no mortgage, not having a good home owners insurance policy in force could be a huge mistake on your part. This is because all of the financial protection that comes with homeowners insurance isn't available to you without a policy, just as these protections disappear as soon as a covered individual allows his or her policy to lapse. Typical home owner coverage includes protection against:

• Financial loss from damage caused by things like fire, extreme weather, vandalism or from theft of your possessions.
• Liability claims if someone becomes injured while at your home. Financial liability can include payments for medical costs, rehabilitation costs, attorney's fees, court costs and more.

The Costs of Letting Your Homeowners Coverage Lapse

If you allow your homeowners insurance to lapse, either by non-payment of your premium or through cancellation of the policy by your insurer, you run the risk of being on the hook for any damage caused to your home or for any liability claims arising from someone being injured while on your property.

If you have a mortgage for the home you previously agreed to maintain a specific minimum amount of insurance coverage in order to protect your mortgage company's interests should something happen to the home. If you fail to meet this obligation by allowing your insurance to lapse, for whatever reason, you'll be in default of this agreement, which will prompt your mortgage lender to take immediate action in order to cover their financial exposure. They will typically purchase insurance on your behalf – something called force-placed insurance – and roll the cost into your monthly mortgage payment amount. This force-placed coverage will, in most instances, be more expensive than your original policy and the coverage will be likely less advantageous to you in its benefits.

Replacing Your Coverage

Another negative aspect of letting your home owner policy lapse is that finding replacement insurance may be difficult and, in almost all cases, the replacement coverage will carry higher premiums than the coverage you let lapse. This is because, to your insurance company, you've become a higher than standard risk and may appear financially unstable. Lapsed insurance is a bad deal all around. Avoid it at all costs.   

Individual & Business Insurance: A Comparison

The simplest way to explain the difference between individual and business insurance is this: individual insurance protects you and your family personally while business insurance protects the different aspects of your business that pose a risk to financial loss. There may be, however, a certain amount of crossover between the two. Personal life insurance, for example, is designed to pay benefits to your beneficiary, usually a family member, in the event of your death. Key man insurance is also life insurance but of a commercial type. It's designed to pay the business of which you're a key person, whether as owner or as a key employee, where you serve a crucial role and without whom the business could financially flounder in the event of your death.

Commercial Lines and Personal Lines

Personal Lines Insurance, another name for individual insurance, consists of property and casualty products designed to protect you and your family from suffering certain financial losses. It may include:

• Life insurance
• Auto insurance
• Homeowners insurance (or renters insurance)
• Medical insurance
• Disability insurance
• Umbrella insurance

Some individual insurance coverage may be required, such as the homeowners insurance you carry. Your mortgage company requires that you maintain a certain level of home owners insurance protection to protect their interest in your home, which has been used as collateral against the mortgage loan they provided you. A certain amount of auto liability insurance is also required by most state's laws, including here in North Carolina, in order for you to legally drive your car on public roads.

Commercial Lines

Business coverage is designed to protect businesses from certain financial risks that allow them to operate without fear of being wiped out financially in the event of a catastrophic loss (and even smaller, covered losses). A business insurance policy is typically written for a particular business enterprise in an effort to cater to that business' specific needs. It could be written for any entity ranging from a huge, multi-national corporation to a small home-based business desiring protection from potential liability suits. Typical business insurance products may include:

• General liability
• Product liability
• Professional liability (aka errors and omissions insurance)
• Commercial property  (all-risk or perils-specific)
• Business interruption
• Home-based business insurance
• Workman's Compensation
• Commercial auto

There are numerous options when it comes to the types of business insurance available. It's best to consult your trusted insurance agent to determine the exact insurance needs for your specific business.