Does Business Equipment Insurance Cover Burst Pipes?

 

A good commercial property insurance policy can be comprised of many different types of insurance protection, many of which most businesses need.  Damage caused by leaking or burst water pipes is included in the coverage provided by many commercial property insurance policies, but check your policy to make sure.  Each business policy written is unique and available protections must be spelled out in the policy contract.

Business Owner Policy

A Business Owner Policy, or BOP, is a combination of insurance coverages providing protection for many of the liability and property risks a business owner faces, bundled together in one package.  While a BOP provides a bundle of basic insurance coverages most business owners need, it's sold at a discount from what the individual protections would normally cost. 

Typically, a BOP provides protection against losses stemming from:

• Property damage
• Liability
• Business Interruption

Businesses can also usually opt to add on additional coverages not provided by a basic policy.

Water Damage

While water damage from something like a burst pipe is likely covered by your commercial business property insurance policy, not all water damage to which your business may be subject is necessarily covered.  Flood damage, for example, is something that could possibly require coverage by a separate flood policy or special endorsement to your base policy.  It's also important to realize that if your water pipe bursts because your property was left unheated during a winter freeze your claim could be denied due to neglect.  Water damage caused by an overflowing sump pump will probably not be covered by the property damage portion of you policy.  Check the specifics of your policy.

Other Applicable Coverage

Several types of coverage may apply to damage caused by water from a burst water pipe.  If you have a great deal of expensive equipment used in your business and it gets damaged and requires repair or replacement, the costs may exceed the benefit limits on your property damage coverage.  Additional equipment coverage may be needed to ensure your full protection in the event that property or equipment damage is greater than your base policy can handle.

If water damage sustained requires you to shut down business operations or move them to a temporary location, business insurance can help cover loss of income because of business interruption.  If you're found liable by your landlord for damage done to his or her property a BOP can help there, too.

4 Tips for Preventing Small Business Insurance Claims

 

Small business owners are responsible for many things geared toward making their business a success and, as a small business owner, you're responsible not only for increased sales and cost reductions but also for managing risk.  A big part of managing risk is to be covered by a comprehensive small business insurance policy that protects you from suffering a variety of losses, one of which may be liability lawsuits.

Your Greensboro small business insurance policy is absolutely something you want to have but also something you never want to have to use.  Without proper protection, however, a serious claim against your business could essentially close down your complete operation.  But smaller claims such as those for a slip and small injury, which is one of the most common, or theft of merchandise or equipment, are not only troublesome but can cost you money in the form of higher premiums.

Tips for Preventing Small Business Insurance Claims

Here are some things you can use to help prevent small business insurance claims:

1. Burglary and theft are the most frequent causes of property loss claims submitted by small businesses, accounting for about 20% of all claims filed.  The best way to mitigate these losses is to introduce some simple security measures such as sturdy locks for all doors and windows and also for any sensitive areas.  High-quality electronic surveillance equipment can be used to guard your business both during and after business hours.  If your employees make bank deposits, it's a good idea to incorporate the buddy system.  Employee dishonesty can be countered by providing a good working environment and fostering high employee morale.
2. Slip-and-Fall Injuries are some of the most common injuries for which claims are made against small businesses.  The more foot traffic your business has, the more vulnerable you are to facing this liability claim.  Good housekeeping is a primary factor in avoiding these injuries.  Inspect for and repair any loose steps or handrails.  Slippery floors should be well marked and any clutter should be avoided.
3. Other injuries caused by unstable product displays or heavy goods falling from high shelves may be alleviated by regular inspections to prevent these problems.
4. Businesses that use vehicles as part of doing business can be held liable if one of these vehicles becomes the cause of an injury or property damage.  Only qualified persons should operate these vehicles and regular driver training should be provided.  

Can Business Insurance Be Written Off?

 

We sometimes hear questions from businesses here in the Greensboro area regarding business insurance and whether or not it can be written off your taxes.  According to the IRS, expenses are fully deductible, including insurance premiums, if they fit the following criteria:

1. The business must be operated "for profit"
2. The insurance costs being deducted must be for insurance that is "both ordinary and necessary"

An ordinary business expense is one that's commonly accepted in your industry.  A necessary business expense is one that's viewed as being appropriate and helpful for your business.

Business Insurance Premiums

According to the IRS, as a business owner, you can deduct the the necessary and ordinary cost of insurance premiums if the insurance is for your business.  There are a number of common business insurance policies that qualify, including:

• General Liability Insurance
• Professional Liability Insurance
• Commercial Property Insurance
• Data Breach Insurance
• Workman's Compensation Insurance and more

These are all policies designed to help protect your business and, if they are considered necessary and ordinary in your particular industry, then the full costs are likely deductible.

Seek a Tax Professional

There are a number of business insurance costs that may be tax deductible and certain policies don't qualify as being deductible.  The best advice is to seek the counsel of a tax professional to determine the difference.  This will help take the guesswork out of which insurance you carry and which are considered actual business expenses.  

If the insurance coverage you want to write off isn't considered necessary and ordinary by the IRS, then they won't consider it a business expense and it can't be written off.  The following types of insurance generally cannot be written off:

• Policies that are designed to help cover lost earnings due to disability or illness
• Life insurance policies
• Self-insured reserves
• Policies taken out to help secure a loan

Business vs. Personal Expenses

While there is no allowance for deducting personal or living expenses, some things used for business and personal use may be partially deductible on your taxes.  An example of this would be your car insurance if you use your car for both personal and business use.  Keeping track of your mileage, you can calculate the percentage you've used your car for business during the year, then at tax time deduct that percentage of your insurance premium cost.  Business use of your home may also provide a partial deduction.

7 Common Business Insurance Claims

Whatever type of business you're in, one undisputed necessity in running a successful business in Greensboro is the protection provided by quality Greensboro business insurance. When business owners purchase a business insurance policy it's likely not in anticipation of suffering a loss that may occur in the daily running of a business, but more for some catastrophic event such as a fire that will totally devastate their business.

While it's true these types of disasters should be properly protected against with quality insurance coverage, there are numerous smaller risks that businesses face in their day to day activities. It may surprise you to learn what types of losses are most prevalent to most businesses on a regular basis, especially smaller businesses.

The Most Common Business Insurance Claims

A nationally recognized property insurer conducted a study in 2015 consisting of a compilation of claims information submitted by more than one million small business policyholders over a five-year period of time. According to this study, it was estimated that approximately 40% of all small businesses will experience some type of loss, either liability or property, within a 10-year period.

Following are the most common types of claims submitted by small businesses:

1. Burglary/Theft – making up a full 20% of annual business insurance claims, burglaries and thefts may be perpetrated by dishonest employees or by outsiders. These claims include not only the cost of lost products and merchandise, but also the cost of damages suffered by break-ins.
2. Water and Freezing Water Damage – accounting for about 15% of annual business insurance claims, these claims may involve roof damage, broken water pipes or a leaking appliance such as the water heater.
3. Wind/Hail Damage – accounting for another 15% of claims, wind and hail damage can affect your structure, out buildings, automobiles and outside equipment.
4. Fire – causing about 10% of business claims, fire damage can be considerably destructive and expensive to remedy.
5. Slip and Fall Injuries – making up about 10% of business insurance claims, add to this another 5% for injuries caused by something other than a slip and fall such as a heavy object falling off a shelf and hitting someone's head.
6. Reputational Harm – your Greensboro business insurance policy covers you against slander and libel claimed by a third party as damaging to their reputation.
7. Product Liability – representing less than 5% of claims, these claims can be extremely expensive.

Own a Small Business? Insurance is Vital

From the day a small business owner begins operations, he or she becomes exposed to certain risks that must be faced. Even before the first customer is served or the first transaction is conducted, it's vital that the proper small business insurance be put in place for the protection of the you, the owner, plus your employees and the business itself.

A single lawsuit or other catastrophic event could take out your small business before it's even had the chance to get off the ground, and if you're held liable for any significant loss it could negatively affect the rest of your life. Fortunately, there's a wide variety of insurance coverage options that offer you protection against the effects of these risks. Buying small business insurance protection should, therefore, be at the top of your to-do list when embarking on your small business enterprise.

What Exactly Do You Need?

You need property insurance to protect you from losses to your building that are caused by things such as fire, storms or vandalism. If you rent your building, you still need coverage to protect the equipment, stocks and supplies kept in the building in the event that something happens to damage or destroy them.

You also need general liability coverage to protect your interests in case someone, including an employee, becomes injured while on your property. Employees must also be covered by workman's compensation insurance in North Carolina if a business employs three or more employees, full- or part-time. You may also want to consider providing disability coverage to your employees.

How Much Liability Coverage Should You Have?

Although every small business is different from the next, the rule of thumb for general liability insurance here in NC is between $500,000 and one million. If you're operating a higher risk operation, such as one of the building trades, it's recommended you increase these limits. The same goes for businesses with a high customer interaction rate such as restaurants or retail sales. Even if you're running a small business out of your home you should have business insurance, keeping in mind that renter's or homeowner's insurance typically provides limited coverage for business liability and business losses.

Additional Coverage Options

In addition to property and liability insurance for your small business, additional optional coverage includes:

• Product liability insurance
• Company vehicle insurance
• Business interruption insurance

Check with your agent for details and coverage advice.