There are over seven million small businesses in the U.S., ranging from construction firms to grocery stores to home-based businesses. All have one thing in common: Without the right insurance coverage, each could be wiped out by a disaster or a lawsuit.
In addition, almost all businesses are accountable for the safety of their workers and bear responsibility for injuries suffered on the job. The following information was designed to help you decide what kinds of insurance you need for your particular business. But remember, this is only a brief summary. Click the Quote tab above to review your specific insurance needs with a business insurance specialist with Marsh ConsumerConnexions.
Commercial Liability Insurance
Good liability risk management can reduce the chances that your business will be sued, but it can never eliminate the risk entirely. You or a member of your organization can make a mistake that injures someone or damages property. Your mistake could harm the reputation or interfere with the privacy of a customer, client, competitor or member of the general public. When such injuries occur, you may be legally liable to pay damages to someone who suffers a loss due to your actions or inaction.
Depending on the degree of harm and the number of people injured and/or value of property damaged, a lawsuit could bankrupt your business. Even if your organization is ultimately cleared of any wrongdoing, a determined plaintiff can keep you tied up in legal proceedings for a long time, at significant cost to defend yourself. Liability insurance pays the cost of your defense and protects your assets.
Employment Practices Liability Insurance
Employment Practices Liability Insurance (EPLI) protects against employment-related lawsuits. EPLI provides protection against many kinds of employee lawsuits, including claims of:
- Sexual harassment
- Discrimination
- Wrongful termination
- Breach of employment contract
- Negligent evaluation
- Failure to employ or promote
- Wrongful discipline
- Deprivation of career opportunity
- Wrongful infliction of emotional distress
- Mismanagement of employee benefit plans
Employment-related risks are generally not covered through a Business Owners Policy. You need to obtain this coverage through a separate policy.
Contact your Marsh insurance representative for a no-obligation analysis of your EPLI needs. If this assessment indicates that you are at risk for an employment practices claim, you can request your representative to work on your behalf to obtain a premium quotation.
More Information
EPLI policies reimburse your company for the legal costs of defending an employee suit plus judgments or settlements. They will not, however, pay for fines or punitive damages. They also do not cover workers’ compensation, bodily injury or property-damage cases, nor do they cover cases specifically covered by other insurance you have.
Role of Property Insurance
Insurers are in the unique position of having encyclopedic information about the many different ways your business property could be damaged or destroyed, from fire and flooding to embezzlement. Property is also vulnerable as a result of a variety of other events, such as electrical surges, accidental activation of a chemical sprinkler system or a computer virus.
Because insurers know so much about what can go wrong, they can provide your business with the insurance coverages your particular type of enterprise requires. Without appropriate insurance, property losses can easily cause the entire enterprise to fail.
The purpose of property insurance for the small business is to provide critical financial assistance in the event of a loss so that the enterprise can continue to operate with as little disruption as possible.
Property insurance alone is seldom enough, however. It should be but one part of an overall risk management and disaster recovery plan. On average, businesses that devote resources to risk reduction and risk control have fewer insurance claims. These firms generally have more insurers competing for their business, so that they are able to find coverage more easily and often at a lower price than enterprises which have more losses.
Workers' Compensation
Employers are legally obligated to take reasonable care to assure their workplaces are safe. Nevertheless, accidents happen. When they do, workers' compensation insurance provides coverage.
Workers' compensation insurance serves two purposes: It assures that injured workers get medical care and compensation for a portion of the income they lose while they are unable to return to work and it usually protects employers from lawsuits by workers injured while working.
Workers receive benefits regardless of who was at fault in the accident. If a worker is killed while working, workers comp (as it is often abbreviated) provides death benefits for the worker’s dependents.
Each State is Different
Workers' compensation systems are established by statutes in each state. State laws and court decisions control the program in that state and no two states have exactly the same laws and regulations.
States determine such features as the amount of benefits to which an employee is entitled, what impairments and injuries are covered, how impairments are to be evaluated and how medical care is to be delivered. In addition, states dictate whether workers' compensation insurance is provided by state-run agencies and by private insurance companies or by the state alone. States also establish how claims are to be handled, how disputes are resolved and they may devise strategies, such as limits on chiropractic care, to control loss costs.
To learn about the requirements where you live, visit your state’s workers' compensation Web site.
Commercial Auto Insurance
As a businessowner, you need some of the same insurance coverages for the cars, trucks, vans or other vehicles you use in your business as you do for vehicles used for personal travel.
Your businessowners policy (BOP) does not provide any coverage for vehicles, so you must have a separate policy.
Most states require you to purchase liability insurance for bodily injury and property damage that may result from a vehicle accident occurring while you or someone from your organization is driving on business. Many states also require you to have uninsured/underinsured motorists coverage and/or medical payments coverage (known as personal injury protection (PIP) in some states). At your option, you can purchase physical damage coverage for vehicles your business owns, leases or hires.
The business auto coverage form (BACF) is the most commonly used contract for providing business auto liability insurance. Although the form refers only to “autos,” autos are defined to include cars, trucks, trailers, van, or other vehicles designed for use on public roads.
Each vehicle you use in your business can be separately “scheduled,” or listed on your policy along with corresponding coverages. In other words, you can choose different coverage for your various vehicles, depending on the vehicle’s characteristics and the coverage you need for it.
Umbrella Liability Insurance
A big difference between property and liability risks is that you can put a value on the property you have at risk, but there is no way to predict the amount of damages you could be required to pay as the result of a catastrophic accident. If, for example, you were found liable in a school bus accident that harmed or killed many children, the damages could be in the millions of dollars.
Umbrella liability—also known as excess liability—insurance provides extra protection for catastrophic events. The primary policies are called “underlying” policies and are specifically listed, along with their limits, on the umbrella policy. Typically, the underlying policies are your primary general liability, auto liability and employer’s liability policies. The umbrella coverage starts to pay when a covered loss exhausts the primary policy’s per occurrence limit.
Most umbrella policies exclude employment practices liability, professional liability, product recall coverage, workers compensation, and coverage for asbestos-related claims, pollution, war and terrorism.