Does your business need Kidnap Ransom Insurance? (image via google)

When it comes to insuring your business, there is basic coverage and what is called specialty coverage.  Basic coverage is the standard type of insurance almost every business needs to have, property, liability, business auto, and worker’s comp.  Specialty coverage is less standard and is provided to cover specific types of risks some businesses face and therefore must mitigate.

There are a wide range of specialty insurance products that are industry specific.  If you are an exporter, you will need Ocean Cargo coverage.  If you are a financial advisor, you might need special coverage specific to any fiduciary responsibilities you might have.  As these products can be very industry specific, you will want to talk to your agent, check with any professional organizations you belong to, and ask your industry contacts for more information on the specific types of coverage you need.

There are also a few specialty products that may be needed across a variety of industries.  Here is a brief overview of each of these types of coverage and information on what kind of businesses may need to secure it.

Key Employee Life Insurance

Regardless of how big your business is, there are likely people within in, including yourself, that may need separate life insurance policies in order to protect the company.  Generally when we talk about life insurance as it relates to an employee, it is the life insurance policy the company provides or arranges for the employee.  The beneficiary is chosen by the employee and the intent is to take care of the employee’s family in the event of their death.  Key employee life insurance is exactly the same except that the beneficiary is the business and the intent is to help the business recover from the loss of a key employee.

Businesses whose income is completely generated by or reliant on the participation or involvement of specific people may need to purchase this type of policy.  Law firms, doctor’s offices, financial advisors, and small business owners are all examples of the type of business that can benefit from this type of policy.   Generally, this type of policy is a term life policy and it only remains in effect so long as the employee is employed by the business.

Kidnap and Ransom Insurance

Around the world, research shows that criminal gangs kidnap an estimated 25,000 people each year with the sole intent of collecting ransom payments and making money.  In many countries, kidnap and ransom is an industry bringing in millions of dollars a year.   For businesses operating in these countries, this fact can pose significant risks to employee welfare and financial health.

A kidnap and ransom policy is designed to provide a limited amount of protection for businesses operating in these areas of the world.  The type of policy determines what expenses and costs are covered.  Most individual polices will not cover the cost of the actual ransom payments but does include the expense of negotiating the ransom and securing the safe return of the person who was kidnapped.   Most corporate policies cover negotiation expenses, ransom payments, and lost wages owed to the kidnapped employee.

Companies of any size that are operating in parts of the world where kidnap and ransom activities are prevalent need this kind of coverage.

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Does your business need umbrella coverage? (Image via FreeFoto)

When it comes to buying the insurance you need to protect your small business, the wide range of options can be confusing and overwhelming.  There are so many different types of policies and different level of coverage that it isn’t always easy to know if you have all the coverage you need, if you are underinsured, or if you have policies that provide coverage for risks you don’t face.  One of the most common questions small business owners ask about the coverage they need is about umbrella coverage and whether or not they need it.

Surprisingly, although it is the type of insurance almost everyone and almost every business should have, it is not as well understood as the other common coverage types like auto, liability, and worker’s comp.  This can have serious, long lasting consequences for business owners of all types.  To understand why Umbrella coverage is so critical to small businesses, you need to first understand what it is and what it does.

Umbrella insurance is a kind of liability coverage.  These policies extend, like an umbrella, over most of your other liability policies like your business auto and your general liability.  If there is a claim that breaches the upper limit of one of your base policies, the Umbrella policy provides coverage over and above that limit.  For example, if you or one of your employees were at fault in an auto accident where your company’s car caused damage in excess of the $50,000 property damage limit on your business auto policy, your company would be responsible for paying every dollar over that limit out of pocket.  The insurance company pays $50,000, you pay the rest.   Now, if your business has a $5M Umbrella policy, the insurance company for your base policy would pay for any damages up to $50,000 and then the Umbrella carrier would pay for any damages from $50,001 to $5M.  To break this down, having that Umbrella policy in place could mean the difference between your company paying nothing and your company being responsible for millions of dollars of damages.

When looked at from this perspective, it is clear why many businesses must have an Umbrella policy in place to protect the viability of the business.  In order to determine if your business needs this type of coverage, here are some things to consider.

If your business requires you or any employee to operate a motor vehicle as part of doing business, you must have an umbrella policy over your business auto policy.  Car accidents can lead to incredibly expensive liability lawsuits and even minor accidents can result in medical bills that exceed your business auto policy limits.  Don’t take the risk; if your business has auto coverage, you need an umbrella policy.

If your business has assets, you need umbrella coverage.  It doesn’t take much these days for someone to file a lawsuit and even if you win, the cost of defending yourself can wipe out your available cash and even your businesses assets.  If you lose, the situation can quickly compromise your entire business.  Umbrella coverage protects you from the high costs associated with getting sued.

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Worker's Compensation

Is your small business properly insured? Image via Flickr

For small business employers, understanding the ins and outs of Workers Compensation coverage and the accompanying legal requirements can be overwhelming.  Here are some of the most common questions asked by employers about Arizona Workers Compensation Insurance.

1.     How does Workers Compensation insurance help my employees?

This type of coverage protects employees who are injured on the job and ensures they will receive compensation for lost wages, payment of related medical expenses, and in some cases, monetary awards for disability and damages.  It is no fault insurance, which means payments are made regardless of who was responsible for causing the accident, injury, or illness.   Workers Compensation insurance also provides death benefits for the survivors of an employee who is killed on the job.

2.     What does Workers Compensation insurance do for me as a business owner?

While the primary intent of Workers Compensation coverage is to protect employees, it also offers some protection for companies and business owners.  If an employee is injured on the job, everything to do with that injury is handled under the Workers Compensation policy.  This means there is no need for litigation between the employee and the company and businesses don’t have to worry about or plan for the potential of huge legal fees associated with litigation.

3.     Who is required to carry Workers Compensation insurance in Arizona?

According to the Industrial Commission of Arizona, the agency responsible for the administration and enforcement of any state law that pertains to the health and safety of employees, all employers in the state are required to secure Workers Compensation coverage for their employees under Arizona Law.  The details of the law and how it is administered and enforced can be found in Article 18, Section 8 of theArizona State Constitution, Chapter 6 of Title 23 of the Arizona Revised Statutes, and the Workers’ Compensation Practice and Procedurerules outlined in the Arizona Administrative Code.

4.     If I am the only person who works for my company, do I need Workers Compensation coverage?

Sole proprietors are not required to carry Workers Compensation coverage for themselves.  However, it may not be a bad idea to cover yourself if you have an occupation that is inherently dangerous or carries a higher than normal probability of injury.

5.     What happens if I don’t have Workers Compensation coverage and an employee is injured on the job?

If one of your employees is injured on the job and you do not have the required Workers Compensation coverage, what happens next is up to the employee.  The employee can file a claim with the Industrial Commission of Arizona (ICA).  If the claim is accepted by the ICA, the state will process the claim and pay for the medical expenses and lost wages that would normally have been covered by the Workers Compensation insurance policy.  The state will then charge your company the full amount of benefits paid out to the employee plus a penalty that is equal to 10% of the amount paid out or $1,000, whichever is greater.  The other option is a civil suit.  Because you don’t have the protections provided by a Workers Compensation policy, the employee can choose to file a civil suit against the company to recover damages.  The employee’s injury is the only requirement in this type of filing to prove the negligence of the employer.

6.     Are there any penalties for not having Workers Compensation insurance if none of my employees ever file a claim with the state?

According to the ICA, the state can fine your company the same $1,000 penalty for failing to carry the required coverage regardless of whether or not a claim is filed.  If your company is found not to have insurance again within the same 5 year timeframe, the fine increases to $5,000 for the second finding and $10,000 for the third.

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Business Insurance

Is your business properly insured?

Whether you are a new business owner just starting out or an established entrepreneur looking to hire your first employee, it is important to understand what insurance coverage you need to protect your business.  However, wading through the all the available information to decide what policies and coverages are right for you can easily end with you being over or under insured.

Insurance for businesses comes in many different forms. What you need often depends on several factors including what type of business you are in, whether or not you have employees, and what state you live in.  Many business owners believe that the way the structured their business, as a corporation or LLC, provides them with the protection they need and eliminates the need for business insurance.  This simply isn’t true.  Company structure can protect your personal assets but they do not provide protection for the business itself.

The first step in deciding what kind of insurance you need for your business is to understand the different types of business insurance and the protection each kind offers.  According to the Small Business Association, these are the different kinds of insurance small business owners may need to fully protect their business.

1.    General Liability Insurance

This type of coverage offers broad protection against most legal actions resulting from negligence claims, accidents, or injuries.

2.     Product Liability Insurance

This type of coverage is important for businesses that manufacture, distribute, or sell products including both wholesale and retail sales.  It protects against legal actions resulting from injuries caused by product defect.

3.     Professional Liability Insurance

Similar to product liability insurance, this type of coverage protects businesses that provide services to customers.  It covers things like malpractice, errors and omissions, and negligence that results in harm to your client.  Depending on your profession, the state you live in may require that you carry this kind of insurance.

4.     Commercial Property Insurance

This kind of coverage protects the property and assets that belong to the company against loss or theft.  While it covers real property like buildings and office equipment, it may also cover things like loss of income and business interruption.

5.     Home Based Business Insurance

This type of coverage is specific to businesses run out of your home which are not covered by most homeowner’s policies.  You may be able to cover your home-based business with a few riders on your homeowner’s policy but you may have to purchase other business specific policies as well.

6.     Workers Compensation Insurance

This kind of coverage provides protection for your employees in the event they are injured on the job.  If you have employees, all states require that you carry this kind of coverage.

7.     Unemployment Insurance

This type of coverage is assessed in the form of a tax and is required by all states if you have employees.  It provides funds for the payment of unemployment benefits in the event one of your employees is let go and qualifies for benefits.

8.    Disability Insurance

This type of coverage provides employees with a portion of their pay if they suffer a qualified disability.  It is required for companies with employees in some states.

Now that you understand what each kind of coverage protects, you need to assess the businesses’ potential exposure for loss.  This exposure will help guide the types and amounts of coverage you need to safeguard your business.

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