Business finance « Fresh Idea

10Jan/090

Liability Insurance

As the operator of your own business, you are responsible for the
safety of your employees and customers. If a customer slips on a wet
floor, you may be liable for damages. You’re also responsible for the
products or services you sell. For instance, the owner of a garage
could be held liable for using a car wax that strips the paint off a
customer’s car, or for employing a mechanic who forgets to set the
hand brake on a car that rolls into the street and causes an accident.
In the first case, the garage owner might have to cover the cost of a
new paint job. In the second, there’s no telling how much the cost
might be. By the time all the costs have been added in, the entire
assets of the
garage could be wiped out. Most liability policies cover losses
stemming from bodily injury or property-damage claims, expenses for
medical services required at the time of the accident, investigation,
and court costs. The actual amount that your policy will pay depends
on both the limit per accident and the limit per person provided for
in it.

For additional liability coverage, look into getting umbrella
insurance. Also called “supplemental liability” or “excess liability,”
this type of insurance provides extra coverage when the limits of an
existing insurance policy are exceeded. Umbrella insurance we called
because its coverage is over and above your basic policy, can help
protect your business in the event that a larger than normal damage
claim is made against it.

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9Jan/090

Fire Insurance

In a standard fire-insurance policy, your building, the property
contained within it, and property temporarily removed from it because
of fire are protected against damage inflicted by fire or lightning.
This coverage does not extend to accounting records, bills, deeds,
money, securities, or manuscripts. Nor are you protected against such
hazards as windstorms, hail, smoke, explosions, vandalism, automatic
sprinkler leakage, and malicious mischief. To guard excluded valuables
and protect yourself against loss from these hazards, you must obtain
additional coverage. Neither fire resulting from war nor actions taken
under the orders of a civil authority are covered by insurance.

Most fire-insurance policies are written for a three-year period, and
both you and the insurer have the right to cancel. You may cancel your
policy at any time. The insurer, however, must give you five days’
notice before canceling. In either event, you will be reimbursed for
any premiums that have been paid in advance. If you are the one to
cancel, however, a penalty as set forth in your policy may be assessed
against your refund. To keep your fire-insurance policy valid, it’s
your responsibility to use all reasonable means to protect the insured
property both before and after a fire. Should it become necessary for
you to file an insurance claim, you will be required to provide the
insurance company with a complete inventory list, detailing the types,
quantities, and values of the damaged property.

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29Dec/080

Personal Insurance

Just as there’s a need to insure your property against loss, there’s
an equal need to insure both yourself and your employees. Group health
and life insurance, a retirement plan, and key personnel insurance all
to do this. The need for these may seem a long way off, but more and
more small businesses are offering an employee benefits package that
includes health and life insurance as a way of retaining valued
personnel. If you decide to incorporate a retirement plan, too,
there’s another advantage. Contributions made to the plan for yourself
and your employees are deductible from your federal income tax.

Key personnel insurance, long a staple in the insurance portfolio of
major corporations, can be just as necessary for the small business
owner. key personnel insurance can at least ease the loss. The
proceeds from the insurance are exempt from income tax and payable
directly to the business. The policy itself has a cash value and may
be used as loan collateral.

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25Dec/080

Business-Interruption Insurance

Many business owners fail to purchase business-interruption insurance
because they don’t think they need it. If a building burns down, they
think a standard fire insurance policy will suffice. But the loss of
business income during the months it takes to rebuild or about the
expenses that continue to mount up even though your doors are closed,
taxes, interest on loans, salaries, rent, utilities is maybe out of
your plan. You must realize that an fire insurance alone isn’t enough.

Only business-interruption insurance covers your fixed expenses and
expected profits during the time your business is closed down. Also,
make sure that the policy is written to provide coverage in the event
that your business isn’t totally shut down but is seriously disrupted.
Some policies pay off only in the event of a total shutdown. You
should also remember that an indirect peril could force you to suspend
operations as well. Protection against these hazards can be written
into your business-interruption policy, but you have to ask for it.