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- Published on Tuesday, 19 August 2014 13:25
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How To Cover Your Business Risks
Staten Island commercial bank cites merit in insuring against havoc
STATEN ISLAND, N.Y. -- Business owners can avail themselves of many kinds of insurance coverages, and Victory State Bank suggests that one way to look at them is their being akin to investing in the enterprise's well-being.
There are several good lists of coverage types, with summaries of their purposes. One example is a roundup by the federal Small Business Administration (SBA).
Insurance coverage is available for every conceivable risk your business might face, SBA says. Cost and amount of coverage of policies vary among insurers. An insurance agent or broker can advise you on the exact types of insurance you should consider purchasing.
Business owners purchase general liability insurance to cover legal hassles stemming from an accident, injuries and claims of negligence. Policies protect against payments as the result of bodily injury, property damage, medical expenses, libel, slander, the cost of defending lawsuits, and settlement bonds or judgments required during an appeal procedure.
Companies that manufacture, wholesale, distribute, and retail a product may be liable for its safety. Product liability insurance protects against financial loss as a result of a defect that causes injury or bodily harm. The amount of insurance to purchase depends on the products you sell or manufacture. A clothing store would have far less risk than a small appliance store, for example.
Business owners providing services would consider professional liability insurance (also called errors and omissions insurance and/or malpractice insurance). This coverage protects your business against malpractice, errors, and negligence in provision of services to your customers. Depending on your profession, you may be required by the state to carry such a policy. For example, physicians are required to purchase malpractice insurance as a condition of practicing in certain states.
Property insurance covers everything related to the loss and damage of company property due to a wide variety of events such as fire, smoke, wind and hail storms, civil disobedience and vandalism. The definition of "property" is broad, and includes lost income, business interruption, buildings, computers, company papers and money.
Property insurance policies are in two basic forms: (1) all-risk policies covering a wide-range of incidents and perils except those noted in the policy; (2) peril-specific policies that cover losses from only those perils listed in the policy.
Examples of peril-specific policies include fire, flood, crime and business interruption insurance. All-risk policies generally cover risks faced by the average small business, while peril-specific policies are usually purchased when there is high risk of peril in a certain area.
Contrary to popular belief, homeowners' insurance policies do not generally cover home-based business losses. Depending on risks to your business, you may add riders to your homeowners' policy to cover normal business risks such as property damage. However, homeowners' policies only go so far in covering home-based businesses and you may need to purchase additional policies to cover other risks, such as general and professional liability.
A compilation by Forbes adds a few more:
If you own your building or have business personal property, including office equipment, computers, inventory or tools, consider purchasing a policy that will protect you if you have a fire, vandalism, theft, smoke damage, etc. You may also want to consider business interruption/loss of earning insurance as part of the policy to protect your earnings if the business is unable to operate.
BUSINESS OWNER'S POLICY (BOP)
A business owner policy packages all required coverage a business owner would need. Often, BOPs will include business interruption insurance, property insurance, vehicle coverage, liability insurance, and crime insurance . Based on your company’s specific needs, you can alter what is included in a BOP. Typically, a business owner will save money by choosing a BOP because the bundle of services often costs less than the total cost of all the individual coverages.
Commercial Auto Insurance protects a company’s vehicles. You can protect vehicles that carry employees, products or equipment. With commercial auto insurance you can insure your work cars, SUVs, vans and trucks from damage and collisions. If you do not have company vehicles, but employees drive their own cars on company business, you would need non-owned auto liability to protect the company in case the employee does not have insurance or has inadequate coverage. Many times the non-owned can be added to the BOP policy.
This is for employees injured on the job. It provides wage replacement and medical benefits to those injured while working. In exchange for these benefits, the employee gives up his rights to sue his employer for the incident. It is very important for a business owner to have worker’s compensation insurance, Forbes says, because it protects you and your company from legal complications. All state laws require you to have workers compensation if you have W2 employees. Penalties for non-compliance can be stiff.
DIRECTORS AND OFFICERS
This type of insurance protects the directors and officers of a company against their actions that affect the profitability or operations of the company. If a director or officer of your company, as a direct result of actions on the job, is in a legal situation, this type of insurance can cover costs or damages lost as a result of a lawsuit.
If the business stores sensitive or non-public information about employees or clients on their computers, servers or in paper files, it is responsible for protecting that information. If a breach occurs either electronically or from a paper file a Data Breach policy can protect against the loss.
Other overviews of the variety of business coverages further add to the list:
Some insurers will lump property and casualty insurance together and refer to the coverage as “property and casualty” insurance. In fact, some contend that “packaged” policies of property and casualty are often the best purchase a business owner can make. However, to have an understanding of the difference between the coverage, I will discuss this as a separate type of insurance. Casualty insurance insures against loss or damage to the business.
Business interruption insurance (also see Property Insurance, above) insures against loss or damage to the cash flow and profit of a business caused by the business being unable to operate because of interruption. The easiest example is to think about a critical piece of machinery being struck by lightning. The repairs to the machine may be covered by other coverage such as property or casualty insurance. But, if you can’t make widgets for three months, then there is no replacement of that income without this coverage.
It could very well be that your business is so unique to have need for coverage that is a mixture of some of the coverage listed above or something written specifically for your particular risk. One can think of some actresses, actors, or sports stars that have had legs insured at some point in there careers. This would be an example of a “scripted” policy.
BOILER AND MACHINERY
Boiler and machinery insurance, sometimes referred to as "equipment breakdown" or "mechanical breakdown coverage," provides coverage for the accidental breakdown of boilers, machinery, and equipment. This type of coverage usually will reimburse for property damage and business interruption losses. For example, this coverage would cover fire damage to computers.
This covers the cost of removing debris after a fire, flood, windstorm, etc. For example, a fire burns your building to the ground. Before you can start rebuilding, the remains of the old building have to be removed. Your property insurance will cover the costs of rebuilding, but not of removing the debris.
Builder's risk insurance covers buildings while they are being constructed. For example, a Builder's risk policy would cover losses if a windstorm takes down your partially constructed condominium complex.
Glass insurance covers broken store windows and plate glass windows.
Inland marine insurance covers property in transit and other people's property on your premises. For example, this insurance would cover fire-damage to customers' clothing from a fire at your dry cleaning business.
ORDINANCE OR LAW COVERAGE
Ordinance or law insurance covers the costs associated with having to demolish and rebuild to code when your building has been partially destroyed (usually 50 percent). For example, your three-story building is 100 years old. A flood destroys the basement and first two stories. Because more than 50 percent of your building has to be rebuilt, a local ordinance requires that the building be completely demolished and rebuilt according to current building codes. Property insurance covers only the replacement value, not the upgrade.
Commercial leases often require tenants to carry a certain amount of insurance. A renter's commercial policy covers damages to improvements you make to your rental space and damages to the building caused by the negligence of your employees.
Crime insurance covers theft, burglary, and robbery of money, securities, stock, and fixtures from employees and outsiders.
A bonding company covers losses due to a bonded employee's theft of business property and money.
About Victory State Bank
VSB Bancorp, Inc. (OTCQB: VSBN) is the one-bank holding company for Victory State Bank. As Staten Island, N.Y.’s only community-based commercial bank, Victory State Bank operates five full-service locations on the Island: The main office in the community of Great Kills, and branches in the communities of West Brighton, St. George, Dongan Hills and Rosebank. For additional information, Victory State Bank may be reached at 718-979-1100 or visited online at www.victorystatebank.com.