Buffer your business with sound insurance

Appropriate insurance can buffer your business against certain unforeseen risks. Unlike insuring a house or an automobile, insuring a business requires a more holistic approach.

Property insurance

For those who work from home, your homeowner’s insurance policy doesn’t protect your home-based business. So call your existing provider to find out how they can extend coverage to your home business.

Safeguarding business against fire, theft or water damage can be done using contents insurance. The easiest way to determine how much insurance protection you will need is to make an itemized list of all business assets (computer, desk, filing cabinets, printer, etc.), including their value. Scan and save all sales receipts for business assets for insurance proof, should you have to make a claim.

Liability insurance

Errors and omissions (E&O) insurance is typically the first professional liability coverage financial professionals purchase. Potential legal issues that warrant this type of coverage may include:

• Failure to act in a timely manner
• Mishandling funds
• Improper instruction in completing an application
• Misrepresentation of coverage
• Breach of confidentiality

The best way to avoid legal liability is to steer clear of grey areas, and document everything.

Disability insurance

There are many types of disability coverage that can be tailored to fit your needs.Although price may be a deterrent, the cost of not having it should be equally weighed. In the event of an illness or accident your income may decline but your business expenses will likely continue.

Business overhead insurance can help you cover the normal expenses of your business, such as rent, utilities or employee salaries (in most cases up to a year). There are some alternative types of coverage that can allow your business to run uninterrupted:

• Gross Earnings Coverage: pays out in the event that your insured property needs to be replaced or repaired due to a fire, theft, vandalism or other possible risks.
• Profit Coverage: pays benefits until the business resumes its normal, pre-interruption level up to the policy limits.
• Extra Expense Coverage: allows your business to relocate to a new premise so that you can continue to serve your clients. Expenses covered could include moving, rental of new premise, installation of phone, computer, machinery, purchase of new equipment and advertisement costs.
• Actual Loss Sustained Coverage: pays up to the actual loss sustained with your insured business. An example would be insurance coverage for both fire damage and loss of gross profits and extra expenses incurred due to the extent of the fire.

Insurance becomes even more imperative when you decide to involve partners in your business. If one partner dies, do you want to see that ownership go to his or her estate, or would you like to purchase it without a legal mess? Executing a buy and sell insurance agreement at the beginning of a partnership, or succession plan, offers business continuity and estate preservation.

Tyrone Matheson, FMA, is a Business and Personal Development Coach and CEO of Inside Out Training, a firm dedicated to helping individuals, organizations and their teams achieve their full potential.