When planning your business, you will need to budget a certain amount
for insurance. Your insurance needs will vary according to the type
of business you own. A retailer's needs, for example, will differ from
a self-employed professional's.
Pick Your Insurer(s) Carefully
When selecting a policy, it is crucial to pick an insurance
company that is in excellent financial shape so that you won't get left
in the lurch should you need to get reimbursed for a claim.
Insurers are rated from A++ or AAA to F in terms of financial
stability. The three most well-known ratings services are A.M. Best,
Moody's and Standard and Poor's.
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It is best to do
business with a company rated A- or better.
Weiss ratings, another rating service, publishes the ten
most stable and ten least stable insurance companies on its website:
http://www.weissratings.com/HL_Life.asp
Retailers
Employer's Liability Insurance - Most retailers, if they rent
their store, are required by their landlord to carry liability insurance
to cover accidents or incidents which may harm customers or employees.
Property/Casualty Insurance - if you own your place of business,
you should buy property insurance to cover the cost of damages in case
of fire, theft or vandalism. Property insurance generally covers your
damaged products and business records, and replacement income for a
minimum of twelve months in case the shop is too damaged to operate.
Cost is based on business income and square footage of the property.
You must normally have several years of business tax records to apply.
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Many insurance companies
offer a "Business Owner's Policy" or "Business Package
Policy" containing both liability and property insurance at a discount.
Such policies often include replacement income as well.
Worker's Compensation - If you have four or more workers, or
one or more workers in a high-risk occupation like construction, you
are required by many states including Florida to purchase worker's compensation
insurance. Health insurance, while not legally required, is often advisable
as a way to attract and retain employees, especially those making a
low wage.
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Employees engaged in high-risk work might need to purchase
additional disability insurance or supplemental
insurance for themselves. Worker's comp only compensates your employees
for accidents sustained while performing the job. Social security benefits
for injured employees are also limited in scope: almost 80% of applicants
for social security disability are turned down for these two reasons:
- benefits apply only to employees will prevent them from engaging
in any occupation, not just the one they were performing at the time
of injury.
- your employee must be disabled for at least five months in order
to apply for benefits.
Business Overhead Expense (Business Disability) - this type
of insurance may help provide you and your employees with a source of
income if you become disabled due to a sickness or off-the-job injury.
- Short-term disability insurance provides monthly benefits for periods
of 3 months, 6 months, 12 months or 24 months. It provides business
overhead payments to pay wages, rent, taxes, utilities, insurance
premiums, business supplies, professional fees and subscription fees.
- You will have to choose an "elimination period" or "waiting
period" before you will be reimbursed for your claim. Elimination
periods can be 30, 60 or 90 days. Your choice should depend on the
amount of cash flow the business will have to pay expenses before
your insurance will reimburse you. A longer elimination period will
mean a lower premium for you.
Individual Disability Insurance - provides
you with a source of income to compensate your lost wages in case of
a disabling accident or injury which prevents you from working.
