Mike Tottman

Some small-business owners look at insurance as if it were a tax. It may be necessary, but if they can avoid it or keep it to a minimum, all the better. This view is penny-wise and pound-foolish. Insurance can give you advantages, as well as providing in the case of catastrophe. There are several kinds of insurance to consider for your business.

Four kinds of insurance are essential: fire insurance, liability insurance, automobile insurance, and workmen's compensation insurance. In many businesses, crime insurance may be essential as well. Fire insurance can be embellished with additional protection against explosion, vandalism, malicious mischief, smoke, etc. at a minimal additional cost. A comprehensive all-risk contract may be the best buy for the broadest protection for the money.

Liability insurance is the shield for the business owner against lawsuits by customers who may slip and fall, or injure themselves with your product. A liability coverage of $1 million is not excessive. Remember, you may be legally liable even when you exercise reasonable care - in some cases even if the injury is sustained by a trespasser! Be certain whether or not property of customers that is in your care is covered.

It is a sad but true fact that in the United States, if you are in business long enough - any kind of business - sooner or later somebody will sue you. We have a greatly disproportionate number of lawyers, and a mentality that says "sue businesses for all they're worth" regardless of the stupidity of the "victim." Remember the famous hot coffee spill in the lap?

Errors and Omissions Insurance is your protection against what in the medical field is called malpractice. While liability protects you if you do everything that "a normal prudent person" would do, that may not be enough. E & O; insurance covers you if you fail to do something an "expert" would do. For instance, a prudent person wouldn't stack 50- gallon drums full of acid without some safeguards against falling. An expert should have known that they should be marked in a particular way before shipping. If an injury occurs in the first case, liability insurance is enough. In the second, E & O; would be necessary, because of your "malpractice" in not properly marking the containers. In this case, the claim may not even be an injury, but it could be a fine imposed for the marking failure.

Automobile insurance is of course required by law. Inquire into fleet policies if you have five or more vehicles used for business.

Workers' Compensation. Also a legal requirement, rates range from 0.1 percent of payroll for "safe" occupations to 25 percent or more far hazardous ones. The workers' comp coverage premiums can be reduced if your accident rates are below average, and using safety and loss-prevention measures.

Other coverages you should consider are:

* Business Interruption Insurance: Covers fixed expenses that would continue should you be closed down by fire or other reason. For in- stance, if the City decides to tear up the road in front of your store, so that your customers cannot come in! A more common example is if you injure yourself so that for a short period of time you are unable to operate your business. The bills don't stop when you do!

* Disability Insurance: Covers you if you cannot work on a permanent or long-term basis. While you were a wage slave, your workers' compensation insurance covered you as required by the state. However, self- employed people are generally not covered by workers' comp. You need to insure yourself instead.

* Crime Insurance: Can be valuable if you are burglarized or robbed. It may cover white-collar crime as well, depending on how the policy is written. There are federal crime insurance plans to help in high- crime areas where private crime insurance would be impossible or too expensive to get.

* Glass Insurance: Covers broken windows, signs, etc. For stores with a lot of glass windows, this can more than pay for itself the first time you have to replace one of those large show windows.

* Rent Insurance: If you don't own the building you operate in, rent insurance will make the rent payments if your rented space becomes unusable. Otherwise, your lease generally requires you to continue with payments even though you have no income coming in!

If you are home-based, your homeowners' or renter's insurance will probably cover the physical structure of your home office, but in many cases business equipment in the home is NOT covered by the policy. You will need to get a "rider" to cover that equipment in addition to your basic dwelling policy. It doesn't take long for the value of computers, printers and the like to really add up!

* Group Life Insurance: If you pay group-insurance premiums and cover all employees, your premiums may be deductible, and the benefits may not be taxable income to your employees. If the employees must pay part of the premium, there is usually a participation rule to qualify for group rates, (i.e., 75% must participate).

* Group Health Insurance: Costs much less and provides more generous benefits than individual contracts would. Generous programs tend to reduce labor turnover, and are seen as an important benefit.

* Disability Insurance: You can purchase coverage for injuries your employees sustain off the job as well as on. This replaces the loss of income while they are recovering.

* Retirement Income: You can get an income tax deduction for funds used for retirement insurance plans under the Employees Retirement Income Security Act.

* Key-Man Insurance: Your key employees can be insured with life and disability insurance made payable to your company.

It definitely pays to shop around for your insurance needs. Different companies may have very different rates for the same coverage - in fact different offices of the same company may offer differing rates, as most are independently owned and operated.

While shopping, check about including many of the coverages under one "umbrella policy." If the company is ensuring your home and your car and your business policies, you can often get a combination deal that will save you money over the premiums of all the policies billed separately.

Mike Tottman is an independent Broker based in Long Beach.

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