Insuring Your Business

October 18, 2021 • By George Saba Jr.

If you own or operate a business, you need insurance. Your vendors or customers may require proof of insurance. At times, you may need to add them as an additional insured on your policy.  Most importantly, you need to make sure your life’s work is protected.

Buying business insurance is not like purchasing homeowners or personal insurance. Most policies start out with the same standard language, however, there are specialty endorsements, exclusions and designed risk coverage that are complex and not always easy to decipher.  Here are a few tips that may help you make sure you are protected:

Your personal agent may not always be the proper person for your business needs. A commercial product involves specialized knowledge. You may want to consult with a commercial broker. If you do intend on using your personal agent, make sure that they are well-versed in commercial coverage and are equipped to “shop around” your coverage.  Ask questions. A savvy agent or broker will be familiar with the various companies and products and compare and contrast to get you the best coverage at the best price. You will have more options. Prices may vary wildly so it always pays to compare. A good broker will understand your risk and shop it accordingly. Most importantly, this will also save you time and aggravation.  

Once you decide on coverage, investigate the carrier. You can check the Pennsylvania Department of Insurance website for market studies or to simply make sure they are properly licensed. A simple Google search will also turn up complaints and lawsuits including class actions.  Keep in mind that every insurance company gets sued but look for investigations by state agents or wrongful denial of claims.  

It you are purchasing from a regional carrier or a small mutual, make sure you investigate them fully.  Often times, these smaller carriers are the first to deny claims or find inventive ways to find coverage exclusions. 

Unfortunately, most folks don’t know they have improper coverage until a claim is denied. We have litigated several cases involving the purchase of the “wrong” type of coverage. Often times, they are due to agent inexperience or unfamiliarity with the product.

A commercial policy is somewhat of a standard product, however, endorsements can be specifically tailored for your risk. For example, if you are a contractor, you will need a “completed products” endorsement. If you are in a low-lying area, you may need a separate flood policy or a sewer backup endorsement. Water losses create all types of issues and carriers scrutinize these claims very carefully. 

If you have employees, you will, of course, need workers’ compensation coverage. The price will be largely dependent on the number of employees and the nature of your business.  Keep in mind that this coverage may protect your employees from injury related losses but, if you are the owner of the business, it may not necessarily protect you.  Make sure you are maintaining your own policy.

Maintaining ongoing Workers ‘Compensation insurance coverage is required by Pennsylvania law. Any operating business entity which has employees must maintain Workers Compensation insurance coverage An attempt to avoid the issue by characterizing and paying workers as “independent contractors “ may not eliminate the need for Workers’ Compensation Coverage.  

General liability coverage will protect you from losses by third parties. Make sure you have sufficient limits and consider the purchase of an excess policy. These are considerably less expensive than your primary and will offer further protection in the event of a catastrophic claim against you.  

If you have company vehicles, they need to be insured on a commercial policy. You cannot insure company vehicles on a personal lines policy. The risks are different as well as the pricing.   

Make sure you have business interruption coverage. This is designed to reimburse you for loss of income if your business is forced to close by a covered event such as a fire. There are also several cases currently pending to determine whether this coverage is applicable to loss of income due to the COVID related closures.  

If you are purchasing property coverage, make sure the requirements of your coinsurance clause are met.  These clauses are designed to make sure that you are not receiving more coverage than you pay for. These clauses can get very complicated, but they are designed to make sure that you have properly insured the property.  Carriers may use these clauses to limit their exposure for underinsured losses.

Finally, there are a myriad of other endorsements and products that can be tailored to your specific risks.  Before you purchase any policy, make sure that you fully understand your risks. Make a check list or talk to a professional.  

The time to ask questions is before there is a loss not when you are faced with a denial of a claim because you did not purchase the correct product, or the loss was not appreciated.  

At DBD we have considerable experience with insurance and risk management. Please feel free to call us if you need help navigating through your insurance coverage or would like a risk analysis of your business.