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Understanding Small Business Insurance

26 June 2018 Insurance

Running a small business is very time-consuming; insurance brokers are there to make your life a little bit easier. A little bit of time now can save you lots of time and money later. As a business owner, the minimum coverage required is premises liability and operations liability. These two policies provide coverage and a layer of protection from accidents ranging from slip and falls to manufacturing incidents. Whether you work from home, your own space or rental space, small business insurance is a must.

A small business owner can refer to any of the scenarios listed below:

  • Building Owners: Who rent out spaces to retail stores, offices, restaurants, auto repair shops, etc.
  • Rented Dwellings: Commercial and residential, student house, rooming house, seasonal dwellings – Owners or property management service providers. (Home offices, dental offices etc.)
  • Various Industries: Convenience stores, retailers, wholesalers, light manufacturers, contractors, janitorial services, restaurants (without liquor), etc.

Commercial General Liability (“CGL”)

The four main areas of coverage of a CGL include:

  1. Bodily injury and property damage
  2. Personal and advertising injury liability
  3. Medical payments
  4. Tenants legal liability

Most importantly, it is an insurer’s duty and right to defend you in the event a claim is filed against you (if the policy applies) so you can continue running your business with peace of mind.

Main Types of CGL Policies

Without products and completed operation

We see more and more lawsuits/litigation where people sue and seek damages for injuries suffered from a slip and fall due to poor or improper property maintenance. Typical problem areas are: parking lots, walkways outside of stores/offices, stairways/steps/entrances of buildings (even carpets in a home office) etc. Business owners may want to at least have general liability coverage as part of their small business insurance policy, to cover premises exposures for bodily injuries and property damages due to property maintenance. This type of liability coverage is for designated premises exposures and excludes liability arising from your products and complete operation.

Your broker will ensure that you understand your coverage if you choose not to insure your products and complete operation. Some insurance companies may also require you to sign the “Products and Completed Operation Exclusion” as one of the policy subjectivities.

With products and completed operation

This is designed to particularly cover liability arising from your product and completed operation in addition to coverage for above-mentioned premises exposures.

Your products can include any goods/products, other than real property, manufactured, sold, handled, distributed or disposed of by you or others trading under your name, or a person or organization whose business or assets you have acquired. Your products can also be containers (other than vehicles), material, parts or equipment furnished in connection with such goods or products. Warranties or representations are also considered to be a part of your product.

If you are a contractor/handyman, light manufacturer, retailer/wholesaler, an owner of a restaurant, a convenience store, or a flower shop, a home baker etc., this is the coverage for you. Talk to an expert or a broker to determine the appropriate coverage for your business.

Property Coverage in Small Business Insurance

Property coverage will cover your business assets in the event of destruction, damage or loss in the instance of fire, theft, water, smoke, vandalism or other perils. This type of coverage is relevant for several types of businesses; whether you:

  • Own a building, and/or rent commercial space
  • Have office contents (equipment, furniture etc.), computers, inventory/stock or tools, tenant’s improvements/betterments, lighting systems, carpeting, outdoor signs, fencing, landscaping etc.

Talk to a Broker About Extras

Other than the above-mentioned coverages, an owner may also want to consider the following:

  1. Business interruption: If there is a fire or other perils causing damage/loss to your property, you may be forced to shut down your business temporarily. However, you are still required to pay rent, payroll, taxes, etc. This policy covers your fixed costs and loss of earnings until you are back in business after your shutdown period.
  2. Vehicle Coverage: You will need an auto policy for any vehicles that your business owns. You must tell your broker or insurer if you use personal vehicles for business.

Scenarios in Small Business Liability

Slip and fall claims are common issues that are related to premises exposure. A claimant alleges she or he tripped and badly twisted an ankle because of debris on the sidewalk in front of your grocery store. Your tenant alleges he or she fell on the black ice accumulated due to the dripping water from the roof and suffered a fractured hip while walking on the driveway to their unit.

Without adequate small business insurance coverage that specifically addresses commercial general liability, you may be exposed to suits stemming from innocent or innocuous events. Talk to your insurance broker today to ensure that no such shortfalls exist in future or existing policy agreements.