Part I: What types of Coverage will you need?
Part II: How to Boost Your Homeowners Policy to Cover Your Business (This Section)
Part III: How to Buy Business Insurance and Part IV – How to Buy Insurance for Your Video Shoot
Part II:How to Boost your Homeowner’s Policy to Cover Your Business
How to Boost your Homeowner’s Policy to Cover Your Business The place to start is with your existing insurance policies, such as your homeowners policy. If your home is insured, you already have coverage for equipment damaged in your home or stolen in a burglary or robbery. Remember that floods will not be covered. Ask your insurance provider if video equipment used for a business run out of the home is covered, and if you can purchase any additional insurance from them with a rider. Most homeowners policies cover your equipment, but limitations are often as low as $2500.
Ask your car insurance company what is covered if, for instance, your video equipment is stolen from your car. What is your coverage limit, and what are the exclusions?
Whatever you do, don’t try to fool your insurance company. The last thing you want to do is give them a reason NOT to pay when you file a legitimate claim. So, if you decide you want to boost your homeowners policy, what are your choices?
Add a Rider or Endorsement
This is the least expensive option for insuring a home-based business. For just a few dollars a month, sometimes as little as $25 a year, you can cover your business equipment up to $10,000 or more. There are computer equipment riders that will cover not only your computer hardware, but also the software. If a catastrophic fire occurs, both will be lost and the replacement of software can be significant. Be very sure that this will cover equipment that is used to make money. Your agent should understand that you are charging money for your services, as some homeowners policies will not cover equipment used in for-profit endeavors. Also be sure you are covered for replacing the equipment without depreciation. It is worth the extra premium to know you can recover your business when the claim is settled.
Add a Floater
A floater, or floating policy, is an insurance policy that covers the loss or damage to movable property, such as jewelry or video equipment, regardless of its location. This is a good solution for a small business that shoots at different locations and has to carry equipment. A floater policy was originally conceived for property in transit, but today it covers particular pieces of equipment, outlined in the policy document, wherever they are when damage or loss occurs.
A homeowners policy will not replace your diamond ring if you lose it while whitewater rafting. A floater policy will. (My friend Kay says she knows this from experience.)
Purchase a Home / Office Combination Policy
As your business grows, you will find that endorsements and floaters on your homeowners insurance no longer meet your needs. For one thing, these additions don’t offer liability coverage. (See A Crash Course in Liability, above.) There is a relatively new type of policy written especially for home-based businesses, called Home Office Policies. They are reasonably priced for those who need limited business coverage for a business operated out of the home.
While home office policies start with just $10,000 in equipment coverage, they often offer $100,000 of general business liability. This protects your home business from slip and fall accidents and other risks to others. A Home office policy will protect you if a meteor falls through your home office roof and impedes your ability to do business. While you are relocating or rebuilding, you will need supplemental income. These policies also offer supplemental theft coverage and high limits for off-site property such as your lighting equipment, a laptop computer, and the like. Specifically, these combination policies may include:
Home Office Contents
Cameras & Duplicating Equipment
Business Income Interruption
Errors and Omissions
Commercial General Liability
Two types of combination policies are:
Business Owners Package Policy
-This type of policy provides coverage for your home-based business, including property and liability coverage. It is referred to as a business owners package policy, or a BOP. It covers the structure that houses your home business, which can be an addition to your house, a studio on the grounds, or a garage office. This is relatively inexpensive for the small to modest operation.
In-Home Business Owners Policy
-This is the next step. Some insurance companies offer policies that combine homeowners and business owners coverage into a single policy. These policies are designed specifically for home businesses. These policies provide both business coverage such as business liability and replacement of lost income, and homeowners coverages such as fire, theft and personal liability. These policies eliminate gaps and duplications in coverage, and the rates reflect the in-home status of your business.
If you are concerned about your growing business, be sure to ask your agent about these policies. If you are ready to purchase real protection for an established business, you may need to hire a broker. See Agent or Broker, below.
Part III: How to Buy Business Insurance
Agent or Broker?
What is the difference between an insurance broker and an insurance agent? An agent works for one company and can only offer you the products of that company. An insurance broker has access to the products of several insurance companies and can find the best combination of coverage, price and service. In other words, an insurance broker works for you.
The following information is adapted from an informative web site, <http://www.cutcomp.com/> which is published by Advanced Insurance Management, Inc. They specialize in reducing worker’s compensation insurance, but their advice on hiring a broker applies to the purchase of any kind of business policy.
Choosing an Agent or Broker
When a business owner or manager needs to make a decision about purchasing a commercial insurance program, the first consideration is the choice of insurance agent or broker. Yet many business owners make this choice carelessly, relying on personal characteristics or other criteria that often don’t lead them to the best choice. Here are some suggestions for making the right choice in this risky decision. Who does the agent work for?
The first question to ask is, what is the agent’s relationship to the insurance company? That is, is he an independent agent, or does he work directly for the company that writes the policy? Agents of direct writing companies are employees of that company. An independent agent does not work for any one insurance company, but is rather an employee of an independent insurance agency which typically has contracts with a number of different insurance companies.
The independent agent normally can present your company’s insurance program to more than one insurance carrier, but remember that they do not have access to ALL insurance companies. The number of insurance companies that a particular agency has contracts with can vary significantly. Sometimes independent agents, in their zeal to acquire your business, may exaggerate the number of companies they can access for you.
An insurance broker is a licensed insurance producer who is not selling insurance for a company with which his or her agency has a contract. The difference between an agent and a broker is pretty technical, and most independent agents act as either agents or brokers, depending upon which insurance company they are dealing with. Many states have moved away from making the distinction between agent and broker, preferring the term insurance producer for anyone selling insurance in any capacity.
When choosing your agent, just keep in mind that an agent for a direct writer must live by what his employer-insurer is doing in the marketplace. This kind of agent normally can’t provide good alternatives if his or her insurance company isn’t competitive in pricing or coverage. An independent agent normally has access to more than one insurer, and can provide more alternatives in coverage. But the differences between one independent agency and another can also be significant in these areas. Evaluate the Agent/Broker
Insurance can seem like a commodity, with the only significant variable being price. But this is not entirely true. While there is considerable standardization in insurance policies, there are still many variables. You need your insurance agent to be your insurance adviser about coverage, companies, claims, and other aspects relating to how your company protects itself via insurance. To select that adviser wisely means looking past personality, and other considerations like who makes the best golf companion, or who provides you with the best free sports tickets. Sometimes it may even mean picking the agent who doesn’t have the lowest price.
Ask about what professional designations the agent has. A professional designation like CIC or CPCU doesn’t guarantee an agent is expert in all insurance aspects you require, but all other things being equal, a designation does mean the agent has made a commitment to pursue professional training. Just because a broker is licensed does not mean he or she has as much insurance expertise as you might need. Sometimes successful insurance agents are successful more for their sales skills than their insurance expertise.
When you’re choosing your insurance advisor, ask him or her for their personal resume. You want your agent to be experienced and knowledgeable in insurance coverage, not just in insurance salesmanship. Ask about the last insurance related seminar the agent attended. Or the last insurance book he or she has read. Make sure your agent is on notice that you expect him or her to be an active advisor. No one can be an expert in everything. It’s important that an agent know the limitations of his or her expertise, and be confident enough to tell you he or she doesn’t know the answer but will find out for you. Here’s one technique you might want to try. Ask an insurance related question about a certain kind of claim, or a certain property limit. Find out the right answer ahead of time. Ask your potential agent how he or she recommends coverage be handled to address that issue. This can tell you about the kind of agent you’re dealing with.
Remember, even a great agent may not know the answer off the top of her head. But a good agent will not make a wrong answer sound convincing. A good agent will either know the right answer, or will tell you he doesn’t know and will offer to find out for you.
Written proposals
When comparing policies, it’s important to get a written and detailed proposal of all coverages before you make a decision. The written proposal should detail costs, coverages, limits, payrolls, sales, rates and classifications that affect your particular coverage and its price. Ask the agent who quotes your coverage to make suggestions regarding alternatives, improvements, and corrections to your old policies. You should not use competing quotes exclusively as a free source of risk management advice. If you do, while allowing your coverage to remain with a less competent or less knowledgeable agent because of loyalty or other considerations, you’re making a mistake that may well come back to haunt you.
Consider How the Agent/Broker Is Compensated
Compensation for insurance brokers has been under scrutiny lately. In New York, the attorney general uncovered serious wrongdoing by some well known insurance brokers and insurers involving how insurance producers were paid. (Those who are licensed to sell insurance products are now referred to as producers. The distinction between agent and broker has become blurred.) The scandal in New York involved brokers who were being paid by their clients because they weren’t receiving any commission from the insurance companies.
These brokers would manipulate quotes from insurers in order to steer their clients toward insurers who were paying those brokers so-called “contingent commissions” behind the scenes. These brokers and insurers were giving the impression that the producer was shopping the clients’ business to get the best deal for the client, but in fact were collaborating to inflate other proposals to make the clients think that the insurer recommended by the broker was offering the lowest price. Actually the insurer was paying the broker commissions that provided the incentive for this deceptive practice.
As the client, you certainly have a right to know all the compensation that the producer will get from insurers if you place your business there. Full disclosure is something that a reputable producer shouldn’t object to, and is something you have a right to expect as part of your decision making process. The National Conference of Insurance Legislators (NCOIL) <http://www.ncoil.org/> developed guidelines on broker compensation.
After You Purchase the Policy
When examining the service given by your agent, ask yourself if he or she carefully reviewed your existing coverage and suggested improvements. Don’t assume the agent is doing this as a matter of course. You should also insist on an annual review of policies in writing. If the agent is unwilling, or unable, to provide this, it may be a warning sign that you are not getting the level of insurance expertise and service you need. When there is a serious claim, you don’t want to discover that your agent has been merely continuing your old coverage at a somewhat better price.
Make sure you old coverage is sufficient to cover any loss that might reasonably occur. Think of insurance as a parachute. You never know how well it’s been prepared until you really need it, and then it had better have been prepared right. Don’t assume your insurance parachute has been packed right, just because your agent seems like a nice person.
A good agent may well ask questions you can’t answer easily, but it’s important to address the issues raised if you want to make sure that the “parachute” is going to work when you need it. Do you have enough property insurance to avoid coinsurance penalties? To rebuild your property in the case of a total loss? Are you covered for employment-related practices? How about for mistakes in administering your employee benefits programs?
Ask for your agent’s written input on a yearly basis regarding property limits, business interruption limits, adequacy of coverage, and alternative approaches to insuring your possible losses. If your agent seems unwilling to do this, it may be time to look around. Some agents are very good at giving the impression they are taking good care of your insurance needs, without actually working very hard at it at all. You, as an informed consumer, should insist that your agent put some effort into keeping your business. The agent should do the research and have the expertise to provide you the right insurance policy and the right level of coverage. If your agent doesn’t seem to be taking care of your insurance needs, it’s time to find another one.
Acknowledgment: This information is based on an article published by Advanced Insurance Management, Inc. Please visit the Advanced Insurance Management website for other helpful information on this topic: http://www.cutcomp.com/
Timing Policy Renewals to Fit Your Budget
If your business has predictable slow periods when you know the income will drop, this may be a bad time for the insurance policy renewal notice. You can change your renewal date so it comes at a better time for your business income.
Talk to your agent or insurance company and see if you could use an early termination and renewal of the policy. This can change the renewal notice to a time that is easier on your business. Another way to do it is to renew with a short-term policy just for one time and then return to the normal annual policy. Just be careful that there’s no lapse in coverage. Also check with your insurance company that this strategy does not incur a rate increase. It can take a while to get your policy renewal date to occur at a good time, but it can be worth the effort.
Part I: What types of Coverage will you need?
Part II: How to Boost Your Homeowners Policy to Cover Your Business (This Section)
Part III: How to Buy Business Insurance and Part IV – How to Buy Insurance for Your Video Shoot
Recent Comments