By Deborah Jeanne Sergeant
You insure your home, auto, health and life. Why do you need business insurance?
“Business insurance is extremely important to protect business owners from liability, property loss and, in many cases, income losses,” said Chris Nelson, State Farm Agent in Oswego. “Without business insurance, someone can lose their business to a fire or lawsuit with no way of reclaiming what they had worked so hard to create.”
Nelson said that many people do not know they need business income coverage. This can help companies during a catastrophe that interrupts their ability to do business.
“That’s why it’s important to report accurately how much business you are doing,” said Julie Restuccio, commercial agent with The Insurance Place in Oswego. “A lot of people think it will increase their rate if they state how much business they’re doing, but if you report you’re selling $25,000 of goods in a month, but if you have loss, that’s the only amount you’ll be able to recover. People tend to misrepresent that number because they don’t want their premiums to increase.”
She said that coverage for public space may be important for some businesses and many business owners do not know this.
“If you’re a retail store and there’s a sign on the sidewalk or a restaurant that has curbside dining, the municipalities want general liability for those issues,” Restuccio said. “If someone gets hurt on your sign, you’ll be need to be covered for that.”
Insurance should cover your different business entities. For example, if a person owns a building owned by their LLC but two of their business entities operate business in that structure, the names should all be on the policy. Skipping this step “is a mistake I see a lot,” said Rhonda Cabrinha, certified insurance counselor and president of Ellis, Moreland & Ellis Agency in Syracuse.
She added that policyholders should make sure that their policy covers replacement cost, not the current value of property, which is a depreciated amount.
Know Your Contract
Some policyholders do not understand that their policy is a legal contract.
“You often hear people say, ‘Something wasn’t covered’ or ‘They didn’t cover everything I wanted them to cover,’” she said. “It’s a legal document that says what’s covered and what isn’t covered and the insurance company has to follow that contract, even if the policyholder doesn’t know there’s an exclusion in the policy or they didn’t have a certain coverage.”
To avoid this issue, she encourages people seeking business insurance to obtain a thorough understanding of the policy and know what they’re purchasing. This also applies to emergencies that the policy may not cover, such as flood insurance, that requires a separate policy. That’s one aspect is often missed, according to Nick Masterpole, partner at Masterpole-Murphy Agency in Syracuse.
“Policies also don’t cover things that are old and worn out, but only things that are damaged,” he added.
A policy would cover storm damage to the roof, but not the cost of replacing a crumbling 25-year-old roof.
Cost of Premiums
Masterpole also said that many people do not understand the factors that go into the cost of premiums. This can relate to the type of business, amount of payroll, amount of property, whether there is inventory, and more.
“This all relates to liability and likelihood of a claim,” he said.