Startup Steps #4: Determining What Insurance Coverage You Need For Your Business
As I advise new businesses as to what issues they need to think about when getting started, invariably the talk turns to insurance coverage for their business. What I do in setting up a business entity merely shields the owner’s personal assets from business liabilities, but risk management does not stop there. Rather, it is necessary to evaluate what other risks exist with respect to the business and how those risks can be minimized through proper insurance coverage.
I asked Kathleen Peck, co-owner of Risk & Insurance Consultants, LLC – a company which, incidentally, was formed through my Firm’s INCubation Center a few years back. Kathleen and her business partner, Laura Kasemodel, have evolved in their business from being clients of mine to being part of that “team of advisors” that assists newer businesses how to do things right. You can reach Kathleen via email at firstname.lastname@example.org.
Determining What Insurance Coverage You need for Your Business
Prepared by Kathleen Peck, ARM – Risk & Insurance Consultants, LLC
So you’ve taken the leap and are starting up your own business – HOW EXCITING!
You think you’ve got the all the I’s dotted and the T’s crossed, but have you really thought through the insurance you need to protect you, your personal assets and your new business?
Separating you personal assets and liabilities while starting your new business whether you are using a LLC, a S-Corp is critical to maintain your “corporate veil”. This same principal applies to your insurance protection as well.
When you are the insurance buyer, you now become responsible for the correct risk assessment, analysis and of course the correct insurance coverage. While your insurance agent is a good resource and can help you through the process, the agent is limited in their liability / responsibility to the insurance binding orders you have given the agent. This means, you need to know what you need to buy for coverage as well as reading the policies after they have been delivered to confirm the insurance coverage you bought is what you intended and need.
So what do you need to consider? Are you producing a product? Are you providing professional advice? Are you hiring employees? Are you handling other businesses assets or cash? Are you taking the confidential information from consumers via a website? Will you be shipping goods in company vehicles? Or are you outsourcing any of these options? What did you forget??
Did you enter into a contract to provide goods or services? If so, did you agree to indemnify and hold harmless other parties? How will your insurance cover these legal responsibilities now created by your new business? Did you agree to name the other party as an additional insured under your insurance policy(s)? Did you buy the correct endorsement on your policy(s) to transfer this risk to your insurance carriers? Did you benchmark the limits of insurance coverage that is prudent to protect all parties?
As the new business insurance buyer, you need to consider many different risks you are now exposing yourself, your personal assets and your business too. The key to a sound risk management program will be the detailed risk assessment and analysis you undertake as you purchase the business insurance policy(s) along with the internal policies and procedures your business adopts.
Congratulations on starting your new business! This will be an exciting and intense time!!