There are many different types of insurance policies — so many that it can be confusing to determine which policy you should buy to properly cover your personal belongings or your business assets.
The real truth is that many insurance policies are really very similar in their basic coverages. A perfect example is the similarities between a standard homeowner’s policy and a basic business package insurance policy. Many of the same coverages that are found in a homeowner’s policy are found in a standard business policy. And just as you should review your homeowner’s coverage every year to make sure you are properly covering your personal possessions, you should review your business coverage using the same focus.
Homeowner’s insurance includes three major types of coverage: liability, property and medical payments. Every basic homeowner’s policy will include limits of coverage for each of these exposures. Every year, homeowners should consider the limit of liability for each one of these types of coverage to make sure they are properly covering their exposures with the limits on their policy.
Let’s start with liability coverage. This provides the owner with protection for injuries or damage to other people for accidents that happen on the property or for activities of the residents of the home. A broken window due to a poorly-thrown baseball, a broken leg due to a slip and fall on the property, a damaged neighbor’s car from a fallen tree are all events covered by liability coverage from a homeowner policy.
Many personal lawsuits are also covered by homeowner’s coverage. Typical limits for liability under this policy would be $300,000, $500,000 or $1 million. However, if the personal worth of a homeowner increases over the year, it might be appropriate to increase this limit to protect personal wealth from a loss or lawsuit.
Business policies also have liability limits which typically start at $1 million or $2 million of coverage. This limit might be appropriate for a small business or a new organization, but as the value of the business grows, the business owner may want to consider increasing the limit. If the business expands operations, adding new products and services as well as additional locations, increasing the business liability limit would be advisable to provide additional protection from potential losses.
Property coverage is the second coverage found under a homeowner’s policy. If a homeowner remodels a home, adds additional rooms to the structure, puts in a swimming pool, or adds a patio cover, coverage requirements probably will increase for the homeowner. In addition, the homeowner needs to consider that buying high valued personal items such as flat screen TVs sets, jewelry, camera equipment or fine arts will also require increases to the limits on the policy.
Business policies have the same concerns. Adding more locations is a normal part of business expansion, but this does not always initiate an increase in the property coverage of the business. Since many policies require that new locations be added within 30 days in order to have proper coverage, this is a critical consideration.
Additional equipment is another factor to consider. Business operations are adding new equipment frequently, and that equipment should be added to a policy when acquired. Still, all equipment should be reviewed annually. Equipment and buildings that are no longer owned should be removed from the policy.
We often find that removing property and equipment gets overlooked. We’ve found property and equipment that had been sold years before but still appeared on the policy. Some insurance carriers may be willing to return premiums for recent policy years, but many are reluctant to return premium for several years.
Similarly, make sure your policy is working the best it can for you. In one situation, a company had selected a deductible of $10,000, which reduced its property premium significantly. However, a number of small buildings were insured on the policy for less than $10,000. In the event of a loss, the company would not have collected a dime on any of these buildings because of the high deductible. We at WGIS removed the buildings from the policy and saved the company thousands of dollars.
Medical payments cover injuries to others on the property, including from animals or activities. Although limited, this coverage does pay for medical costs in the hope of avoiding lawsuits and extensive losses.
Homeowners should evaluate the level of this coverage to make sure it provides appropriate limits for these types of losses.
Business operations also have medical expenses, either on their policies or for employees in the form of health care and workers’ compensation coverage. Instead of assuming these coverages are “okay to renew,” business managers should review them to make sure the right coverage is in place for the needs of the business.
Just as you should review your homeowner’s coverage each year to guarantee you have the right amount of coverage, your business should conduct a similar review of business insurance to make sure the limits and items insured are correct and appropriate. Western Growers Insurance Services provides detailed analysis of business and personal insurance needs. If you would like more information, contact Greg Nelson, vice president of WGIS.
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