Insurance Basics
| Resources |
Small-Business Owner’s Insurance Consumers’ Guide” , Florida Department of Financial Services National Flood Insurance Program Citizens Property Insurance Corporation Florida Department of Financial Services, Division of Workers’ Compensation Florida Workers’ Compensation Joint Underwriting Association National Council on Compensation Insurance |
Liability
Liability coverage protects a business from loss as a result of injuries, deaths or property damage caused by a business’s operations, employees or products.
“Premises and operations” coverage pays when a business is legally responsible for an injury claim, if, for example, someone slips and falls on company property.
“Products and completed operations” coverage, commonly called product liability, helps pay for monetary losses that result from injury or damage caused by a company’s product.
One type of liability coverage required in Florida is commercial automobile insurance. It covers vehicles owned by the company or personal vehicles operated by the company’s employees while on the job.
Property insurance protects the value of physical assets.
“Replacement cost” coverage pays to replace or rebuild buildings and other property, as long as the property is insured for its replacement value.
Windstorm
The most contentious issue in the property tax arena is windstorm coverage. Type of construction, size of structure, proximity to water and location determine the cost and availability of windstorm insurance.
In Jan. 2007, a special session of the Florida Legislature enacted an insurance reform bill that included several commercial property provisions. All commercial, nonresidential policies insured through the Property and Casualty Joint Underwriting Association, which was revived in the fall of 2006 to insure certain commercial properties that were unable to get coverage from private insurers, were moved to Citizens Property
Insurance Corporation, the state-created insurer. The new law allows Citizens to write commercial property across the state, not just in coastal areas. Also, it allows Citizens to write fire, theft and vandalism coverage in addition to wind.
As many Floridians learned in 2004 and 2005, property insurance does not cover damage from flood waters, whether from rivers, bays, offshore water from the Gulf of Mexico, Atlantic Ocean or other bodies of water. The National Flood Insurance Program (NFIP), operated by the federal government, provides much of the flood insurance nationwide. For the best protection, make sure both the building and contents are covered. Through NFIP, a small business’s building and contents each can be insured for up to $500,000.
Business Interruption
When a business must close because of an insured property loss, a business interruption policy, called “business income insurance,” pays ongoing expenses such as rent, utilities and some or all payroll expenses.
“Extra expense insurance,” another type of business interruption coverage, reimburses for special expenses that help a business minimize losses by getting up and running. For example, if a business can restart operations in a week, rather than a month, by paying a surcharge to ship replacement equipment by air express, the extra expense insurance would cover the air express charge.
Remember that most business interruptions occur in the first 30 days after a disaster, so it is important to get a policy that kicks in within a few days of the event.
| Insurance is the issue weighing most heavily on the minds of many Florida small business owners. A Jan. 2007 survey by the Florida Chamber of Commerce found that property insurance rates increased in the past year for almost 80% of businesses. |
Other Insurance
Workers’ Compensation
Florida law requires employers that are not in the construction industry and have four or more employees, either full-time or part-time, to have workers’ compensation coverage for their employees. In the construction industry, workers’ compensation coverage is required when there is one or more full-time or part-time employee. Corporate officers are included in the definition of “employee.”
Agricultural employers who have more than five regular employees and/or 12 or more other workers for seasonal agricultural labor lasting 30 days or more must have coverage.
Directors’ and Officers’ Liability
When employees, shareholders, government agencies and others allege that the company has suffered financial losses due to company mismanagement, the response is often to sue the directors and officers. This coverage protects both the company and individual executives.
Key Man
When one or two individuals are vital to a business’ success, it’s important to have key-man insurance — which of course can be for a woman. The insurance protects the business in case of the death of the essential individual. The company buys and pays for a key-man policy — similar to a life insurance policy — on a specific individual and the death benefit goes to the company rather than the individual’s family.