Insurance Basics

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

“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.

Certain commercial properties that cannot get coverage from private insurers may qualify for coverage through Citizens Property Insurance Corp., the state-created insurance provider. Citizens will provide up to $1 million in wind coverage to business owners. As of December 2008, Citizens had 32,926 commercial non-residential policies, including both wind and multi-peril policies.

Flood

Property insurance does not cover damage from floodwaters, 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. From 1998 through 2008, insured flood losses in Florida totaled nearly $2.3 billion, according to the NFIP. Through NFIP, a small business’s building and contents each can be insured for up to $500,000.

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. Sole proprietors and partners are not considered employees.

In the construction industry, workers’ compensation coverage is required when there is one or more full-time or part-time employees. 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.

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.

Directors’ & 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.

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