Business Insurance
By: John McDonald
The Henssler Financial Group Position Paper

Business insurance is a risk management tool that enables businesses to transfer the risk of loss to an insurance company. Businesses can protect themselves from the possibility of substantial financial loss with relatively small premiums paid to insurance companies. All businesses need to insure against risks such as fire, theft, natural disaster, legal liability, automobile accidents, and the death or disability of key employees; but it is especially important for small businesses. Quite often a small- business owner's life savings may be invested in his or her company; therefore, certain steps should be taken to protect the owner and his or her family from the consequences of events that may disrupt operations, drastically reduce profits or even cause the business to cease existence.

Small-business owners looking for protection through insurance should first identify their company's main areas of exposure to risk. Many insurance companies can help with this process by utilizing risk analysis surveys. Once the areas of risk are determined, the business owner can assess the probability of each risk and determine the potential loss associated with each risk. Using this information, the owner can then decide which areas to insure against and at what level of coverage.

According to the Small Business Administration, the most common types of risks encountered by small businesses involve: property losses; legal liability for property, products or services; injury, illness, disability or death of key employees, and interruption of business operations and income that is due to the occurrence of these losses. Each of these categories can be managed with a corresponding type of insurance.

Common Types of Losses and Insurance

Property
Property losses common to small businesses may include theft, physical damage and loss of use. Theft typically results from the actions of persons outside the business. However, fraud, embezzlement and forgery generally originate from within the company. Physical damage is usually a result of fire, severe weather or vandalism. Loss of use can occur without physical damage to property and is usually the byproduct of another covered event. For example: an office building shut down because of a gas leak or a restaurant that is closed temporarily for health code violations.

Legal Liability
Whether your business is small, medium or large, the potential for a lawsuit resulting from a product you made, a structure you built, a service you rendered, or just a customer walking on your property, is a real concern. General liability insurance will protect the assets of your business.

Workers' Compensation
This is a special category of liability coverage which provides medical and disability coverage for all job- related injuries to employees. Since workers compensation insurance is a state-mandated and regulated insurance program, the rules and regulations will differ from state to state. The Georgia Workers' Compensation Law requires workers compensation insurance if a business has at least four employees.

Company Vehicle
Whether you use your personal car, van or pick-up truck in your business, as a business owner, you are driving a commercial vehicle. To provide the proper insurance protection, this vehicle should be insured under a commercial auto policy. This policy provides protection against damage or destruction of vehicles used in business.

Key Person Loss
Businesses can protect themselves against the loss of a key person by putting in place either a buy-sell agreement or a key person insurance policy. A buy-sell agreement gives the surviving partner(s) or stockholders the right to purchase the deceased person's portion of the business. A key person insurance policy can facilitate financial arrangements so the business can continue operations if a key person becomes ill or disabled. Corporate plans can ensure the continuity of the business under the same management, and possibly fund a repurchase of stock in the event a major stockholder dies.

Life and Health
Group life and health insurance are common methods companies use to provide for employee welfare, as well as use them as a tool to be competitive in the workplace.

Business Interruption
This type of insurance is also known as Business Income Protection, Profit Protection or Out-of-Business Coverage. Basically, it provides a company with the difference between its normal income and its income during a forced shutdown.

Employment Practices Liability
This is a relatively new type of business liability insurance, which was designed to protect employers against claims made by potential, current or former employees. The types of claims normally covered by Employment Practices Liability Insurance are:

• Age Discrimination
• Sexual Discrimination
• Racial Discrimination
• Disability Discrimination
• Sexual Harassment
• Wrongful Termination
• Failure to Hire
• Failure to Promote
• Inappropriate Discipline

Even though the claim against a company may be groundless, the cost of defending it can be staggering.