When your insurance agent asks you much coverage you want, how should you answer?
Ask yourself these questions: What value do you place on your equipment, inventory, manpower; your name recognition or your reputation? How much money would you lose over your lifetime if you had to close your business because you didn’t have enough liability insurance coverage to pay for a drawn out legal battle?
Here are some starting points when buying business insurance policies:
General liability limits
How likely is it that someone might be injured by your operations or that you might damage something they own? If you are a general contractor constructing homes or offices, you have much more risk of these things happening than if you embroider ball caps. Conventional wisdom in the insurance industry is to start at $1 million general liability coverage and consider increasing from there, based upon your assets and the inherent risk of your business.
Automobile liability
Your risk of an automobile accident increases the more vehicles and drivers you have, and the more days and miles your vehicles are on the road. You also have a risk when employees drive their own cars or trucks on company business. Standard in the insurance industry is to begin at $1 million liability limits and consider increasing from there based on your exposure and the value of your assets.
Employers liability
An injured employee collects workers compensation benefits according to payment schedules regulated by Hawai‘i law. However, if he or she chooses to sue you for negligence, those limits are under the Employer’s Liability section of your Workers Compensation policy. Statutory Employer’s Liability limits are $100,000 per accident, $100,000 per disease per employee and $500,000 per disease per policy limit. Higher limits are available at a nominal cost and are often required if you carry an umbrella policy.
Umbrella policies
Umbrella policies provide an extra layer of liability over and above your general liability policy, and sometimes also over your automobile and employers liability. Coverage normally begins at $1 million and can be increased in increments of $1 million. Umbrella premiums are normally much lower than your general liability policy.
Property coverage
If you want to have enough money after a claim to replace your office furniture, inventory, equipment or other business property, make sure you insure for how much it would cost you to replace those items, not for your depreciated or book value. Also, make sure you carry replacement cost coverage on your policy.
Consider how much your business is worth to you and your life and choose carefully when deciding how much insurance to purchase.
Most importantly, talk with your agent to learn your options and how to cover your assets.
• Have a question about business insurance you’d like answered in this column? Email Pamela V. Brown at pbrown@insurancefactors.com. Pam has 30 years experience in the insurance industry, mostly in Hawai‘i. Contact Pam at 821-8899 or on her mobile at 651-3533 or visit www.kauaibusinessinsurance.com.
