By Rocco Fiorentino, President and CEO of Benetrends
We all learned how important the right insurance coverage can be, when hundreds of businesses suffered power outages lasting for weeks due to Hurricane Sandy. Business interruption coverage played a critical role in the survival of many businesses that were unable to open due to power outages, resulting in loss of revenue and loss of property.
For many business owners, it was the difference between re-opening their doors and going out of business. Let’s face it; no one wants to be under insured and no one wants to pay to be over insured! Proper coverage and limits should be reviewed by you and your agent on an annual basis.
Key Business Insurance Components
General Liability insurance is the core of a commercial insurance policy. The policy protects your business from claims of bodily injury, property damage, negligence claims and includes protection for litigation resulting from these claims, including defending lawsuits up to the policy’s coverage amount.
Commercial Property insurance can help protect the property your business owns and/or leases, including items such as medical equipment, inventory, furniture and fixtures. Also included are things you may not have thought of, like protection for your accounts receivable records, computers and media. Business interruption coverage, also sometimes referred to as business loss of income coverage, can help replace lost income when your operations are suspended and can no longer operate due to a covered loss. In some cases, specially designed custom vehicles are used to provide certain services.
If any of these vehicles were involved in an accident and required repairs over an extended period of time, you may suffer a loss of income, if in fact you are not able to simply rent a replacement vehicle from traditional truck rental providers. One of our clients had a vehicle out of service for more than 60 days waiting for specially ordered parts to repair it properly. Fortunately, the proper coverage provided for the loss of income during the down period.
Cyber & Data Breach Liability Coverage is insurance coverage for liability that arises out of unauthorized use of, loss or theft of credit or debit card numbers, electronic data or software within your network or business. A business owner has an obligation to protect the data and the financial information of its customers, regardless of the whether the business is a brick and mortar operation or an ecommerce environment, the potential for exposure exists. One credit breach could cripple a business. First party coverage pays the response expenses, including mailing notification letters, credit monitoring services and public relations. Third party coverage is for defense and liability expenses in the event you are sued because of a breach.
Worker’s Compensation insurance is required by law in almost every state. As an employer, you pay for workers’ compensation insurance and in return, your business is covered for work related accidents. The coverage will pay for an employee’s doctor, medical and hospital bills. Additionally, it will help make up for lost wages and cover rehabilitation and other expenses. Each state’s rules and regulations vary significantly, so seeking the expertise from a qualified licensed insurance agent is important for this crucial coverage.
In recent years, most carriers would require an upfront deposit based on the projected annual payroll dollars, then conduct an end of year audit and bill back for any underpayments, which sometimes is very burdensome on a new business. We provide most new businesses with a program known as “Pay As You Go”. There are no upfront deposits required and no surprises as you go forward. You simply pay only on the payroll amount every pay period. This program is much more popular for start ups.
Employment Practices Liability Insurance, or EPLI policies generally cover job-related lawsuits and claims, such as harassment, wrongful termination, gender, age and other types of discrimination. Additionally covered is invasion of privacy, breach of contract, emotional distress and wage and hour violations. This coverage can also protect the business owner from meritless claims brought by disgruntled employees.
Professional Liability insurance, also known as Errors & Omissions is required for professionals who have expertise in a specific area. This additional coverage is needed because general liability insurance policies don’t offer protection against claims such as negligence, malpractice or misrepresentation, arising out of business or professional practice. What if you operated a salon and one of your stylists applied the wrong color to some ones hair and it was prom night? Chances are there will be a claim for emotional distress.
Equipment breakdown insurance covers the financial costs when equipment essential to the daily operations of the business, such as a graphic designer’s high tech printer, or a restaurant’s refrigeration unit breaks and stops working. It is likely that any business that uses electricity may have a need for this coverage. The consequential damaged property and business interruption costs can add up quickly.
Spoilage insurance coverage will come in handy for food service operators if a freezer goes down and you have a substantial amount of inventory or product lost during the breakdown. This coverage can apply to Florists, Ice Cream Parlors, Tropical Fish Stores and Deli Shops
It is always prudent to have insurance coverage by design and not by default. It is wise to discuss your specific needs with your agent so you can get the right coverage for your brand. Many carriers have special programs for certain types of industry. This would be time well spent. Unfortunately, after the fact is too late to review the current policy specifics.
Rocco Fiorentino brings more than 25 years of franchise industry experience as President and CEO of Benetrends. He is also a Director and board member for Swiss Farm Stores and Saxbys Coffee, franchisors of drive thru grocery stores and coffee shops respectively, Fiorentino served as president and CEO of Freedom Rings, LLC, an area developer and multi-unit franchisee of Krispy Kreme Doughnuts for Pennsylvania, New Jersey and Delaware. He currently serves on the Board of Directors for the International Franchise Association (IFA) and co-chairman of IFA’s Membership Committee. He is a Past Chairman for the Multi-Unit Franchise Conference, and Member and Board of Advisors for the Multi-Unit Franchise Conference. Fiorentino is a frequent speaker and moderator on franchise matters at the International Franchise Association Conference and the Multi-Unit Franchise Conference and has authored numerous article on franchiser financing. Fiorentino holds a Master’s of Science in Management from the Richard D. Irwin Graduate School of the American College and holds the distinction of Certified Franchise Executive(CFE) by the Board of Governors of the IFA.