Grow Your Business

Any business comes with risks, and where there’s risk, insurance is needed—even for your small or startup business. Even one accident or lawsuit could drain your funds and drive you out of business.Insurance should be looked at as an important tool to protect your business, not just your personal assets.

• What type of insurance do you need?
• What’s the appropriate amount of coverage?
• How much will your deductible and premium be?

The type of business you are also matters—whether you’re a corporation, partnership or sole proprietorship—because it affects your protection and liability.

Here are some types of insurance to help you make your business financially secure:
 

General liability: According to Carol Tice of Allbusiness.com, this insurance protects you if anyone is injured at your place of business. It also covers any injuries that might be caused by a product or service you sell. Tice says be sure to check coverage carefully “because there often are many exclusions to general liability coverage.” This is why many businesses also have umbrella liability.

With liability insurance, the insurance company “is authorized to pay for your legal defense, settle the claim and pay any judgment within the policy limits,” adds lawyer Jeffrey Steinberger of Entrepreneur.com. “Given that claims and litigation are all-too-frequent in our society, liability insurance should be a top priority.” In the Philippines, restaurants, parlors, cinemas and malls need to get public liability insurance before they can get a Mayor’s permit to operate.

Umbrella liability: This coverage is intended “to fill in any gaps left by all your other forms of insurance,” says Tice. If your business is complex or exposes you to many risks, for instance, if you make a product that could injure people or damage their property, umbrella coverage “ensures you won’t be stuck with a big bill.”

Property or casualty: This, says Steinberger, covers losses from physical damage to your property or loss of use and should cover the contents of your property (meaning building or any physical structure), just like you would insure your own house from damage. An “all-risk” policy is preferable over a “named peril” policy since it covers losses under most circumstances, such as fire, theft and vandalism, says Tice. Depending on your location, you may also want flood and earthquake coverage. Make sure you get enough coverage to completely rebuild your structure at current costs, adds Tice. “You may be able to purchase a policy with an inflation guard, which automatically adjusts the payout amount upward as inflation rises.”

Workers’ compensation: This is not compulsory in the Philippines (unlike, say, the United States), but if your business has employees (and almost every business does), it should carry this type of insurance, which covers medical bills and lost pay for employees who are injured on the job.

“Workers’ comp” according to Tice also includes employer liability coverage, which compensates families of employees permanently disabled or killed at their workplace. A third, optional portion of this insurance covers employment practices liability. This protects your business from claims related to personnel problems such as discrimination or sexual harassment, she adds.

Disability insurance: While government disability programs (such as Philhealth or the Social Security System) cover your workers, you need private disability insurance to compensate owners and key managers if they’re injured and unable to work, says Tice. (You’ll probably do this when your business has grown and you have, say, over 50 employees.)

This insurance guarantees the insured parties an income, though usually not 100 percent of their salaries, while they are disabled. You can purchase either short-term disability insurance, which protects for up to a year, or long-term disability insurance, which extends indefinitely. Be sure to check for the waiting period a policy requires before benefits kick in, because it varies. Some Filipino employers may not be aware of it, but they are actually paying for their employees’ health insurance when they pay Philhealth premiums.

Life insurance: If your business stops functioning without you there to guide it, this can replace that lost income and ensure your family members are financially secure. “You may be required to have life insurance to get a bank loan for your business, but it’s a good idea in any case,” adds Tice. When businesses have multiple owners, the business often takes out a life insurance policy on each of the co-owners. Upon the death of one owner, this insurance payout is used to buy out that partner’s stake in the business, “so that the remaining partners can continue running the business without interference from the deceased partner’s family,” Tice adds.