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Insurance basics you need to know
Feb 22, 2012
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.
There are many different ways to go about getting this protection, and many more questions to answer, like:
• 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.”
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