Business Insurance 101- What You Need to Know

Hi, my name is Gordon Coyle and in this video I'm going to give you a broad overview of business insurance, the basics of understanding insurance policies in general, the types of policies that most business owners need, and how you want to go about buying business insurance, and a whole lot more coming right up. Before we get started, can I ask you to smash that like button? That'll help tell the YouTube gods that this is good content and it'll help my channel grow. Thanks. Yeah, this is going to be a longer video than most of the ones I do, but my goal is to help you understand how business insurance works so you have the knowledge to make better decisions on protecting your business. And that's really the bottom line. We're talking about buying protection for what is probably your biggest asset, your business. You can go cheap and maybe not get all the right coverage, or you can do it right and safeguard this big asset. That's up to you. Now, if you have a specific question I don't answer here, or if you need further guidance, contact me. Even if you're not ready to buy or switch brokers, I'm happy to go over your questions or issues with you. My contact info is in the description box below, and it'll also come up at the end of this video. Okay, so let's jump into it. The first thing I want to talk about is how most business insurance policies are structured. There are five important points here to go over. The first one is coverage, sometimes called the coverage grant or insuring agreement. And this is the section of the policy that defines what the policy intends to cover, and under what circumstances. For example, in a general liability policy, this will start with wording like, the insurance company will pay sums that the insured becomes legally obligated to pay as damages, and so forth. The second section of the policy are the exclusions. So the first part of the policy broadly states what this policy covers, and then the coverage grant is narrowed in scope. These exclusions will often make sense. Like in a liability policy, there will be no coverage if you expect or intend to do harm to someone else. In many policies, common exclusions will be for perils or acts which are better covered under different policies, other policies, such as in a liability policy, there's an exclusion for workers' compensation claims, as there are for employment-related claims, because these exposures are better covered by other policies. Now you may be thinking, that's just like an insurance company to exclude everything. But the truth is, is that if these exclusions weren't in the policy, the cost of coverage would be so high, no one could really afford it. Number three, the next item to look at in the policy are the limits of coverage. These are the amounts the insurance company will pay up to if there's a covered claim. For property insurance policies, it's important to review the limits with respect to your building, your contents, and business income, and more, and to make sure they coordinate with things like co-insurance, valuation, and other policy conditions. For liability coverages, be aware that there's occurrence limits, the maximum amount the insurance company will pay for any one claim, and then there are aggregate limits. That's the maximum amount the insurer will pay for all claims in any one policy year. The fourth section are definitions. An insurance policy is a legal contract between you and your insurance company. Some policies are hundreds of pages long, and there are a lot of terms and words used that have very specific meanings that may not be exactly what you think they mean in common language. So there's a section every policy has called definitions. If a word is written in bold letters in the policy, that means the word or term is defined. So you go to the definition section to understand how the insurance company is defining that word or term. The last section I want to go over is the deductible, and in some policies a deductible is also called a retention. They both essentially mean the same thing. It's the amount of money you will pay out of pocket before your insurance company pays a claim. The one thing I want to mention about deductibles is that the agent or company you're working with may quote your insurance with what deductible they think makes sense, and depending on the size of your policy, it may make sense to look at higher deductibles in order to save money. If you think you're not going to have claims and you're doing a good job controlling risk, then maybe taking a higher deductible makes sense to save on premium dollars. Okay, so that's how most commercial insurance policies are structured, and I want to add in here that business insurance policies can be complex. After the basic policy, there are several amendatory endorsements and several other forms added to policies that either expand or restrict coverage. This means that having an expert guide you through all this makes sense in my opinion. If you decided to buy a business policy direct from an online portal with no human interaction, how do you know what you're getting? How do you know what to ask for? You become the expert, so that's a little dangerous. Yes, online insurers are fast and easy, but that doesn't necessarily make them accurate or comprehensive or correct. The deployment of artificial intelligence or AI in the insurance buying process isn't going to know what questions to ask to make sure you're getting what you really want, so I just want to add that here as a word of caution. So moving on to what types of insurance do most businesses need? Here there are six categories of insurance policies that most small businesses need that I'm going to explain. Again, keep in mind that this is a broad overview or insurance 101 video. It's not an in-depth examination of what you specifically need. That's why you should speak to an expert, but generally speaking, the most common policies for business owners are one, property insurance. This is coverage for your building, your business personal property, or your contents, or if you're a tenant, then the improvements you put into your landlord's building that needs to be identified and insured here. And lastly is your business income. Business income or business interruption or loss of income is often misunderstood, but it pays you, the insured, when you're forced out of your premises by a covered claim and you can't earn income. This is critically important, and in most business owners or BOP policies, your insurer will give you this coverage without a stated limit. Instead, you get up to 12 months of coverage for the actual loss you sustained in a claim. Pretty good. Second is general liability. Often, it's called GL coverage. GL provides protection for claims arising from bodily injury, property damage, or personal injury to third parties. Coverage includes not only protection from lawsuits and settlements, but also for defense costs, meaning lawyers fees and other costs associated with defending you from lawsuits, even if those claims are baseless. In many small business policies, property and liability coverages are combined into a BOP policy I just mentioned a minute ago. At minimum, you should purchase a million dollars of general liability insurance, and for more detail on GL coverage, you can view this video here. Number three on my list is workers' compensation. Workers' comp protects you from claims of your employees who are injured on the job. It is intended to pay for their medical bills and a portion of their lost wages incurred while injured on the job. Workers' comp is mandatory in most states when you have employees, and a point I want to make here is that many small business owners will say to themselves, if I hire workers as independent 1099 contractors, then I don't need to worry about workers' comp or payroll taxes and similar issues like that. But be careful. There are several litmus test rules that the IRS uses to determine whether a worker is an employee or an independent contractor, and regardless of what the IRS says, if a worker is injured in your employee, they may seek workers' comp benefits. The last thing you want to have to worry about is paying those benefits out of pocket. Imagine a serious injury and how costly that would be, and then being fined by the workers' comp board for failing to have workers' comp insurance. In my opinion, it's wiser to pay the premium for workers than risk paying out a big claim out of pocket. For more detail on workers' comp, you can see this video here. Number four on the list is commercial automobile. Commercial auto insurance covers you for both owned vehicles you have in your business, as well as firms with no autos. It can extend to non-owned and hired automobiles as well, and I recommend a million dollars of limits here. Number five on the list is commercial umbrella or excess liability insurance. Umbrella and excess insurance provides an extra coverage or protection over and above your primary policies, such as general liability, auto liability, and employer's liability, which is part of your workers' comp policy. Why do you need an umbrella or an excess policy? Because the million dollars of primary liability you're getting in your GL and auto liability is not sufficient to protect you from potentially catastrophic lawsuits that regularly happen today. Again, going back to the premise that your business is your biggest asset means protecting that asset. The other point I want to make about umbrella insurance is that it normally does not protect over and above policies I'm going to speak about in the next section. Umbrella policies do not go over and above professional liability, employment practice liability, D&O liability, and similar policies. To get higher limits of protection on these forms of insurance usually means purchasing separate excess policies on each coverage form. And that brings me to section six, miscellaneous or other coverage forms to consider. Depending on the type of business you're in, you may want to consider the following policies. Professional liability. If you provide advice or services of a professional nature, then you may need professional liability insurance, sometimes called errors and omissions, or E&O insurance. I've done several videos on that subject, and you can see more about that here. Employment practice liability. For any employer, employment practice liability, sometimes called EPL or EPLI, is important to protect the employer and their firm from claims which can arise from wrongful employment acts. I've done several videos on this topic as well, and you can view one here. Next is cyber insurance. Now, regardless of the size of your company, in my mind, cyber insurance is a must-have protection to protect you and your data from a variety of claims and losses that can occur. I believe that cyber risk is the number one threat to any small business sustainability, and you can view more about cyber insurance here. Next on my list is D&O insurance or directors and officers liability insurance. Not every business has a real need for it, but some businesses do, especially those that have any investors and many companies in the financial services sector. There are tons of miscellaneous and extra coverages to consider for every small business, such as flood insurance, inland marine, equipment breakdown, and more. And that's the value of working with an independent agent or broker who is a commercial insurance expert to help you identify risks and policies you should consider. So now let's jump into how can you buy business insurance. As I mentioned earlier, you can purchase insurance in a variety of different ways. You can use a neighborhood insurance broker, you can use a broker you find online, you can purchase directly from an insurance company online or in person, or you can purchase from a newer breed of insurance providers called insure tech firms who use a mostly human-less interface to make the buying process quick and easy. I'm not going to say which one is right or better than the other because buyers all have different buying styles, but what I will tell you about are some of the differences. Buying direct from an insurance company like Allstate, Geico, or Hartford online means you're usually just getting their one brand of insurance and no other options. That means you may need to initiate the buying process over and over multiple times to get different ideas and quotes and opinions, and that can be terribly inefficient and really lack expertise. Buying from an insure tech firm with no human interaction can leave a lot up to chance. You become the insurance expert and may need to do a lot of research to find out what you need and how much you need. Lastly, you can buy from an independent agent or broker whether you find them online or locally who probably represents multiple insurers to get you options and competitive quotes. The bottom line is regardless of who you purchase from, you want to make sure that you're getting a person or a firm that's going to advocate for you and be there when things go wrong. You're going to want to like and trust the firm you're doing business with, and they should be an expert in your industry and in commercial insurance in general. Here's what you get when you work with a firm like mine. No call centers. You get a dedicated account manager who's friendly, helpful, and there for you when you need help. You also get clear, honest advice and guidance. We don't work for an insurance company. We advocate for you in good times and in bad. The other thing is multiple company representation. We represent the top brand name insurers to find you the best coverage options to fit your particular needs. Lastly is expertise. All we do is business insurance. We don't get involved in home or auto insurance life or benefits. That means we spend all day every day working with clients like you on business insurance and have the expertise and experience to solve your problems or questions. So that wraps it up. I hope you found this video helpful and it broadened your understanding of business insurance. If you're online looking for coverage, I hope you'll consider giving me a call or dropping me an email. I'm here to help you to get the right protection at the right price, and I really enjoy working with business owners, so let's find some time to chat. Thanks.