Wednesday, May 28, 2014

General Liability Insurance: 3 Costly Mistakes to Avoid

General liability insurance is an important aspect of running a business. Having this policy protects you from many of the common risks associated with business ownership, such as personal injury and property damage. But if you don't take the time to carefully review and learn about your specific coverage terms, you may end up learning the hard way that it's called "general" liability for a reason.

Insurance experts discussed some costly mistakes that small business owners frequently make concerning their general liability insurance, and what you can do to make sure your business is fully protected.

Thinking you don't need insurance

One of the worst assumptions a business owner can make is that he or she doesn't need any insurance coverage. While you may not have a lot of room in your budget, the price you'll pay for a lawsuit if something goes wrong is far greater than any monthly premium for basic liability insurance.

 "By not properly assessing their risks, small business owners may conclude that they do not need insurance," said Stephen Leveroni, executive vice president and general business practice leader at insurance and financial services firm The ABD Team. "Those that start in their homes may have the false assumption that their homeowners' insurance policy provides coverage [for their business]."

Leveroni also pointed out that structuring your company as a corporation, LLP or LLC does not mean you don't need a general liability policy.

"While [the structures of] these entities do help, they are not substitutes for liability insurance," he told Business News Daily.

Assuming your policy covers everything

While general liability coverage does address the most common business risks, it's not necessarily a catch-all for every possible scenario. Small business owners often assume that their policy automatically covers them if any issues arise, but those who have read the fine print — which many fail to do — know that this isn't the case.

"Insurance contracts are agreed-upon transfers of risk for a fee," said John Buckley, a partner with Ungaretti and Harris law firm. "Insurers, however, are careful about what risks they accept and what risks they exclude. Unprofitable, unpredictable and unmanageable risks are excluded by the insurers over time to reduce their risk and manage their portfolio more profitably."

Buckley advised speaking with a professional broker to help assess your business's specific risks and shape your general liability policy to best fit your needs.

Forgetting about cybersecurity

In an age where nearly every business has a Web presence, cybersecurity is an issue that will most likely affect you, regardless of your industry. Tech startups are usually hyper-aware of this risk, but non-tech businesses tend to forget that they're not outside the reach of hackers.

"Small businesses are of greatest risk for a breach due to their often limited budget, lack of security and thin staff," said Matt Cullina, CEO of business risk and identity management solutions provider IDentity Theft 911. "They're a growing target for hackers and thieves who know small businesses are especially vulnerable to exposures. Anything from a denial-of-service attacks, data lost to viruses or other security issues, or even something as simple as a hacked email can contribute to a costly, reputation-damaging situation."

In most cases, general liability policies will only cover you for reputational damage due to libel or slander. They don't directly cover losses due to data breaches and other exposures by third-party IT service providers. For this reason, it's important to consider a separate cyberinsurance policy on top of your general liability.

As your business grows, your insurance needs are going to change. The best thing you can do to keep your assets protected is revisit your general liability policy and modify it as necessary to cover your risks, Buckley said.

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Tuesday, May 13, 2014

Choosing an insurance plan: 3 common mistakes

We focus too much on deductibles and not enough on overall costs.

FORTUNE -- Behavioral finance -- the study of why humans make irrational decisions about money -- has made its mark on the world of investing in a big way. Look at the way many companies now both enroll employees into their 401(k) plans and ratchet up their deferrals. Both are now frequently done automatically; if you don't want to participate or increase the amount you kick in, it's up to you to opt out. Similarly, there are many plans where target-date retirement funds have replaced money market funds, as the investment default.

Although some believe this is too "Big Brother," these tactics (the financial equivalent of hiding the broccoli in the mac and cheese) are a good thing. They point to success stats like the huge lift in participation rates when a plan automatically enrolls -- and how that alone can help employees stash away more for retirement.

But what about in the world of insurance? A few weeks ago, I wrote about my trip to the Wisconsin Business School at the University of Wisconsin in Madison. While there, I spent time with Justin Sydnor, an assistant professor in the Department of Actuarial Science, Risk Management, and Insurance who conducts much of his research in the field of behavioral finance. We talked about the none-too-rational mistakes humans make when shopping in this confounding field -- and how we can help ourselves through them.

Here are three biggies:

We focus on the wrong variables

Think about the last time you were asked to choose a health insurance plan. Whether you were shopping an exchange or your employer's menu, chances are there were many features to consider: co-payments, doctor availability, and deductibles. "It's very easy to focus on the features that turn out to not to be financially important while missing the ones that are," Sydnor says. Specifically, we have a tendency to focus too much on deductibles because of the large numbers associated with them. That can be a mistake.
Try this instead: If the first filter you apply when you're looking at policies is the deductible -- and you go for a low one -- you'll end up looking at a bunch of high-priced policies and miss the lower-priced ones altogether. Instead, Sydnor suggest narrowing the universe by first looking at factors that don't have a huge impact like the coinsurance rate and the health care providers you really want. By leaving the deductible comparison to the end, you'll get a policy that's better suited to your needs (and your wallet).

We don't do the math 

Premiums, whether you're talking about auto insurance or health insurance, are typically not presented as a yearly number -- but as a quarterly or monthly number. Deductibles, on the other hand, are presented as an annual number. And as Sydnor's research has shown, many people are so laser tuned to that factor they end up paying more in overall premiums than they save on deductibles. "If you pay $450 more in annual premiums and that gets you a $500 lower deductible, it's a $50 difference -- and you've paid the $450 up front," he explains. That's not a smart move. Even less smart: "We've seen cases where people will pay a $600 difference for a $500 lower deductible."

Try this instead. Look at the yearly premiums. If they're quoted in monthly increments multiply by 12. If they're quoted quarterly, multiply by four. (I know it sounds ridiculously easy, but far too many people don't go the extra step.) Then look at the spread between the difference in premiums and the deductible. "If the two numbers are close buy the high deductible policy," Sydnor says. "Otherwise, you're essentially paying up front for a reduction in deductible later."

We insure the wrong things

Have you ever bought insurance on your cell phone? Or taken out an extended warranty on a new electronic? Or opted for a low deductible on your car insurance because, you thought: "If I have a fender bender, I don't want to have to come up with $1,400 to fix my car." We do these things all the time -- Sydnor explains -- essentially spending money to protect ourselves against relatively small losses. At the same time we're ignoring much bigger financial risks. "We're not buying disability policies. Some homeowners aren't buying excess liability," he says. "If we took all the money we paid to cover ourselves for small risks and devoted it to unlikely but big ones, that would be a much better way to manage the risk in our overall lives."

Try this instead: If you can't afford to replace it, insure it. If you can afford to replace it, don't. "My general principal is that unless you have a really good reason to believe you are highly special and are, for example, going to destroy five iPhones, you're better off avoiding most coverage under $1,000 and focusing on the bigger risks," Sydnor says.

"Insure the things you can't replace by yourself like your house or your income and don't pay for extra insurance on the small things. That's what your emergency cushion is for."

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Defining Business Insurance Policies

Insurance for General Liability:  All businesses should have at least basic general liability insurance.  This is true even if you run a home based business or consultant.  Liability insurance policies provide coverage for litigation and damages that are caused as a result of you, an employee, product or service.  This includes property damages as well injury to one’s person.

Insurance for Property: A property insurance policy should be purchased to cover your building as well as any business property including office equipment, tools and inventory. Separate coverage should be considered to protect against fire, theft, vandals and such. 

Interruption Insurance: This is a policy that can be purchased by business owners that covers the business in situations where there is an interruption that does not allow the business to operate.  This insurance protects the potential earning power of the business when service or products are unable to be provided. 

Auto Insurance For Commercial Vehicles:  As you insure a car for your personal benefit your work fleet also needs coverage.  Commercial auto insurance is used to insure vehicles that are used in the line of work from damage as well as collision.  When employees use their personal vehicles to complete business related tasks it is important the business owners have insurance that covers the business in case the employee does not have adequate coverage. 

Insurance for Workers Compensation:  Workman’s comp, as it is often referred to protect employees who suffer from work related injuries or who are hurt on the job. This insurance provides for a replacement of the employees’ wages as well as medical benefits.  Workers compensation protect the business owner and company from legal complications.  Providing workman’s’ comp benefits alleviate employers risks from future litigation arising from the incident.

Error and Omissions Insurance:  Also known as professional liability insurance the policy provides coverage for litigation and damage that is the result of services rendered improperly.  This coverage is different from general liability insurance.  Professional liability insurance is tailored to specific trades and professions.  Services professions such as lawyers, accountants, real estate professionals, insurance agents, hair salons, technology providers and more should all be sure to have adequate error and omissions insurance. 

Key Person Insurance:  Coverage under key person insurance provides compensation for any financial losses that come about from the death or incapacity of a key member in the business.  If one person is responsible for the majority of revenue brought in to the company this coverage is a necessity.  If one person’s work, knowledge, skill set or contribution is unique and consider irreplaceable without incurring loss or expense to the business; key person insurance can carry a business through a period of time and financial loss.

When it comes to insurance, policies, protection and coverage needs for your business it is wise to seek advice from a reputable business insurance agent.  An agent that is familiar with your industry is more likely to know the needs associate with your company providing the exact bundle of business insurance that is needed.  This also helps to ensure that you are not over insuring your company and in turn wasting valuable financial resources. 
For more information on business insurance throughout Livingston County, MI including Brighton and Howell, contact Cobb-Hall Insurance. We are experts in all types of insurance needs and look forward to helping you with all of your business and personal insurance needs. Check us out online at

Take Risks In Business But Not With Your Insurance Coverage

As you open a business no matter how big or small there are a ton of questions that run through your head.  I bet business insurance is one of those things that comes to mind. When it comes to owning your own business you will take a lot of risks and you will make a ton of mistakes.  Don’t let insurance coverage for your business be one of them. When it comes to insurance for your business there are a million questions you need to ask to ensure that you are substantially covered.

The first question you need to answer is in regards to equipment and goods used while outside of the actual business premise.  Your business insurance coverage should cover business equipment whether on site or in transit to a tradeshow.  You will want to make sure your coverage is all inclusive when it comes to where the equipment is located.

Question your insurance provider to make sure that you are covered under circumstances from theft to a flood.  It is important that the insurance policy for your business covers expenses that are man-made as well as natural occurrences.

Do you need to contact your insurance agent when you make upgrades to your equipment or your premise?  It is important to understand your policy and the intricate details.  If additions to the premise or upgrades in equipment need to be reported the agent for the insurance to cover them that it is essential that you address that before you make the purchase so that it is covered. 

With the policy that you have purchase does it cover replacing the building if it is fully destroyed? Are you required to build in the same spot or are you allowed to build in an area that is more suitable than the last one?  

Does your policy cover a loss of income if your office, warehouse or production site is destroyed?  What about if it is partially damaged or if your business is severely affected by the damage be it man-made or a natural disaster. It is dire that you completely understand the coverage that you purchase.

When considering purchasing a policy make sure that it covers in case of a breach of data.  When you take client information and payment via credit or check you need to make sure that your client’s information is protected.   Data protection is a newer policy to consider but is so important in the age of technology that we are currently living in. 

Questions are important especially when it comes to your business and the insurance plan that you have on it.  Your business is your source of income.  Income creates the means that support your family and livelihood. It has never been more important that when buying business insurance to understand what you are getting in return for the money you are paying. If you have any questions regarding the insurance coverage to your business ask your agent questions.  Your insurance agent is there to help you understand and to clarify your business insurance policy.

For more information on business insurance throughout Livingston County, MI including Brighton and Howell, contact Cobb-Hall Insurance. We are experts in all types of insurance needs and look forward to helping you with all of your business and personal insurance needs. Check us out online at

Limiting Risk In Business With Insurance Coverage

No matter what size business you own whether it is small, medium or large purchasing business insurance is crucial.  Risks are inevitable when it comes to owning a business.  Insuring your company helps limit your exposure to these risks.  Selecting the correct insurance policies is also important when it comes to insuring your business.  Avoid the following mistakes when it comes to obtaining a business insurance plan that covers all of your business needs. 

Protect Your Business’s Financial Situation With The Right Insurance Coverage

The size of your business does not dictate whether your business has risks that need to be insured.  All businesses regardless of size has the possibility of facing risk.  A good insurance agent will find the risks in your company and offer insurance to protect against them.  Risk comes in many forms and can be man-made or natural.  Risk involves the things outside of your control.  Risks that are natural include weather related risks such as flooding, hurricanes etc.  Man-made risks involve theft, vandalism, data loss and so on.  

When your insurance agent evaluates your business exposures they will take into account all of the man-made and natural risks that could occur in your industry with your company.  They will look at who your customers are, the product or service you offer and evaluate any and all potential risks that could factor into your business.  From here the insurance agent will present you with the policies that they believe are in your company’s best interest to purchase.  Having insurance for the risks involved in your business is sensible.

Don’t Underestimate How Important Insurance Is For Your Business

All businesses have risk.  Don’t underestimate or think even for a minute that your business is exempt.  Even if the risk is small you need to purchase coverage to meet the need. Even if you think your company can financially withstand risk insure your business needs.  The cost of the insurance outweighs the financial risk to the business all day every day.

Don’t Get Swayed By Low Priced Insurance Policies

Low priced policies are not always the most cost effective options in business insurance.  Low premiums may cover only the minimum risk in your business.  Consider that, do you want only the minimum of coverage?  Think about business insurance like you would health insurance.  When considering health insurance coverage for your family would you ever consider purchasing only the minimum?  The answer is a resounding NO! If you knew your son or daughter was at risk for cancer you would never choose the minimum coverage.  Think about your business the same way.  Everyday your business is at risk of something be it a man-made or natural disaster.  Insure accordingly.  

Only Purchase Insurance From An Agent With Industry Knowledge

As you know by now purchasing insurance for your business is a challenge. It requires diligence and research.  Find an agent and insurance agency with a solid track record of settling claims and servicing clients.  Credibility is important when it comes to finding an agent to insure your company. 

Insurance is an important part of life and business.  Avoid these pitfalls and mistakes when covering your business risks.  

For more information on business insurance throughout Livingston County, MI including Brighton and Howell, contact Cobb-Hall Insurance. We are experts in all types of insurance needs and look forward to helping you with all of your business and personal insurance needs. Check us out online at