Property Coverage

Ensure the business’s real (buildings) and personal (contents, including inventory) property for their replacement costs, not the depreciated value.

General Liability Coverage

If the owner is found legally liable for injuries occurring on company property (including job sites), this policy pays damages. The business is also protected from claims related to product liability and “completed operations” (providing a service that leads to injury or property damage). Get covered for at least $1 million per incident. Certain businesses (consultants, architects, engineers, financial specialists) may also need Professional Liability coverage, which covers “errors and/or omissions” they may make in the course of their day.

Business Auto Coverage

The liability portion protects owners from injuries or property damage caused by company vehicles. Make sure anything with an engine and wheels is titled or leased in the name of the business to maintain “insurable interest.” It’s also a good idea to include comprehensive and collision coverage for damage to the vehicle itself. Do employees use their personal vehicles for business? Add Hired and Non-Owned coverage to protect the business against damages above and beyond the driver’s personal insurance limit. Sure, employees’ personal auto insurance policies offer primary coverage. But if it isn’t sufficient for, say, a serious accident, the claim could drag you in, since the employee was operating the vehicle on behalf of your business.

Coverage caveat

: Make sure your uninsured and underinsured coverage matches your liability limits. Why? More than 10 percent of drivers are uninsured, and many others hold only minimal coverage. One bad accident could push you to the brink of collapse. Besides, if you’re willing to provide coverage for others when you’re at fault, it makes sense to get the same level of protection for yourself.

Umbrella Coverage

General Liability policy limits may not fully protect owners from serious property damage or personal injury claims. An Umbrella excess-liability policy offers additional coverage over and above General Liability, Auto Liability, and the Employers Liability section of the Workers Compensation policy. Umbrellas are available in $1 million layers. Smart owners add enough Umbrella coverage to protect all of their business assets. If your insurer offers it, include matching limits of uninsured and underinsured motorist coverage.

Employers Liability Coverage

Protects the business owner from employment-related suits like sexual harassment, wrongful termination, and age discrimination. General Liability covers none of these claims, which grow more expensive to defend by the day. Without coverage, you have to pop for defense costs and any judgments against you, and pick up the plaintiff’s attorney fees. The sad fact is, it’s often a matter of when, not if, claims like this hit a business.

“Key Man” Life Insurance

This is simply a life insurance policy written on the life of the owner. The policy pays for costs associated with running the business temporarily should the “key man” die. Tailor it to direct proceeds to another beneficiary (the owner’s spouse) should the surviving decision-makers choose to dissolve the business.

Disability Insurance

Pays the owner up to 66 percent of his pay (tax-free) if he’s unable to work. Disability coverage is especially helpful for all those small-business owners who exempt themselves from workers comp coverage. If the owner is disabled, his salary goes to paying somebody else to take the wheel while he recuperates.

Last word

Make sure your policy is tied to your occupation. That means you’ll get paid for as long as you’re unable to perform the job you held at the time of injury. Many disability policies payout for only twenty-four months, after which you’re required to get back to work doing just about anything productive.