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About Business Insurance

March 5, 2009

This article was contributed by SCORE Volunteer James Abert

Introduction:  Business insurance is very important.  You need to insure yourself and your business against various kinds of third party liability.  You also need to insure your business property, yourself and employees against income loss if injured on the job.  And, in Pennsylvania, you will need to take out unemployment insurance on your employees.  Health insurance, in particular may be difficult to acquire and expensive.

Relevance:  Basically, to all business owners.  However, this article mainly deals with insurance for the sole proprietor.

Counseling/Managerial Advice:  You should talk with several agents but most likely once you pick one you should put as much of your business as possible with them. 

Business Property Insurance is needed to cover your buildings, personal property like equipment, loss of income due to breakdown of your equipment, as well as all other hazards that would temporally close down your business.  Ask about an “all risk” policy. 

You will need a Comprehensive General Liability policy to provide coverage to 3rd parties.  This will cover Personal and Advertising Injury, Fire legal liability, Products and Completed Operations, Medical Expense or Medical Payments and General liability for your premises. Coverage depends on your type of business.  You may not need Personal and Advertising or Products and Completed Operations.  Make sure you understand the definitions.  Such a policy might cost about $1,000 per million dollars of coverage. This varies by type of business. The estimate is for an ordinary retail store, not, for example, a gun shop. Investigate deductibles. 

If you have employees you will need to purchase Worker’s Compensation Insurance.  If you are a sole proprietor with no employees, you do not have to cover yourself but maybe you should.  You can get injured as well.  The trade off here is your health insurance or your disability insurance.  If you cannot work, your business and your income are going to have problems.  You can buy this from the State or from private insurance carriers.  The State Worker’s insurance Fund can be reached at (570) 963-4635.  Make sure that you are correctly classifying workers as employees and not contract labor.  This is an important consideration.

You will not be able to cover yourself with Worker’s Compensation insurance as a sole proprietor. You should consider Disability Insurance.  The general limit of coverage is 60% of your income.  However, if you have no income you have a problem.  You should become familiar with terminology.  Some plans do not cover you if you can not do your current job but you can work in another field.  Check out www.disability-insurance-center.com.

In Pennsylvania you are required to have Unemployment Insurance for your employees.  But, you can not cover yourself.  If you are a sole proprietor, you are not an employee.  See below for contacts on this.  Unemployment Compensation insurance is applied for using the form PA 100.  The telephone contact is 1-800-362-2050.  This form can be down loaded from either www.revenue.state.pa.us or www.paopen4business.state.pa.us

Two specialized considerations:  Employment Practices Liability Coverage.  This covers suites for wrongful termination, sexual harassment, etc.  Life Insurance, for example, in a partnership to allow the survivor to buy out the interest of the deceased.

Health Insurance is an important and complex topic for another article. 

To get answers about basic business insurance questions, contact SCORE at (717) 397-3092.

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