Is a “BOP” right for your business?

Considering all the things that can go wrong with a business, small business owners may be considered risk takers. However, there are two risk exposures that any business owner can ill-afford to overlook: property loss due to perils, such as fire, theft, and wind or water damage, and liability loss for injuries sustained by individuals while on business premises and/or during operation of the business. In today’s litigious society, self-insuring is hardly cost effective, particularly for potentially catastrophic losses. This is where a business owners policy (BOP) can play a crucial and beneficial role.

A BOP bundles prearranged property and liability coverages in one package. Thus, a BOP provides property coverage for a building and its contents, as well as losses of business income after an accident, and liability coverage for physical injury or physical damage caused by an employee, premises, operation, or product. (Health insurance, workers compensation, and business automobile coverage are typically not included in the standard BOP.)

The main advantages of a packaged arrangement are ease of handling, streamlined rating procedures, and a reduced need for detailed risk management decisions. A BOP is typically less expensive than maintaining several policies.

Generally, specific criteria must be met in order to qualify for a BOP policy. First, your business should be considered a “good” risk so that premiums can be priced attractively compared to individual exposure policies. For instance, a small neighborhood bookstore selling books on gardening may have an easier time obtaining a BOP than a company that is in the building demolition business (where serious accidents may be more likely to occur). Second, your business should have “ordinary” insurance needs without the potential for unusual exposures to loss. Again, a demolition company certainly has unusual exposures. A standard BOP that does not adequately meet the needs of a particular business may be customized to answer those specific needs, which often makes a BOP an appropriate choice for small mercantile and service businesses.

While every business is unique, many businesses are exposed to similar types of risk. If the risk exposures of your business are fairly common, you may want to explore the benefits of a BOP. Having most risks covered under one policy can prove to be a cost-effective risk management tool. For more information on BOPs, give us a call. One of our qualified insurance professionals will be happy to help you determine if a BOP is right for your business.

Recovering quickly after a computer disaster

Suppose you open your doors for business one morning only to discover that water damage from heavy rains the night before has shorted out your computer equipment, leaving your automated systems inoperative. Or, perhaps, an overnight power failure has wiped out a large portion of your critical electronic records. Without warning, your entire business operation could be in jeopardy. Fortunately, this type of disaster needn’t be a major setback for your company. By taking the right steps now, you can get yourself “up and running” with minimal delay.

1. Insure yourself against electronic data processing losses. Standard commercial insurance packages don’t cover some losses relating to computers and other electronic equipment. Electronic data processing (EDP) insurance is specifically designed to fill this gap. EDP coverage generally covers your electronic data processing equipment, all your computer data, and the disks or tapes on which it is stored, as well as additional costs necessary to continue normal business operations after a disaster. It also covers any lost business income due to the disaster. EDP insurance may include protection against a wide range of threats including damage from water or other liquids, rust, corrosion, mechanical breakdowns, changes in temperature and humidity, power fluctuations, sewer backups, theft, vandalism, and earthquakes.
   
   
2. Back up your systems regularly. From customer records to accounts receivable and payable, your company undoubtedly relies on a vast store of electronic data. If this information were lost, it could be expensive and time-consuming—and, in some cases, impossible—to recreate. Make it a practice to back up your critical data nightly and to store the backup data in a safe, offsite location. It’s also a good idea to keep a second backup copy from the previous day.
   
   
3. Practice recovery drills. Even if you have the foresight and commitment to back up your systems on a regular basis, how quickly could you get your computers up and running if disaster strikes? Do you know exactly how to restore the data? Are you sure the tape drive you use for backups is still compatible with your system and is not outdated? The best way to answer these questions is to run a practice drill occasionally. This will confirm your backup tapes are free of defects, and that you are indeed able to respond quickly in a true emergency.

In today’s competitive business environment you can’t afford to lose one day to a computer shutdown. If you are unable to service your customers’ needs, your competition will be happy to do so. Businesses that plan ahead are are in the best position to keep disruption to a minimum. Following these steps can help get your company “up and running” quickly if disaster strikes. Give us a call today for more information on EDP coverage.

Environmental liability: a concern for your business?

Evolving attitudes, new legislative and regulatory initiatives, and constant product and process innovations continue to make environmental compliance and repercussions for violations of environmental laws a significant concern for today’s business owners. Since pollutants are surprisingly common and exist in many different forms, most businesses, regardless of whether or not they handle hazardous materials, have some type of environmental liability. However, the typical general liability policy often does not provide enough protection for pollution exposure. For many businesses, obtaining environmental impairment liability insurance coverage—either through a separate policy or by obtaining a specific endorsement—is becoming a critical part of risk management.

What Is Environmental Impairment Liability Insurance?

Environmental impairment liability insurance protects businesses from environmental damage caused by contaminants released into or on land, the atmosphere, or any watercourse or body of water. These policies may cover the expense of both on- and off-site environmental cleanups mandated by the government; bodily injury or property damage liability; defense costs for environment-related lawsuits; business interruption costs; loss of value of third party property as a result of contamination; and liability of parties contracted by your business.

How Can You Be Sure?

Environmental problems can surface from previous business actions unknown to you. There may be existing pollutants on your property, or your company’s disposal procedures may be inadequate. Environmental liabilities often have unlikely origins, and there may be no indications that particular problems exist. In light of this, here are a few steps you can take to help minimize the risk of environmental liabilities on your business.

1. Evaluate your history. Check for problems, both past and present, on any land your company owns, and be sure to use extra caution when purchasing new sites.
   
   
2. Examine your risks. What chemicals do you use? If you have a subsidiary company, what chemicals does it use? Do you store hazard- use? Do you store hazardous materials on site? What are your disposal procedures? These are just a few of the questions you should consider in your overall risk analysis.
   
   
3. Create an emergency procedure. Make detailed preparations for handling possible accidents and train your employees accordingly. The plan should be accessible at all times, and a copy should be kept at an off-site location.
4. Be aware of federal, state, and local regulations. These may vary according to area and type of business operations. Also, be sure you understand reporting requirements in case of possible accidents.
   
   
5. Report any accidents immediately. Notify the appropriate regulatory agencies of any accidents that may lead to environmental contamination; then, begin containment and cleanup immediately. Also, give us a call so we can start acting on your behalf.

Businesses of all sizes and types can potentially face pollution liability, the effects of which could be devastating to a company’s finances and its ability to continue business operations. While some businesses just need an endorsement to their general liability policies, others may need separate environmental impairment liability coverage for full protection. Please feel free to get in touch with one of our qualified insurance professionals for more information.

Using life insurance for business ends

Life insurance is an important feature of many business arrangements. While most business owners are familiar with providing life insurance as an employee benefit, many may not fully appreciate the variety of other business uses that are available. Here are some of the more common ways you can use life insurance to help benefit and solidify your business:

Funding Buy-Sell Agreements. Under a typical buy-sell agreement, business partners agree to purchase each other’s interest if one of them dies. Life insurance can be a cost-effective method of funding this type of agreement provided you and your partner are insurable. And, if you purchase cash value insurance, you can use the accumulated cash value to buy out your partner’s share if he or she retires or becomes disabled.

Providing an Employee Benefit. Life insurance is a basic component of many employee benefit packages. One good example is a traditional employee group term plan, which generally covers most employees. You can also use life insurance to enhance the benefits of elect (key) employees who are vital to the success of your business. In many instances, this death benefit coverage can be provided at little cost to the select employee. Businesses must be careful, however, not to violate antidiscrimination tax regulations when providing individualized employee benefits. Always seek professional advice.

Insuring Key Employees. The death of a key employee can create a number of financial pressures for a business: Revenues may be affected, customers must be assured business operations will continue, and a replacement must be recruited and trained.

Key person life insurance can provide funds to help meet all these needs without jeopardizing your business operations or cash flow.

Insurance in Qualified Retirement Plans. Life insurance can generally be acquired within a company’s qualified retirement plan. Legal limits apply in general, and some may be specific to whether the plan is a defined contribution plan or a defined benefit plan.

Guaranteeing Business Loans. Owners of new or growing businesses may face difficulty in obtaining business loans. Lenders want to be assured that loans will be repaid, even if you die unexpectedly. Business credit life insurance may make it easier to obtain financing by guaranteeing repayment with a life insurance policy.

Tax Benefits and Consequences

Life insurance presents business owners with many opportunities for tax savings, but it also has the potential for negative tax consequences. It is important to understand the issues up-front. Careful planning is essential to maximize the tax benefits and minimize—or eliminate—any tax consequences.