Why your insurance policy should be as unique as your business.
By Rakesh Gupta
Today’s small business owners are often doing the jobs of a whole team — HR, PR, sales and more — and working long hours to make their business successful.
Making sure the company is properly insured is a necessary responsibility that shouldn’t be time-consuming. However, too many owners and managers are overlooking this task. In fact, 75% of small business owners are underinsured, according to Marshall & Swift/Boeckh. Not having the right coverage to match individual business needs opens an owner up to additional risk.
A business owner’s policy should be as unique as the business. For example, a chef opening a brand-new restaurant has much different coverage needs than a veteran salesperson operating a new retail store.
The chef must consider:
- Liquor liability
- Food spoilage
- Non-owned auto coverage
The retail store needs coverage for:
- Delivery errors and omissions
- Merchandise withdrawal (recall)
- Data compromise
A good option for small to mid-sized businesses is a business owner’s policy, or BOP. A BOP is property coverage and general liability insurance wrapped into a single policy. It can be customized through endorsements, making it unique to the business’s current needs and risks.
The chef’s BOP should include the following coverage for his or her restaurant:
Liquor Liability
This endorsement covers a bar or restaurant for the liability of selling, serving or furnishing alcoholic beverages. For example, if the business is found liable for serving someone visibly intoxicated who is involved in a car accident after leaving the establishment, this endorsement would cover the legal expenses. It is important to note that most states require businesses selling alcohol to have liquor liability coverage.
Food Spoilage
Equipment breakdown or a power outage could cause food inventory to spoil. This costly loss could be reimbursed if the restaurant has coverage for spoilage of food. In addition, if there is an outbreak of a foodborne illness, this endorsement could reimburse the business for contaminated food, required cleaning of equipment, loss of income if forced to close for a time, vaccinations or medical tests for employees, and reputation-rebuilding public relations or advertising costs.
Non-Owned Auto Coverage
Restaurants with delivery services may allow drivers to use their own vehicles for deliveries. In this case, they should make sure to add a non-owned auto endorsement to their BOP. This coverage provides liability protection when an employee uses a vehicle for business purposes that is not owned, leased, rented or borrowed by the business. In most cases, personal auto policies don’t cover damages incurred when a vehicle is driven for business.
Although some endorsements will overlap between industries, a business owner’s policy allows each business to ensure they have the exact coverage they need. In contrast to the chef, a retail business owner would need to consider the following BOP endorsements:
Delivery Errors and Omissions
E&O coverage should be a consideration for many professional services, but also for retail shops. An errors and omissions endorsement covers delivery failures or mistakes.
Merchandise Withdrawal
A recall can happen in any industry at any time — wiping critical profits from store shelves. Merchandise withdrawal coverage reimburses a company for costs associated with a recall, including removing merchandise, notifying customers and returning the recalled items to the supplier or manufacturer.
Data Compromise
This endorsement should be considered by any business that stores customer data in any way. Data compromise coverage includes expenses required to respond to the loss, theft or accidental release of personal information, including forensic IT review, legal review and notifying affected customers, as well as public relations and advertising services to help repair the business’s reputation. It also covers defense liability for lawsuits and damages that result from a data breach, which would reimburse the business for defense and settlement costs in the event that someone whose personal information was breached files a lawsuit against the company.
It’s also important to note that as a company evolves, so should its coverage. An experienced insurance provider can walk a business manager or owner through the options to build a customized coverage plan that’s right for their current, unique business needs. With today’s technology, owners can answer a few dozen questions online and receive a quote in minutes. Running a business is complicated; business insurance should be simple.
— Rakesh Gupta is the chief operating officer at biBERK.com, part of Warren Buffett’s Berkshire Hathaway company, specializing in commercial insurance for small businesses. biBERK provides small business owners with a superior customer experience and high quality coverage at a low price by disrupting the traditional insurance sales model. He can be reached at rgupta@berkre.com.