Few things in life are as risky as launching and running your own small business, or expanding your existing business. There is always the possibility that you could be involved in a lawsuit brought by an individual who has suffered an injury and will seek to attribute the injury to negligence on your part.
Major parts of the risk of any business are liability to others and the loss of critical equipment. Either incident could cause a loss of income that could force you to close you doors. Insurance allows you to transfer these risks to the insurance company–offering you protection and security!
My clients often ask me how soon should I purchase insurance?” Insurance is needed from day one. If you suffer a loss and have no coverage, no insurance agent will be able to help. Also, certain laws or leases may require insurance before you are able to start operating.
Generally, you will need to have three types of insurance: Professional liability, General liability, and Property coverage.
Professional Liability commonly known as malpractice liability–is bodily injury and/or property dam-age arising out of any personal or professional service you perform.
General Liability will provide coverage for any damages for which you are held legally liable as a result of bodily injury or property damage, including any suit, both for defense costs and any settlement. General Liability claims can result from such things as someone tripping on a carpet or bumping their head.
Your coverage must include defense costs. Often settlements are not paid or are very small, but the defense costs could be thousands. Your insurance must provide you with protection from the start of the claim.
Your liability insurance policy should also include products liability coverage, which in some cases could be secondary to the manufacturers’ coverage.
Property Coverage will provide protection from such perils as fire, lightning, windstorm, water damage, vandalism, and theft. Perils generally not covered would be earthquake and flood. Your property includes your building (if you own it), your contents (including equipment, inventory, and betterment’s and improvements made to the premises). A careful inventory of your equipment and contents will provide you with the amount of coverage needed to properly protect your business.
Property Coverage can be written on either an “actual cash value” or “replacement cost” basis. We recommend replacement cost in order to have your property replaced at today’s’ cost without depreciation.
Knowledge is Your Best Protection. The insurance agent you use can be as important as the coverage you buy. You will want to deal with a licensed insurance professional who is qualified in their field, knows your industry, and who represents “A” rated insurance companies
Do Not Be Afraid to Ask Questions about the policy you are buying, the qualifications of the agency placing the coverage, and the rating of the company writing the policy. Be aware that often a lower price does not determine the best deal. As with any other major purchase you make, be sure to be an informed consumer. If you do not know the questions to ask, speak with other professionals in your field, seek in-formation from trade associations and read trade publications.
Also, keep your insurance up to date. Only you know when you are changing locations, adding services or purchasing new equipment. In order to protect yourself, you must notify your agent of these changes.
(originally published in the CO Society of Aesthetics and Spa Therapists Association newsletter)