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Business insurance: More than a budgetary afterthought

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From ransomware to a roof failure, trucking chemical spill or company car accident, does your business insurance policy have you covered?

While it might seem like yet another bill to pay, not having appropriate business insurance or misunderstanding the benefits a policy provides can result in mild disappointment or catastrophic damage, loss of resources, harm to your reputation or worse.

Business insurance should never be an afterthought. A basic policy should be flexible enough to cover existing business plans and operations, and poised to evolve over time as the business grows and changes.

“It is important to understand the types of coverage available and how they relate to your business,” said Robert F. Firely Jr., a Certified Public Accountant and partner at Herbein + Co. Inc. in Wyomissing.

INSURING LOSS OF PROFITS

Tailoring business insurance to coverage needs and not over-insure helps to contain costs and avoids wasting insurance premium dollars.

Firely said often business owners don’t consider insuring against a business interruption or have loss-of-profits coverage.

“This insurance provides cash flow in the event that a business is unable to conduct normal operations [because of] fire or water damage, for example,” he said.

CYBER INSURANCE

Is the building or property owned or leased? That arrangement affects the insurance that is needed, Firely said.

Firely said adequate insurance protection for significant business risks should include fire, flood, theft, liability, building(s) and contents.

“One additional consideration in today’s business environment is cyber insurance,” he said. “Cyberthreats are a relatively new phenomenon, but are also an increasing risk to businesses.”

INCREASED COVERAGE

Susan Jarvis learned quickly what her policy would cover last year when the Certified Public Accountant experienced a business cyberdata breach.

The owner of Susan D. Jarvis CPA in Bushkill Township, she said “awareness is huge.”

While her general liability policy provided protection, Jarvis has since increased the amount of her coverage and added specific coverage to address data protection.

She said business insurance looks different for different business needs, but insurance policy essentials should include: type of work being done, where work is being done, revenue streams and gross revenue.

POLICY REVIEW

Don Elsenbaumer, a CPA with Loch, Elsenbaumer, Newton & Co. in South Whitehall Township, said an annual policy review is a must.

“However, any time a business is experiencing significant changes … growth in revenue, assets or personnel, [that should] prompt a discussion with your insurance agent,” Elsenbaumer said.

He said a few points should always be top of mind:

Have a clear understanding of what the policy does and does not cover.

Are coverage and policy limits appropriate now and for the future?

Are there coverage gaps in the policy? Should they be filled to prevent loss?

TEAM APPROACH

Elsenbaumer advocates a team approach to business insurance advisement, which should include a CPA, attorney and insurance provider.

“Each business adviser brings a different expertise and perspective,” he said. “To me, a team approach makes the most sense.”

He recommended the team approach to clarify and understand insurance policies and avoid disappointment, should claims need to be made.

IDENTIFY LIABILITIES

Cheri Hutchinson Freeh advises new business-owners to identify and discuss the liabilities associated with their business with an appropriate insurance agent and include a CPA and attorney in talks. Freeh is a CPA and principal of Hutchinson, Gillahan & Freeh PC in Richland Township.

“The best piece of advice I can give any business owner is to realize that it’s OK to not know everything,” she said.

“… But it’s important to accept this and then surround yourself with trusted business advisers who can help.

TAX ADVICE IF A CLAIM IS MADE

Freeh said once a claim is made, some insurance proceeds may be taxable income, and business owners need to understand their obligations up front.

“If a [business] taxpayer experiences a loss and receives insurance proceeds, I strongly suggest that they consult with their tax preparer to determine if any of it could be considered taxable income,” she said.

“No one wants to be hit with an unexpected tax bill.”

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