Utah Small Business Health Insurance
Utah Small Business Insurance 101
As an entrepreneur myself, I appreciates the undertaking of a new venture, and I know it has its difficulties and pressures. The intent of this article is to make sure that business owners don’t have to add insurance to that list of worries. Whether you know exactly what you need or you don’t know where to start, after reading this article you’ll have the knowledge needed to buy your first business insurance policy with confidence. So increase your businesses chances for success by ensuring you have the proper insurance coverage in place to protect your business.
General Liability
Comprehensive general liability coverage insures a business against accidents and injury that might happen on its premises, as well as exposures related to its products. For example, suppose a visiting customer slips on a banana peel while taking a tour of your office and breaks her ankle. General liability covers her claim against you. But let's say your company is a window-sash manufacturer, with hundreds of thousands of its window sashes installed in people's homes and businesses. If something goes wrong with them, general liability covers any claims related to the damage that results. The catch is that the damage cannot be due to poor workmanship, this points out one difficulty with general liability insurance: It tends to have a lot of exclusions. Make sure you understand exactly what your policy covers...and what it doesn't.
How much liability coverage do you need? Generally, experts say, $2 million to $3 million of liability insurance should be plenty. The good news is that liability insurance isn't priced on a dollar-for-dollar basis, so twice the coverage won't be twice the price.
Property/Casualty
Property and casualty insurance provides coverage for losses due to the physical damage or destruction of your business. With the right policy, neither fire nor exploded boiler can put you out of business. Everything from your office building to your cabinets to your water cooler can be covered.
Make sure you get all-risks coverage. Then go the extra step and carefully review the policy's exclusions. All policies cover loss by fire, but what about such crises as hailstorms and explosions? Depending on your geographic location and the nature of your business, you may want to buy coverage for all these risks. Whenever possible, you should buy replacement cost insurance, which will pay you enough to replace your property at today's prices, regardless of the cost when you bought the items. It's protection from inflation.
Worker's Compensation
Workers' compensation covers medical, rehabilitation costs, and lost wages for employees injured on the job, is required by law in all 50 states. Typically Workers’ comp insurance becomes applicable when you have three of more employees, but laws vary from state to state. Workers' comp insurance consists of two components, with a third optional element. The first part covers medical bills and lost wages for the injured employee; the second encompasses the employer's liability, which covers the business owner should the spouse or children of a worker who's permanently disabled or killed decide to sue. The third and optional element of workers' compensation insurance is employment practices liability, which insures against lawsuits arising from claims of sexual harassment, discrimination and the like.
Generally, rates for workers' comp insurance are set by the state, and you purchase insurance from a private insurer. The minimum amount you need is also governed by state law. When you buy workers' comp, be sure to choose a company licensed to write insurance in your state and approved by the insurance department or commissioner. If you are purchasing insurance for the first time, the rate will be based on your payroll and the average cost of insurance in your industry.
Health Insurance
Ahh…the joys of health insurance, most of us have a good understand of the important role health insurance plays in our lives, but we hate the costs associated with having it! As a start-up you’re trying to keep your costs ultra low and need a plan that will accomplish that. In most cases it’s cheaper to go with an individual health insurance plan for your family and partners vs. group insurance plan and/or Cobra insurance through a previous employer. Selecting an employers Cobra insurance plan will prove to be the most expensive method of providing health insurance. However, in some cases if the family or individual has some significant health issues Cobra insurance maybe the only available option.
The best thing a business owner can do is consult with an experienced health insurance agent to determine what options would be most appropriate for your unique situation.
Life Insurance
Often times when starting a new venture life insurance is overlooked, this is because in most cases the individual had life insurance coverage through their previous employer. It’s critical to not overlook the important role life insurance plays in starting a new business venture. After all your family, your customers, and your business partners will be depending on you more than ever. And often times banks require a life insurance policy on the business owner before lending any money. Such policies typically take the form of term life insurance, purchased yearly, which covers the cost of the loan in the event of the borrower's death or disability.
Term insurance is less costly than permanent insurance at first, although the payments can increase each year depending upon the type of policy. Permanent insurance builds equity and should be considered once the business has more cash to spend. The life insurance policy should provide for the families of the owners and key management. If the owner dies, the creditors are likely to take everything, and the owner's family will be left without the income or assets of the business to rely on.
Key Man Insurance
Key man insurance pays out when an invaluable team member dies or, more commonly, becomes disabled. For many small businesses, the only truly indispensable person is the owner -- in which case it may merely duplicate individual life and disability policies. The exceptions include partnerships, for which these policies are often used to buy out a member or his heirs, and companies in which a particular employee possesses technical or highly specialized skills or knowledge that can't be easily replaced. When you buy it, buy enough to cover the cost of finding a replacement and maintaining support staff and facilities until the new person begins to earn his keep. Key man disability is separate from key man life and usually limited to a percentage of the person's income.
Buy Sell Agreement
A buy-sell agreement is a critical component to every business continuation plans. A good buy-sell agreement will address a series of important “what if” questions: What if an owner dies, what happens to the business? What if an owner becomes disabled? What if an owner suffers a serious illness? What if an owner suffers a divorce?
In the unfortunate event that a business owner, partner, or shareholder experiences any number of unforeseen events the buy-sell agreement ensures that the business will remain intact. Most buy-sell agreements are funded with life insurance which provides for immediate funds to buy out the owner's family or partners at fair market value. When determining your insurance needs to fund your buy-sell agreements or owner disability plans, be sure to consider any costs, expenses or liabilities related to your business and how they will be handled. Consult with an expert in business succession to have a discussion and advise you on establishing your plan.
Disability Insurance
It's every businessperson's worst nightmare--a serious accident or long-term illness that can lay you up for months, or even longer. Disability insurance, sometimes called "income insurance," can guarantee a fixed amount of income--usually 60 percent of your average earned income--while you're receiving treatment or are recuperating and unable to work. Because you are your business's most vital asset, many experts recommend buying disability insurance for yourself and key employees from day one.
There are two basic types of disability coverage: short term (anywhere from 12 weeks to a year) and long term (more than a year). An important element of disability coverage is the waiting period before benefits are paid. For short-term disability, the waiting period is generally seven to 14 days. For long-term disability, it can be anywhere from 30 days to a year. If being unable to work for a limited period of time would not seriously jeopardize your business, you can decrease your premiums by choosing a longer waiting period. Another optional add-on is "business overhead" insurance, which pays for ongoing business expenses, such as office rental, loan payments and employee salaries if the business owner is disabled and unable to generate income.
In Summary
No one ever said starting a new business would be easy, but when done right is always worth it! Start ups will face a series of challenges in getting the business off the ground, and the fact of the matter is most business owners simply want to focus on those key tasks they do best. This is why it’s so important for business owners to surround themselves with experienced professional advisors.