Loss Insurance 1
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How to Protect Your Business and Personal Assets from Loss
Business insurance is something few people like to discuss and no one likes to buy. After all, who really wants to pay for something they can't see or touch and hope they never have to use?
Like it or not, however, insurance is a necessary evil A fire or theft, an accident involving a customer or employee, or a lawsuit brought against you or your company could destroy your business and eat up your life savings if you don't have adequate insurance. This chapter alerts you to some of the risks you may face and gives you the basic facts you need to make informed decisions about what kind of business insurance you should consider buying to protect your business and personal assets from financial loss.
I’m always careful in my work and fix things if customers have complaints. Am I really likely to be sued?
No matter how knowledgeable or careful you are, you could suddenly find yourself the defendant in a lawsuit. Typical is the case of an independent consultant who recommended specific hardware and software for one of his business clients. When the software didn't work properly with the hardware configuration, the client sued and won a $100,000 judgment against the consultant. In another case a small company offering data storage and list management services as a sideline sustained a $2 million loss after it inadvertently mixed up two lists, substituting a list of credit risks for a list of prime customers.
Professional negligence is just one type of risk you may face as a business owner. Other possible exposures (risks) include product liability, personal injury (if a client or employee tripped and broke a leg in your home office, for instance), vehicular accidents involving an employee, and loss of equipment due to fire or theft.
I operate my business from my home. Won't my personal insurance policies protect me against losses?
Personal insurance policies offer little or no coverage for business-related losses. Homeowner's insurance usually excludes liability coverage for business pursuits and may exclude computer or other business equipment used in the home. If electronic equipment is not excluded, it may be limited to only $2,500, an amount far below what many home business owners have invested in their computer software and peripherals.
Is there any way I can get protection for my home office without getting a separate business policy?
You may be able to gain some protection by purchasing riders or endorsements for an incidental office in your home. (A rider or endorsement is an add-on to your policy.) When available these add-ons give you a limited amount of property coverage for losses to home office equipment and furnishings and a limited amount of liability coverage for personal injuries to clients or employees on your premises. Sometimes these add-ons are combined into one endorsement, and sometimes they are sold separately. They typically cover only businesses with $5,000 or less of annual sales.
Can I get endorsements to my home policy for professional or product liability protection?
No, product liability and professional liability (which is a form of malpractice insurance) are not available as endorsements to homeowner's insurance.
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