Preparing the Northwest

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Insurance Facts for Small Business Owners

Coverage

Insurance companies that sell Business Insurance usually offer policies that combine protection from major property and liability risks in one package.  A common type of package purchased by small- and mid-sized businesses is the Business Owner's Policy (BOP).  Larger companies usually purchase Commercial Package policies or customize their policies in order to protect against special risks.
Standard Business Owner's Policies offer the following coverage:

  1. Property Insurance - Covers buildings and contents owned by the company. There are two different forms, Standard and Special. Special Form policies provide more coverage and tends to have marginally higher premiums.
  2. Business Interruption Insurance - Covers loss of revenue resulting from an insured loss that disrupts business operations. It can also provide extra expenses so the business can operate from a temporary location while repairs are made at the primary location.
  3. Liability Protection - Covers your company's legal responsibility for harm it may cause to other people or businesses resulting from the actions or inactions of the owner or employees. Businesses that sell or manufacture products also carry additional coverage that compensates individuals or businesses that are harmed by the product sold or manufactured by the business.
  4. Business Auto Coverage - Not included in a standard BOP but can be added as an optional coverage, or as a stand-alone commercial auto policy.

Exclusions

BOPs do not cover Professional Liability, Workers Compensation or Health and Disability Insurance. These risks require special coverage that is available in a stand-alone policy from an agent or insurance company representative.

Flood, earth movement, including earthquake, landslide and mudflow, and acts of terrorism are generally not covered by business insurance policies.  However, coverage for these perils can be purchased as endorsements or separate policies.  Consult your insurance agent or company representative for details.

Flood

If you wish to buy Flood Insurance, or your lender is requiring you to purchase it, contact your insurance agent or the National Flood Insurance Program. For information about the program, call (888) CALL-FLOOD or visit www.Floodsmart.gov. Flood Insurance can only be purchased through the National Flood Insurance Program or private specialty lines carriers.

Earthquake

Coverage for earthquake damage is excluded in most property insurance policies, including Homeowners and Business Owners package policies.  If your business is located in an earthquake-prone area, you'll need a Special Earthquake Insurance Policy or a Commercial Property Earthquake Endorsement.

Terrorism

Under the Terrorism Risk Insurance Act of 2002, only businesses that purchase optional terrorism coverage are covered for losses arising from terrorist acts.