June 2005

Covering Your Assets

High Tech Connect Sound Bytes Excerpt

Most independent consultants don't ever think about buying insurance, but as we all know, stuff happens. Always when you least expect it, too.

Every business faces the reality that it will be the target of legal action from past, present and prospective employees or clients. Even if the claim is groundless or fraudulent, the defense of a suit can be expensive in time, resources and finances. Increasingly, corporate clients are also requiring business or professional liability insurance even when you are a sole proprietor working from home.

The Insurance Information Institute (III) in New York City estimates that about 40 percent of small business owners have no insurance at all, because many falsely believe they can't afford coverage or don't have the time. The truth is any small business can't afford NOT to have adequate insurance.

Communications and marketing consultants have frequent contact with multiple publics so there is greater exposure to legal liability arising from the conduct of a business compared with the potential for legal liability from personal activities. Think how one missing decimal point in a press release or incorrect word on a web article could affect a client's stock price, or incorrect information on a product brochure could cause damage to an entire network.

Here are common types of small business insurance:

• Business liability insurance - a standard business owner's policy (BOP) provides coverage for property (fire, wind, theft, etc.), liability (injury of someone in your business or by your product) and business interruption. It's designed to protect your business assets if your company is sued for something it did or even didn't do that resulted in bodily injury or property damage to someone else.

• Worker's Compensation - any employee who has suffered an injury or illness resulting from employment is entitled to workers' compensation benefits provided at the employer's expense.

• Errors & Omissions - appropriate for anyone who gives advice, makes educated recommendations, designs solutions or represents the needs of others, such as teachers, consultants, software developers, ad copywriters, web page designers, placement services, telecommunication carriers or inspectors.

• Commercial Automobile Insurance - If you transport a client or move property by a motor vehicle, you may have personal auto insurance, but you still need commercial auto insurance. That's because vehicles involved in an accident while engaged in company business may not be covered by your personal insurance.

• Employment Practices Liability - a relatively new form of liability insurance, it provides protection for an employer against claims make by employees, former employees or potential employees. It covers discrimination (age, sex, race, disability, etc.), wrongful termination of employment, sexual harassment, and other employment-related allegations.

• Disability Insurance - probably the most overlooked and important coverage for individuals. It covers some portion of your salary if you are injured or disabled and can't work.

• Umbrella Liability Policy - every small business is vulnerable to a major catastrophe or a huge lawsuit. Umbrella insurance policies provide additional liability insurance coverage after the limits of your underlying policy are reached. It's not expensive and in certain instances, it could literally save your business.

Most small businesses, even sole practitioners, should consider liability insurance to cover business- related activities. This is especially important for professionals such as health care workers, architects, engineers and independent consultants who face a greater level of potential legal liability because of the highly specialized and/or technical nature of their work.

You may want to contact a local insurance broker to make sure your business and personal assets are adequately protected. Here are some resources to help you learn more:

Insurance for Home-Based Businesses from Allbusiness.com

A Small Business Insurance Primer from American Express

Protect Your Business: 7 Types of Insurance Coverage from Microsoft Small Business