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6 Basic Insurance Policies Every Small Business Should Consider

Insurance policies

When you open a business, you expose yourself to legal liability and risk. One of the most overlooked parts of opening a business is purchasing the correct insurance to cover and protect it. While there are many great insurance options for small businesses, it can be daunting to figure out which you actually need for your business. Here are six common small business policies worth considering:

General Liability coverage

General liability insurance (GL) provides essential protection for your business. Sometimes referred to as small business or commercial liability insurance, it protects against bodily injury claims, damage to the property, and personal injury.

Who should purchase? Those who interact with clients in person, use advertising, utilize third-party locations for business, or are required to have this coverage for a project.

What’s the cost? Pricing is a factor of industry, location, business size, and the degree of coverage you need; Hiscox reports that an IT consultant who makes $100,000 annually might pay $350.

An important note: for small business owners who have hired staff, GL usually will not cover worker’s compensation (if an employee injures themselves on the job), nor will it cover Personally Identifiable Information (PII); so additional insurance should be considered for employees.

Worker’s Compensation

If you’re even considering hiring employees, you should get quotes for Worker’s Compensation insurance (which typically can be appended directly to an existing policy). This will cover your business if one of your employees is injured or dies on the job/as a result of their work.

Who should purchase? Those with part-time and/or full-time employees.  Even employees who are a “low risk” for work-related injuries could slip and fall or develop carpal tunnel syndrome. While these seem minor, they can be costly to a business; you could even be liable to cover lost wages. The National Safety Council reports that the average cost of a worker’s comp claim is $40,000.

What’s the cost? The degree of risk must be considered for a quote from an insurance provider; Insureon reports that a low/medium risk business might pay $47 monthly.

Business Owners Policy

A business owners policy (BOP) is usually added to GL insurance to ensure the business equipment and property are covered as well. This can often be customized to include vehicle liability insurance, office insurance (for fire or business interruption), and/or electronic data loss.

Who should purchase? Those who own a piece of property or valuable business equipment required for work.

What’s the cost? It varies widely based on industry, location, and business size; Hiscox quotes a Business Consultant in MA at approximately $760 annually.

Professional Liability Insurance

With more people consulting now than ever before, professional liability insurance has become increasingly popular. Sometimes referred to as Errors and Omissions Insurance (E & O), it protects against the risk of professional services. In other words, it shields the business if you’re sued by a client for making a mistake, and will cover costs to defend yourself or reach a settlement.

Who should purchase? Those who act as consultants, advisors, etc.; anyone who provides professional advice or service to clients.

What’s the cost? It varies based on industry, location, company size, and the amount of coverage you need. An IT consultant in California, for example, is projected to pay $441 annually for professional liability insurance.

Property Insurance

Property insurance, sometimes called commercial property insurance, simply covers a business’ real estate assets and its contents.

Who should purchase? Those with a physical location for their business (whether leased or owned), or who have products, inventory, or valuable business assets that are crucial to running the business.

What’s the cost? Coverage is expansive, ranging from small standard policies targeting specific risks/locations to much larger plans that include natural disaster coverage.

Cyber Security Insurance

Cybersecurity is a rapidly evolving field, as serious breaches have reached an all-time high. Cyber attacks could drain all valuable data, leaving one unable to perform operations or access any systems. They may also be liable for any personal health or identifying information stolen by hackers. Cybersecurity insurance protects businesses against these computer-related crimes, losses, or simply if a laptop containing important data goes missing.

Who should purchase? Those who maintain any sensitive and/or personal information and those who accept credit cards or other forms of digital payments.

If you have any questions or need assistance with small business insurance, please contact LRZ Consulting.

4 Tips for Working Remotely

With the unfortunate rise of the COVID-19 pandemic, more employees are working from home than ever before. Since we’ve always operated this way at LRZ, here are some tips for working remotely that have been helpful for us over the years.

Invest in a comfortable setup

Can’t stress this one enough. If you’re working eight hours a day cooped up in the same environment, even the smallest discomfort can become very irritating. I used to experience minor back pain every day; nothing significant enough to see a doctor about, but it was there. After trading in my old desk chair for a newer model, the pain was gone. It didn’t take long for me to determine the old chair with poor neck support had been the problem all along. Moral of the story: take the time to curate a comfortable setup for yourself. Especially since many of us are likely working from home indefinitely, consider purchasing a standing desk, reevaluating your chair, or getting something small like a cushioned mouse pad; whatever will keep your workspace comfortable. Similarly, make sure you have the necessary computer setup. I’m personally most efficient with three monitors and a wireless mouse/keyboard.

Know your phone and video-conferencing etiquette

Video calls have become more prevalent over the past few years, even since before the pandemic hit; I’m sure many of you have had a Zoom subscription for quite some time now. But since March, it seems that half of the day is spent on unfocused or inefficient calls. Raise your hand if you’ve been on a call where the host dials in over five minutes late, or someone doesn’t realize they are muted/unmuted, or there’s lots of background noise and it’s hard to hear, the list goes on and on. It can be very frustrating.

We try to follow two basic but important principles:

  1. If you’re the meeting owner, act like it. You have to be on time to start the meeting on time. Take a moment at the beginning of the meeting  for housekeeping items – remind everyone to mute themselves when not speaking (if there are a lot of participants) and lay out any other guidelines. Lastly, recap the agenda and goals of the meeting. This will make it easy to get the discussion back on track if it gets out of your control later on (be honest, we all have peers who commandeer meetings or steer the conversation off topic). Just remember that everyone in the meeting benefits when someone steps up as a leader.
  2. Don’t be afraid to speak up. This could include inserting a question, or (politely) asking someone with lots of background noise to mute themselves. Believe me, the other participants on the call will be internally thanking you for speaking up, rather than having to sit through a call full of technical issues.

Set a schedule and stick to it (but don’t forget to take breaks)

One of the most necessary traits to have when working remotely is discipline. Establish guidelines for what constitutes a “normal” workday – would your employer be comfortable with you working a more flexible schedule that dips outside the average nine-to-five, or do they expect you to be available strictly during those hours? My personal recommendation to employers: if it’s not imperative for your employees to be online for specific hours, then allow them to have some flexibility. We as humans are more efficient when taking periodic breaks, so go get a workout in, do a hobby, or cook a homemade meal for yourself – it’s almost guaranteed to boost your productivity.

Work on your green thumb

It may sound silly, but try bringing some plants into your workspace. You don’t need an expansive garden that requires a ton of upkeep; even a single succulent can breathe some life onto your desk. There’s countless health benefits too – having plants in your home can lead to better air quality, increased memory and focus, and reduced stress. (And we personally just love the way they brighten up the room.)

A Thought on Health Care & Tax Reform

The origin of employer-sponsored health insurance in the United States was a plan created by a group of teachers in Dallas, Texas in 1929. The insurance didn’t cover medication, physicals, or the majority of other items covered by a typical health insurance plan today. The insurance covered expenses for the participating teachers at one hospital in the area. The idea behind the plan was that these teachers, like most other professionals, would have no ability to cover their medical expenses if they had a serious condition that required treatment and hospitalization over a long period of time. They were pooling their risk, which is essentially the reason for obtaining any insurance coverage, whether it be medical, home, auto, life, etc. Subsequently, in the 1950s, federal law was established to exclude these employer-sponsored health benefits from federal taxes. This was, in essence, a way of subsidizing health insurance premiums to increase the percentage of the population that had access to affordable health insurance coverage. A noble cause by any measure.

Fast forward to today, and we now have employer-sponsored plans that come with a Health Savings Account (HSA). Contributions by an employee to an HSA are not subject to federal income tax, and contributions made by employers are also not subject to federal income tax for the employee and are deductible for the employer. Earnings within an HSA can also accumulate tax-free, which have caused some people to refer to an HSA as having triple tax benefits. Take a look at the list of medical expenses an HSA can be used to cover, and you will see that LASIK is a qualifying expense. LASIK, for the right candidate, can lead to a huge increase in quality for life. I am certainly not saying there should be less LASIK procedures. But LASIK, in almost all cases, is a luxury. It is an expensive procedure that an individual elects to go through based on their personal evaluation of the costs, risks, and benefits. Due to the tax favorability of HSAs, they have made it so that individuals are receiving a tax break when they have LASIK, if the individual has an HSA. That means current tax laws are subsidizing LASIK. Funds that could be going to life-saving procedures, to reduce health insurance premiums, or going to other government initiatives such as education or defense, are instead going to help those receiving an elective procedure.

This post isn’t politically charged and it’s not an argument against HSAs. It is a reminder that with every aspect of tax reform, we must think about both the intended and unintended consequences that may result from each provision. We should ask how it will affect behavior, what impact will it have on the economy, does it allocate limited resources in the best manner, and does it pass the common-sense test.

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