Insuring Your Office and Equipment
Life is full of surprises: some good, some bad. A tornado may drop a bag of
money on your driveway, although it's more likely to drop a tree limb on your
roof. Such unpleasant events — wind or storm damage to your house or personal
property, legal liability to others injured in an auto accident, or expenses
from needed medical treatments — are risks that we often choose to insure
ourselves against. By paying an insurance premium, you can avoid most of the
economic impact (known as a "loss" in the insurance industry) of such
unfortunate events.
When you cut through the mumbo jumbo of any insurance policy, you basically
have this: In exchange for premium payments, one party (the insurance company) promises
to pay to another party (the insured) a specified sum of money upon
the happening of a covered economic loss.
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A wind storm uproots a tree on your property, which falls on
your house, causing $2,000 damage. If you have a homeowners
policy, the insurance company — which has agreed to bear the
economic consequences of such a risk — will pay you the
$2,000, less any deductible amount (the share that you must
pay).
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As a business owner, you're going to have to weigh the cost of insuring
against a variety of risks against the economic impact of an uninsured loss.
Insurance premiums can make a substantial dent in any business's budget. How do
you obtain the right coverage at the right price without spending a lot of time
and money on research? We suggest the following process:
- Learn
why insurance is important to your business. Insurance takes on a new
dimension of importance when you go into business. Actually, the most
important coverage that you'll purchase will probably be to insulate you
from liabilities associated with what you — or your employee — might do
to someone else, rather than to insulate against something happening to you.
- Determine
which types of insurance you need. To avoid spending money on coverage
you don't need, we suggest that you review the various types of insurance
customarily available to small businesses. Then evaluate which of these
types of coverage you can, and cannot, live without.
- Determine
how much protection you need. Once you determine that you need a
particular type of insurance, you've only just begun. You must next
accurately assess how much insurance you need. Carrying too little insurance
leaves you vulnerable and may even violate state or federal laws. On the
other hand, paying $500 a year for theft insurance on a vehicle worth only
$1,000 will bleed cash from your business and get you very little protection
in return. Be sure to get as much coverage as you need, but not a penny
more.
- Explore
alternatives to insurance. In some cases, you may have to think about
ways to insulate yourself against loss without buying insurance. For
example, your carrier may be unwilling to insure you because of high risks.
Or the premiums may be so high that it's not a viable option. In other
cases, you can save on your insurance premiums by taking certain actions to
cut your risks. For example, if you install burglar alarms, your property
insurance premiums should decrease because your risk of robbery or vandalism
decreases.