When running a webmaster business be it web development, graphic design or seo, capital should be allocated to business insurance coverage. Interruption of business, property, accidents, commercial vehicle liability or workers’ compensation can all lead to unexpected expense. Budgeting for business insurance will depend on size of business, industry and applicability.
Cost-benefit ratio of a policy’s premium structure can be estimated in analysis of gross receipts or estimated payroll depending on type of insurance. For instance, workers’ compensation premium rates will be based on payroll, whereas property and business interruption are calculated according to property size, location, and title of ownership. Business insurance premiums are tax deductible.
The fact that businesses are subject to a number of external forces such as environmental hazards, and communications failure, means that protecting cash flows during a time of interruption is critical. The introduction of IT enterprise systems business processes in organizational operations has also led to increased risk during a network failure.
During recovery time to operations, companies can sustain delays to profit due to lost data, malfunctioning transaction gateways, and eCommerce website technical errors. Insurance covering interruption of business processes is the best method of ensuring that a small business sustains cash flows for accounts and repairs.
Protection of buildings and their contents with business insurance covers inventory and plant, property and equipment assets line-items listed in business accounting audit, as well as supplies and any liability if renting. Commercial rental insurance or business insurance providing indemnity on property is essential for recuperating finance that might otherwise be lost during an earthquake, fire, flood or other natural disaster.
Liability insurance policies covering business owners from litigation pursued by a party in response to an accident, bodily injury or property damage on site is mandated by law. In the case of a liability claim, compensatory damages for remedy of a tortious grievance are paid for by the policy. Fees included under most liability insurance policies: cost of defense, medical expenses, and settlement bonds or judgments.
Commercial Automobile Insurance
Businesses requiring a company vehicle for commercial use must hold automobile insurance. General liability coverage may be sufficient in some cases, but does not cover certain activities of employees; and especially during use for other than designated purposes.
In most states, workers’ compensation insurance is required of businesses with employees. Size of business determines if workers’ compensation is obligatory. Employee’ medical expenses and any subsequent missed wages post injury are paid under these policies. The level of insurance employers must carry, as well as the rate of benefit and types of coverage per employee, varies according to state.
Planning a Business Insurance Budget
The general rule to for calculating business insurance budget costs is to use 20% to 30% of predicted gross sales as the baseline cost for comprehensive coverage. In preparation of line-items, pay attention to these ‘4’ main priorities: 1) contract binding compliance – property, employee bonding, and public contracts; 2) human assets – health, life and disability, and worker’s compensation insurance; 3) Liability and warranty – insure against damage to customers and their property, and guarantee warranty of manufactured or distributed goods; 4) continuity – business interruption. Businesses may add standard policy supplements designed to cover targeted risk:
Directors and Officers
Employment Practice Liability (EPL).
Errors and Omissions (Professional Liability)
Fiduciary Liability and Bond
High-risk sectors such as construction and manufacturing may require a higher contribution. Health and life insurance should be part of this calculation, and there are quite a few add-ons that can be purchased. Calculation of contract labor costs should be evaluated for direct risk.
Higher premiums may be assessed if the risk of physical injury is disproportionate to other sectors. Industries where contractors sustain little physical risk, such as data management may not be considered under workers’ compensation or other accident liability policies, but cited as a substantial risk, and therefore qualified under an errors and omissions policy.
Custom coverage can increase a business’ insurance policy premium. Seek consultation from a reputable insurance agent that can provide detailed information about business property asset valuation, and cost of proportional risk related to the activities of your business. Savings may be offered in discounts, higher deductibles or umbrella insurance.
All of these types of insurance should be considered in light of your specific business needs.
About the author:
Ben Basden writes about business insurance for Insureon.com, a world class business insurance brokerage.