Posted: February 17, 2012

By Susan Smigielski Acker

Correspondent

Insurance protection for a business can be a complex topic but one that shouldn't be avoided.

Business owners can purchase either a business owner's policy or a commercial package policy, according to Ken Johnson, an agent with Middle Peninsula Insurance Co. in Williamsburg.

Johnson more often recommends a business owner's policy for small business for two reasons: It is economical and has coverage over multiple items, some of which an owner may not even need, at least right now.

"I like to say a business owner's policy is like a buffet: You pay one price for a lot of food, some of which you may not eat," he said.

"The commercial package is more like cafeteria-style. When you go to a cafeteria, you select certain items and are charged for each one separately.

"The business owner's policy has broader coverage," he said. "For instance, you may not have an outdoor sign and not need one, but the policy has coverage for an outdoor sign. You cannot take it out. However, if you decide later to put a sign up outside, it will be covered."

A business owner's policy covers personal property of the business. Johnson said if a business is leasing its space and there is damage due to a storm, the landlord is responsible only for replacing his property, not for items the business loses such as desks, chairs and computers.

"Many times businesses have spent thousands of dollars on equipment, decorated, put up cubical walls. That will not be replaced by the landlord," he said.

A business owner's policy protects loss of income for up to 12 months.

"If you have a fire and you cannot operate your business for six months and were drawing a salary, this insurance will help replace the net income," Johnson said.

It will also help with extra expense. Johnson said many times businesses will operate in a temporary location, with a business owner's policy covering the extra expense of moving and securing a lease.

When St. George Brewery Co. in Hampton experienced a fire a couple of years ago, it relocated for six months.

Later the business moved to a permanent location.

Bill Spence, St. George's general manager, said the brewery has a loyal customer base and couldn't afford to be out of business. Insurance helped to temporarily relocate and to rebuild.

There are two kinds of coverage for theft: employee theft and other theft. Coverage varies, depending on the business.

"An electronics store, which has a high-value inventory, should consider the risk of their supply being stolen over an accounting office," he said.

There are several events not covered under business owner's insurance including flood and earthquake. Flood is something to consider, Johnson said, because of the frequency of hurricanes in Hampton Roads.

"And after the recent earthquake, there were a lot of people thinking and talking about earthquake insurance," he said.

When considering a deductible, Johnson said a business owner should ask, "How much do I want to insure myself?"

In other words, how much savings can be used for a catastrophic event?

"The deductible really drives how much the premiums are going to be. If you can insure yourself with your own money, then you can have a deductible for about $2,500, which will reduce the premium. But if you cannot insure yourself for a high amount, a low deductible is better and the premiums will be higher."

You

can save a lot of money by having a lower premium if you have a higher deductible, he said.

Depending on the type of business, it may not make sense to increase the deductible.

"I have written some policies where a $1,000 deductible versus a $500 deductible only saved the business owner about $200 a year with the premium. In that case, having the lower deductible made sense," he said.

When selecting an agent, Johnson said there are two ways to go: an agent who works for one insurance agency or an independent agent who deals with multiple companies.

He recommended dealing with an agent who works with many businesses that are in the same type of industry.

"For example, if you have a car repair business, then you want to go with an agent who works with a lot of other car repair businesses. They will understand more what type of insurance is needed because they understand the type of business."

"We represent 60 to 80 churches, because they hear about us through other churches," Johnson said. "We know their needs as a church."

He recommends dealing with an agent who has connections to the community.

"Ask around. Usually small business owners know other small business owners," Johnson said. "Ask if they are happy with the service and the relationship.

"The small business owner doesn't have time to worry about insurance," he said. "They need to have someone they can trust."