Know The Kinds of Insurance That SMB Need

The answer to the question: “it all depends.” There’s no one answer that’s right for all small businesses. Although every business will have some business insurance needs, a small manufacturer is going to have somewhat different needs than a web development firm with five employees, and an environmental testing company’s insurance requirements are likely to be different from those of a home-based virtual assistant.

With that in mind, take a look at a few types of insurance, and some of the factors that will help you understand whether that insurance fits your business needs:

Business Owner Policy (BOP)

A business owner policy is a single policy that many businesses can get that covers several general types of insurance needs. This is the type of policy you need if your small business rents space, if you have employees or customers come to your business location (or if you go to their location), and if you want to protect equipment, inventory, furniture and other items against loss from fire and theft.

Policies vary somewhat based on the insurer and your business needs, but in general they cover these types of losses:

  • General Liability Insurance. This insurance covers you in routine situations for bodily injury or property damage to a client or customer. These situations include things like trips and falls, or accidental damage. They are the “oops” minutes your business has, such as when a client’s assistant tripped on your employee’s sample case and broke her ankle, or your salesperson put his caramel latte down on a customer’s desk and then knocked it over onto the customer’s laptop keyboard, causing the computer to stop working.
  • Property Insurance. Think fire and theft here. Property insurance covers losses you would incur if a fire destroyed all or part of your business, or your equipment or inventory is stolen from your premises.
  • Business Interruption Insurance. The fire that destroys your restaurant’s kitchen may prevent you from reopening for and bringing in income for months, but chances are you’ll still have to continue payment on business loans and other ongoing business expenses. Business interruption insurance is the type of insurance that will help you with these expenses.

  • Industry-based coverages. If you’re running certain types of businesses, you may need or want an industry specific insurance package. This might be a BOPs that’s written based on the type of industry you are in, giving additional types of protection against things such as data loss, for example. Or it could be a heaver-duty commercial package. Be sure to ask your insurance provider about such specialty coverages and also be sure to closely read your policy and watch for change notices. It’s not unusual for insurance companies to specifically exclude some types of coverage from these policies.

Home Business Insurance

Most home insurance policies offer little or no protection for a business in your home. So, if you don’t think you need the business owner policy described above, you should at least look into getting an endorsement (an add-on) to your homeowner (or renter) policy to cover your business. An endorsement will cover equipment and inventory up to a set amount, and provide some protection against liability if delivery person or other business visitor is injured on your property. This type of endorsement is relatively inexpensive, but be sure you find out exactly what will be covered, and what the dollar limits of the coverage will be.

SEE ALSO: Does Your Home Business Need Insurance?

Product Liability Insurance

If you manufacture or distribute any kind of material product, and that product causes a physical injury, how would you pay for the financial damages and the legal fees if sued? A general business owner policy typically won’t cover this type of risk. So ask your broker about buying a product liability insurance policy in addition to the general business insurance you buy. It may be available as an add-on to your Business Owner Policy or as a separate policy.

Professional Liability

Doctors and lawyers carry thick professional liability insurance policies. Makes sense – who else gets sued more than them?

But other professionals, like accountants, need it, too. It protects you in the event someone sues you for malpractice or errors you or your employees commit as you provide a service to your clients. Again, this is coverage you may need over and above your general business insurance.

SEE ALSO: How to Minimize Law Suits and Legal Fees

Data Breach Insurance

Our modern world has created the necessity for this newer type of insurance. Have you heard of Heartbleed? Or the Target data breach? Things like this happen to small businesses, too, and the associated costs can put you out of business. Data breach insurance can help limit the financial damage to your company if private information you store about employees or clients is stolen.

Key Person Insurance

Does your company’s success highly depend on a particular individual? Maybe that’s you. What would you do if you or that person suddenly died?

That’s where key person insurance comes in. You purchase a life insurance policy for you and other key employees. The policy is for the company, not for you personally.

If someone dies, then you can use the insurance benefits to cover business expenses until a replacement person can be found. If it’s inevitable your company will need to shut down, you can do so slowly and more orderly.

If you’re a sole proprietor, you don’t need this insurance, as it does not cover your family if you die. That’s what life insurance is for.

Worker’s Compensation and Disability Insurance

If you have any employees, you’re required in most states to carry Worker’s Compensation Insurance and Disability (two separate policies). Failure to comply with the laws can result in very steep penalties. To find out about purchasing this insurance and complying with yearly audits that may be required, check with your accountant or your state department of labor. Some payroll services also can help you – for a fee – with getting and paying for workers compensation and disability insurance.

Health Insurance

You probably already know about this one. And it’s possible to dedicate a whole series of articles to it. The basics are these: you do not have to offer health insurance to full-time equivalent employees if you have fewer than 50. Once you hit that threshold, though, you do.

And, if you have less than 25 full-time equivalent employees who make less than $50,000 per year on average, you might qualify for a tax credit. For-profit small businesses can take a tax credit up to 50% of their employee premium costs, while tax-exempt employers can get up to 35%. But it’s only available if you go through Healthcare.gov’s Marketplace.

Those are various types of insurance your business may or may not need. What’s important is that now you know what each can cover, so you can make a decision regarding which your company should carry

Entrepreneurs Can Take Away From the Tour de France

Cycling is similar to many other professional sports. Beyond dealing with grueling physical challenges, cyclists rely on a strategy, and despite the fact that one person is ultimately awarded the title, a large degree of teamwork.

Many aspects of cycling have helped me understand and manage business teams more efficiently and effectively. In honor of the start of the 2014 Tour de France on July 5, here are three cycling truths that even non-cyclists can learn from:

 1. Members of the group know their leader and the leader knows the importance of the group. In multiday stage races like the Tour de France, each leg has a distinct challenge. One might be covering the distance. Another might be related to the terrain. Each leg requires different skills, and while professional riders are good in all areas, some specialize in one.

To effectively put together a winning tour, the members of a team cannot all be conditioned to excel in short individual time trials, sprint finishes and long climbs. Individuals must specialize in one of these. Likewise, employees on a team need to complement one another’s skills — not duplicate them.

Most businesses do a decent job in diversifying their talent. The real challenge, however, is in making these differences clear to employees.

In cycling, each team member knows his individual role. He may be there to catch a breakaway and bring a person back to the pack (or peloton). Or he may be there to try to push the pace — with the goal of tiring out members of other teams. Others are there simply to protect the chosen leader. By sacrificing themselves and making the leader’s ride safer and easier, the whole team goes for the yellow jersey.

Related: The Art of Keeping Your Team Focused on the Same Goal

2. There’s an art to suffering. In every Tour de France, there are epic mountain stages with long, punishing climbs through the Alps. Probably a rider will question at some point why exactly he got on the bike in the first place.

Sometimes I arrive at a point of questioning why I even own a bicycle (and this arises while trying to conquer a hill in my home state of Illinois, recently rated the second flattest state in the United States). Perhaps it’s due to the physical exhaustion. Or maybe sitting on the same, hard saddle for hours has worn on my disposition.

Such is the case with businesses. Entrepreneurs continuously pivot and push their companies forward — a long process that can be physically and mentally taxing.

Suffering with grace is critical, however. Sure, it may be the fourth 16-hour day in a row, but the whole team is likely in a similar position (or recently was). And while injecting negative energy into a company is not done on purpose, complaining is detrimental to those looking for inspiration, particularly during an uphill climb.

Let’s take a lesson from Jens Voigt (riding this year in his last tour), who famously pleads with his body while leading breakaways up mountains, “Shut up, legs!”

Related: This Is Why You Should Be Excited for the ‘Internet of Bikes’

3. Every battle matters. Whether in a stage race with natural breaks or during a long one-day race, competitors constantly have a distinct strategy to win the battle over the next 10, 20 or 50 kilometers. Even those who are long shots to win the race need to have a plant to conquer each of these battles.

The winner of the tour gets the yellow jersey, but each stage has a winner as well. And there are jerseys for best climber and most aggressive rider. These are not consolation prizes. They are serious competitions in and of themselves.

Many entrepreneurs are similarly tackling problems while pitted against larger competitors. Trying to unseat one of these competitors or win a client is a task that needs to be broken up into a million small battles. Acknowledging incremental progress builds momentum and morale. Yes, the goal is to win the war, but the individual battles do matter.

It’s often said, “None of us is as smart as all of us.” That is certainly the case in the Tour de France, where an individual operating alone, regardless of skill and fitness, would have no chance against a person backed by a team. Business is no different. Even sole proprietors need to rely on partners and teammates.

When a winner dons the yellow jersey this year, remember that it took a team of nine riders, all suffering through 21 different stages, to get him there.

Innovation Flowing as Your Startup Grows

Successful entrepreneurs often complain that their companies have lost much of the innovativeness they had when they were small startups. They miss the environment where new ideas are constantly being debated and acted upon to generate new products, services and value-adding enhancements — or to improve the way the company functions.

At the same time, the company’s growing size distances managers from the front lines and separates people in different departments. This is why an entrepreneur should also put in place formal management systems to allow for the same free flow of ideas that occurred naturally when the company was small.

 

Setting up a fast track for ideas. The first step for leaders who want their now-larger organizations to regain their sense of innovation is to set up a high-performance idea system for front-line employees — that is, a system capable of implementing 20, 50 or even a 100 ideas per person a year.

As an organization grows and managers become more distant from front-line activities, regular employees see more and more problems  — and opportunities — that these managers can’t. Our research has shown that in organizations of any size, roughly 80 percent of the improvement potential is locked up in the ideas of their front-line people.

It may seem strange that a leader looking to increase innovativeness should make it a top priority to go after (mostly smaller) front-line ideas. But there is a multifaceted interplay between innovation and front-line ideas, an interplay that most managers are not aware of and so fail to exploit. Consider the following examples:

 

Making a Post-it that sticks around. Because large innovations are novel and complex, often many smaller ideas are required to get them to work effectively or in some cases even to work at all. Art Fry, inventor of the Post-it note, once told us that the main reason the 3M product is still superior to other sticky notes is the large number of small improvement ideas that went into it — ideas that competitors have difficulty duplicating.

Large numbers of small ideas can create substantial new capabilities that allow an organization to offer innovative products and services that competitors can’t match.

In 2009, Allianz China brought out a highly customizable novel life-insurance policy called SuperFit. In an industry in which new products and services are usually quickly imitated, competitors were still struggling two years later to figure out how Allianz China was able to offer such a product. CEO Wilf Blackburn told us that the reason was his company’s extraordinary flexibility, which came from all the front-line ideas his high-performing idea system brought in.

Front-line ideas can transform routine innovations into major breakthroughs. Task Force Tips, a fire-fighting equipment maker, has a policy that it will not introduce a new product unless it is substantially better than its competitor’s products. TFT relies on front-line ideas to make the difference. No surprise that its award-winning lightweight water cannon had 21 innovative features, all suggested by front-line workers.

Front-line ideas can directly open up new opportunities for innovation. One of Whirlpool’s highest margin product lines, Laundry 123, was based on direct suggestions from front-line workers.

Related: The 10 Must-Have Ingredients for a Successful Invention

Staffing up with 900 inventors. A high-performing idea system allows a company to continue exploiting these synergies as it matures and grows. Take Brasilata, for example, a steel can maker that despite its mature market is routinely named one of the top-10 most innovative companies in Brazil. Its roughly 900 “inventors” (the job title of its workers) average some 150 implemented ideas a person per year!

We once spent several days tracking the development of one of Brasilata’s award-winning products. At one point, when we on the production lines tracking a particular feature of the can, we casually asked, “By the way, who thought of this feature?”

A heated discussion ensued in Portuguese.

Finally, a worker turned to us and said, “We’re not sure whether that was us or R&D”.

Later, we asked the R&D department the same question. No one there could tell us either.

Now that’s a large company that has kept the ideas flowing