Oct 21, 2020
Business A to Z: Insurance
Putting Fires Out Before They Ignite
You insure your car. Your house gets insured in the event of natural disasters. You even have insurance for yourself and your health. But what about your business?
Every year thousands of claims are made against business acting in ways that customers and in some cases, employees find to be unfair and negligible.
The infamous Mcdonald’s coffee case is discussed in many business law classes. To summarize, a woman ordered coffee from McDonald’s which was served at 180–190 degrees Fahrenheit. She stopped in the parking lot to add cream and sugar to the coffee, but the cup tipped over, spilling extremely hot coffee in her lap. The sweatpants she was wearing soaked in much of the coffee, holding it to her skin. This caused her to have third-degree burns on her inner things and other skin in that area.
She had only requested $20,000 which was the cost of medical expenses, but McDonald’s offered no more than $800. Because of this, she sued the fast-food chain for damages. She ended up winning the case and had received over $2.9 million for her damages.
This is one of the many reasons companies carry insurance, to soften the financial blow when an issue arises. While McDonald’s was told to pay a large amount to the lady, their insurance may have paid for it or helped to lower the cost of damages.
Business insurance is not a one size fits all deal. There are six main types including general liability, product liability, professional liability, commercial property, home-based, and business owners. Each type covers specific elements. As a business owner, you do not need all six but should have the policies that would protect your business best.
General liability insurance is for almost any business and protects the business from financial loss as a result of bodily injury, property damage, medical expenses, libel, slander, and the list goes on. This policy is perfect for small businesses or contractors.
Product liability covers any financial damages to the business caused by a defective product that causes bodily harm. In the example, McDonald’s most likely had this type of insurance to cover some expenses and legal fees for the coffee case.
Professional liability insurance protects businesses from financial loss in the case of malpractice, errors, and negligence. This insurance is typically carried by service businesses such as accountants, doctors, and psychologists. Anyone who offers some type of service might want to have this coverage as well.
Commercial property insurance covers a brick and mortar business in the event that the building is damaged or destroyed. Policies in this category can cover anything from hazardous weather to vandalism. Most small businesses that have a physical location or offices should consider this type of insurance.
Home-based insurance policies cover the business if it’s mostly operated from your home. Let’s say you have a printing press company and all your equipment is housed in the garage. If anything breaks or a visitor is injured by one of the machines, this policy will help cover some of the financial burden associated with that lawsuit.
The final major policy is a business owner’s policy which is essentially a bundle offered by some insurance companies. This allows them to protect you more, while you get a lower overall rate. Think of a multi-driver discount. Because you are paying for more people, your insurance company might charge less as an incentive for you to purchase more coverage.
I would highly recommend looking at several insurance companies and their rates before purchasing. Geico may cover some of what Next Insurance doesn’t. Your deductibles will also vary between policies and that could mean you must pay thousands of dollars more before the insurance company will step in and help. Happy entrepreneuring!
-ZG
Thanks for checking out my story! Expand your knowledge even more with my Udemy classes here!
