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Up to now, my columns have dealt with insurance for personal needs, such as home and auto. I am sure many readers also utilize or have a need for commercial insurance, and would like some of my thoughts on this topic.
The area of discussion here is vast. Maybe that's why I've put it off until now. The need for insurance in a business operation can be handled using numerous policy forms. Unlike personal insurance policies, commercial forms are varied, customizable, and can be packaged together or stripped down to meet specific needs. I would venture a guess that commercial buyers of insurance are a bit more sophisticated - if not more educated - than the average personal lines client.
That having been said however, there are some smaller operators out there, some recent new start-ups who haven't bought insurance yet. Some have never understood the need for insuring their smaller operation. For those who may not appreciate the need for insurance, I'll broach the topic of commercial coverage for the first time in this column.
No matter what type business you are in, you have some kind of business personal property of value. You may have a building or primary premises from which you operate. You most likely have an auto or truck that is used in business. Therefore, you have a risk of losing your property to some sudden peril like windstorm or fire.
Along with losing your property, you can lose your ability to continue operations and earn income. You are also exposed to liability for an accident occurring on your premises or caused by you at some other location, or through a vehicular accident. So there you have it, the need for property and casualty insurance should be self-evident.
One solution is a Texas Businessowners (TBOP) policy. This is a convenient policy, which packages insured's buildings, business personal property and business liability exposures in a simple package format. Buildings and business personal property can receive replacement cost coverage with no co-insurance requirement.
A co-insurance limitation occurs when coverage for an insured building is less than 80% of its cost to rebuild. The building owner is co-insuring himself by virtue of the fact that he is retaining a substantial portion of the risk of its replacement cost. The underwriting assumption for the TBOP is that this policy will be written for 100% of the building's value.
The TBOP is available for many, but not all, types of operations. Only those eligible under this program's rules may take advantage of this policy form. Risks include: most types of office exposures, institutional and mercantile business with limitations. Ineligible risks include: servicing, selling, or performing work on motor vehicles; bars, grills or restaurants; contracting or manufacturing processes; second hand or antique consignment sales; places of amusement, or
recreation, and others. Check with your agent to see if your business qualifies.
The TBOP has a reduced premium, a package of the regularly needed coverage, and easy underwriting. One attractive feature of the TBOP is the inclusion of additional coverage for the loss of business income and extra expense incurred as a result of a covered loss, at no additional charge. The extra expense coverage is limited in the Texas form to $10,000.
Some other coverage extensions include $10,000 for business personal property at newly acquired locations, up to $2,500 for personal property in transit, $1,000 for personal property off premises, $1,000 for outdoor property. Endorsements could be added to provide additional coverage for exterior glass, outdoor sign coverage, burglary and robbery or money and securities.
The TBOP is built for the average business risk. Some business activities that create the need to consider alternative coverage can include transporting business personal property to another location. The TBOP provides only $2,500 of coverage for property in transit, and only for a few causes of loss.
The TBOP can be endorsed to cover ground floor and basement glass. The need for glass coverage, above the limited coverage provided in the TBOP, for other glass can create the need for a separate glass policy.
Significant exposures for electronic data processing equipment and data may create the need for a special EDP policy to provide coverage better than that provided in the TBOP.
Unlike the TBOP, Boiler and Machinery policies can provide comprehensive coverage for mechanical breakdown for pressure vessels and air conditioning equipment. Some retail operations, especially grocery stores and floral shops may need coverage for the consequences of breakdown in refrigeration equipment. The BOP excludes these causes of loss.
Professional exposures for your completed operations or for your professional actions on the job are not incorporated into this policy. Exposures like these can give rise to the need to explore other policy forms that can meet the need. Business insurance should be used as a risk management tool to protect your livelihood.
Russell Janecka is a Certified Insurance Counselor. He is the owner of Janecka Insurance Agency in Victoria, and serves on the board of directors with Germania Insurance Companies. (361) 573-4475 e-mail: info@jiavic.com
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