Insurance

Every business faces different challenges and a unique set of risks. Risks can't be eliminated but they can be managed with the procurement of insurance policies.

You can obtain insurance for almost any type of risk. This is a part of overhead and is necessary to provide protection against losses that could put you out of business. If you’re not already, you should become familiar with standard policies, such as bonding, liability, workers’ compensation, and health and life insurance as employee benefits. A good insurance agent can be an invaluable resource to learn about the different types of insurances available to you. Here are a few of the most common types.

• Workers’ compensation protects you and your business against financial liability if an employee suffers a serious injury or death on the job. As an added benefit, your employees and their family will have the financial support they need in case of a serious accident.
• Business Owners Policy (BOP) protects business owners, employees, and customers from general liability exposures, such as accidental damage to property from wind, fire or falling objects, theft of materials or tools, and damages from business interruptions. These risks exist everywhere you do business.
• Professional liability insurance protects companies or employees that do consulting and design work. It protects the design professionals against risks incurred as a result of errors and omissions that occur while performing professional services.
• Completed operations insurance covers the contractors liability for property damage or injuries to a third party after a job is completed.
• Key man insurance mitigates risk associated with losing a key executive in the company. The premium is paid by the business to provide financial assistance to the business if the "key" person dies. It can be used to buy out the associated equity or provide financial resources to sustain the company while a suitable replacement is found to continue operations.
• Bonding is required on many larger job contracts to protect the owner of the project from failures on the part of the business. Bonds can actually increase risk to the business if a project goes bad. There are generally three types of bonding insurance (also known as "Surety Bonds").
• Bid Bond: A bid bond protects the owner against a bidder failing to honor the terms of the bid agreement or being unable to perform the work promised. It ensures the project owner is monetarily protected up to the amount of the difference between the bonded bid price and the next higher bid.
• Performance Bond: The performance bond protects the project owner by ensuring that the contractor will perform the services or work within the terms and conditions of the agreement, at the contractual price, and within the time permitted.
• Payment Bond: A payment bond protects certain laborer, suppliers, and subcontractors from nonpayment. This type of bond is especially effective for public contracts as the typical 'mechanic’s lien' cannot be placed against public property.

Conduct a detailed review of your firm’s insurance policies annually and complete a risk analysis at least every five years, or when business conditions change so as to warrant it. You need to gauge your firm’s liability exposure and put the right solutions in place to bridge the gaps.

Think of other specialized policies you need, such as storefront insurance should you rent a store. There are many risks associated with the operation of a business. While some may say that you can never have too much insurance, you most assuredly can have too little of the correct type. Occasionally, you can manage risk easier than you can produce the additional profit needed to pay for the insurance.

The above content is extracted from Mike Holt's Business Management Skills program.

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Mike Holt is an author, businessman, educator, speaker, publisher and National Electrical Code? expert. He has written hundreds of electrical training books and articles, founded three successful businesses, and has taught thousands of electrical code seminars across the US and internationally. His company, Mike Holt Enterprises, has been serving the electrical industry for over 40 years, creating and publishing books, DVDs, online training and curriculum support for electrical trainers, students, organizations, and electrical professionals. 

Mike has devoted his career to studying and understanding the National Electrical Code and finding the easiest, most direct way to share that knowledge with others. He has taught over 1,000 classes on over 40 different electrical-related subjects to tens of thousands of students. His knowledge of the subject matter, coupled with his dynamic and animated teaching style, has made him sought after from companies like Generac, IAEI, IBEW, ICBO, NECA, and Fortune 500 companies such as IBM, Boeing, Motorola, and AT&T. He is a contributing Editor for Electrical Construction and Maintenance Magazine (EC&M) and formerly Construction Editor to Electrical Design and Installation Magazine (EDI). His articles have been seen in CEE News, Electrical Contractor (EC) International Association of Electrical Inspectors (IAEI News), The Electrical Distributor (TED) and Power Quality Magazine (PQ).