Archive for December 16th, 2009

Dear Danielle: What Insurance Do I Need?

Dear Danielle:

I am looking into starting an administrative support business and am having some trouble finding information on insurance that is required. I am assuming it is required to have errors and omissions insurance. I am having trouble finding an insurance company that can give me an idea of the cost or that covers this industry. I would really appreciate it if you could provide me some information on this. SC

Errors and Omissions isn’t required, but it’s certainly a good idea to have that kind of insurance in a business such as ours.

For those who don’t know what it is, Errors & Omissions (E & O) insurance protects you if a client claims you are responsible for errors or failed to perform as promised in your contract. If you are a sole proprietor (where you and your assets are at risk directly and personally), it can be even more important to have this kind of coverage.

This is a very common type of business insurance so I’m not clear why you would have any trouble finding a broker or insurance company who can talk to you about it. My best advice is to keep calling around.

Coverages are going to vary and be dependent upon your own particular situation so you really do need to talk to the source, but very, very roughly, you can expect this kind of insurance to cost around $1000 or more annually.

Another kind of insurance you may want to look into is some kind of General Business Liability. Policy terms, limits and coverages are going to vary and be dependent upon your particular situation as well as the insurance company so you really do need to talk to the source.

Generally, this kind of policy covers “trip & fall” type situations you are responsible for either at your office or at a client’s office (like if someone tripped over your briefcase while you were making an office call, for example), medical payments, business personal property (damage/loss/fire/vandalism), signage and loss of income (excellent coverage to have in case fire, loss, damage, etc., prevents you from running your business).

Different insurance companies will have different coverages and limits that come standard and then optional coverages that you can add on so, again, you’ll need to talk to the source and work out the particulars with an agent. An administrative consulting business running out of a home office making roughly $125,000 annually could expect this to cost between $250-$300 a year.

It’s important to note that even if you have homeowner’s or renter’s insurance, you may not have proper coverage for the business itself so be sure and find out from your agent what kind of business “riders” you need to add-on to protect those interests.

Another kind of insurance you may want to look into is Disability Income. This is a separate policy that would cover you if you became injured or ill and couldn’t run your business and earn your living.

The amount of the policy will depend on all your personal particulars such as age, income, whether you smoke or not, etc. This one can (very roughly) run around $115 or more per month, but as with all things insurance-related, you must get your information directly from the source.

If you live in an area where there are frequent natural disasters (slides, flooding, for example), you may also want to look into high-risk coverage to protect your personal business assets. These types of situations are often above and beyond regular business liability coverages (meaning you may not be covered in those events) so it wouldn’t be a bad idea to ask your agent about that as well if it applies to you.