Insurance-Related Factors that Could Impact Your Business

Navigating the complex field of liability and other insurance related issues is often difficult and confusing for small business owners. Nevertheless, as everyone knows, having the right kind of insurance is a saving grace in the event that a major problem or accident occurs that involves one or more of your employees. In this month’s business corner editorial, we review some of the most common insurance-related issues that small business owners should be aware of. One of the most important points to take into consideration is to be fully aware of what could happen that may put a halt to your operations. One piece of advice recommended by many insurance agents it for small business owners to take the time and brainstorm with your managers to come up with a list, as extensive as possible, of any possible foreseeable problems or disasters that may come your way that would be devastating without adequate protection. Once you and your team have come up with such as list, your next step is to consult with your insurance agent in order to find out what types of coverage you may need that would cover possible problems, and finding out what your costs might be. While some of the items on your list may not be covered, or cost too much given the lowered probability of them occurring, many or most of the list items could be acquired at an affordable price point premium.
In addition, make sure you are fully aware of how different insurance providers will view the subcontractors that work for you. While some companies are only concerned with whether your relationship with subcontractors are based on 1099 forms, others many have more specific concerns related to subcontractors and liability that you should be aware of. There have been numerous cases where small business owners, who had classified certain employees as subcontractors, later find that the work they are performing and your relationship with them, would actually put them closer to employee status, regardless of the 1099 status. If that could happen, they may be considered employees for the purposes of insurance premium calculations. You would not want this to happen so again, make sure your carefully clarify all of different possibilities with your insurance agent to make sure you are covered in the event of any problems that may arise.
Of course be aware of the fact that it is the business owner’s responsibility to be forthright with your insurance provider when it comes to relationships you have with those working for you that you consider subcontractors. Experts recommend that business owners fully clarify the issues because nothing is worse than getting caught off-guard. What you thought your relationship with some workers are may not reflect that facts and if this happens most insurance providers reserve the right to hit you with a premium for those “subcontractors,” resulting in your spending money you didn’t expect and perhaps cannot afford if something happens to them. In order to avoid any problems, one best practice recommended by experts is to require them to provide you with a Certificate of Insurance, listing all policies their insurance company coming from the provider. In order to protect yourself, it is important not to accept any certificate that does not come directly from their insurance provider.
However, if you have chosen to not require that your subcontractors have insurance, make sure you are fully aware of all of the steps you need to take to formally establish a subcontractor relationship. This can be done by filling out and filing your state’s workforce commission forms with any subcontractors working for you. This way you will be protected in the event that any of your subcontractors are injured on the job. When it comes to liability policies again, make sure you clarify all of this with your insurance company so you fully understand how an uninsured subcontractor could impact your insurance premium. Taking these steps should be enough for your own insurance provider being charged on your workers compensation policy for the subcontractor. Unfortunately, it is often the case that business owners do not take the steps to fully protect themselves, especially when friends or family are subcontracted by you to do work. Remember, if something does happen, it will be you that is most likely liable. So keep in mind the old saying that “It’s just business,” and nothing personal when it comes to friends or family members.
Another crucial issue that must be realized is that many insurance policies could be included in the event that you get audited. This means that initial policies should be set up using estimates for payroll, job classifications and gross receipts. In such cases, insurance companies performing an audit would want to determine which the real figures on which to base the premium costs are. If you are audited and not aware of such issues or have not taken the appropriate steps, you may find that an additional amount of premium needs to be paid out. Not including uninsured subcontractors or failure to file the appropriate forms could cause major problems that you were not expecting and/or not prepared to deal with.

Story by Mark Joseph Manion

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