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The Underinsured Small Business: A Game of Russian Roulette

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By Neetal Parekh on September 16, 2009 1:13 PM

Insurance is an important consideration for any small business.  It takes just a quick look at headlines to begin to envision the likely and unlikely circumstances that could put your enterprise in a tenuous financial position.  Wild fires, robbery, earthquakes, freak accidents, flooding, and lawsuits could threaten the daily functioning of your business as well as tie up your resources and time in jumping through legal hoops. 

Getting small business insurance is a first step.  But just signing the dotted line isn't enough.  Small businesses must be informed and aware in choosing the appropriate amount of coverage for their needs.  Filing for bankruptcy can become a tough reality for the uninsured business facing unexpected circumstances, but it can also be the ultimate fate for the underinsured business that is not able to bridge the gap between insurance payouts and out-of-pocket expenses.

Here are some tips to ensure that your business has the right amount of insurance:

  • work with an insurance agent who has experience with your type of business and your unique needs
  • consider buying a policy that covers replacement costs of the property, not just the property's actual current value.  If you face an event that necessitates buying new equipment, receiving actual current value of the lost property may not be enough to buy the new gear.
  • a renter's commercial policy will cover damages to your leased workplace, even when the damage is not covered by the owner's policy-- such as damage resulting from worker negligence.
  • for businesses of 100 employees or less, look into a Businessowner's Policy.  It can provide broad coverage, covering both liability and property insurance.

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