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Business casualty 101 Featured

9:33am EDT July 22, 2002

Every business, whether the owner owns the facility or not, should have comprehensive property, casualty and liability insurance.

However, before you contact an insurance agent or purchase a policy, you need to understand basic coverage terminology and what can be included on a policy. Here are business coverage examples that should be discussed with the agent during the initial meeting.

Extra-expense coverage

With this coverage, your business is reimbursed if you need temporary headquarters or have to rent equipment while the main office is undergoing reconstruction or renovation. Many business policies only offer $1,000 of extra-expense coverage. Still, this is a must if a your business's profit margins are thin and you can't continue to operate. Many businesses with inadequate coverage end up filing bankruptcy.

Valuable records coverage

If you suffer a fire or a flood, many things would be destroyed, including important paperwork or computer software. But if your business has valuable records coverage, the insurance company pays the cost of reconstructing those records. Read the contract carefully, as valuable records coverage may only cover paper records or computer software.

While this coverage is valuable, proper planning to avoid the problem is even better. Scanning technology is cheap, and important papers can be scanned into the computer system, which should be backed up daily. Back-ups should be stored off site or in a fireproof/waterproof safe.

Improvements and betterments coverage

This reimburses you for a portion of the cost of improvements you have made to a leased office.

Waiver-of-subrogation coverage

This eliminates the fear of lawsuits for the landlord and the tenant. A waiver of subrogation is an agreement between the landlord and the tenant that says that, regardless of fault, the insurance companies for both will pay their own claims and not sue the responsible party. This provision is standard in most policies but should include the agreement between the landlord and tenant to not sue over damages.

Use and occupancy coverage

There are two kinds of use and occupancy insurance coverage. The first requires the insurance company to reimburse your business for actual loss of profits. The second requires it to pay a certain amount for each day, week, or month that your business is down, regardless of whether you have lost profits.

Sometimes comprehensive property, casualty, and liability insurance can be included on one combined policy purchased from one carrier. Before deciding on a policy, however, discuss in detail with your agent each feature, the risks, the cost of higher coverage and the savings of higher deductibles.

As with any other documentation regarding your business or its operations, re-examine your policies every three years, requesting quotes from different agents. Louis P. Stanasolovich, named one of the best financial advisers in America the last four years by Worth magazine, is founder, president and CEO of Legend Financial Advisors Inc., a fee-only financial advisory firm located in the North Hills. Reach him at (412) 635-9210. The firm's Web address is www.legend-financial.com.