Business insurance 101

What you need to know to cover your bases on the Vineyard.

Covering bases: at a recent Martha's Vineyard Little League game, Richie Combra crosses first base as Harper Hearn turns for a throw. —Sam Moore

First the good news: There is insurance coverage available to protect your business against virtually any conceivable risk. The bad news is that there are a lot of risks that your business needs coverage against. Since most businesses on the Island are relatively small, a business owner’s policy (BOP) may be a good place to begin. A BOP is a basic package suitable for most “Main Street” businesses, such as stores and restaurants; it provides coverage for major property and liability risks. Because the services are bundled, a BOP is generally cheaper than buying services individually.

For larger or more complex businesses or organizations, such as contractors, auto dealerships, or even townships, you may be better off with a commercial package policy (CPP), which can also bundle policies to make them more economical.

Policies that cover just individual liabilities are called monoline policies. Here is a list of areas they will typically cover:

Liability insurance

According to Forbes magazine, every business, even if it’s home-based, needs to have liability insurance. Liability insurance covers you if your employees, or your products or services, cause someone injury or damage their property. It pays damages and medical bills for which you are found liable, up to the policy limits; it also covers attorneys’ fees and other legal defense expenses you may incur.

Professional liability insurance

“Professional” occupations, such as lawyers, accountants, consultants, real estate agents, insurance agents — even yoga instructors — should consider having professional liability insurance (also known as errors and omissions insurance). This type of policy protects against malpractice errors, and negligence in providing services to your customers.

Directors and officers liability insurance

Bill Brown, president of Martha’s Vineyard Insurance Agency, says that because of all the nonprofit organizations and home associations on the Island, this type of insurance is very big on Martha’s Vineyard. Essentially, it protects directors and officers of corporations or organizations in the event they are sued for mismanagement.

Property insurance

Property insurance is just that: a policy that covers any commercial building or property that you own, as well as things like office equipment, computers, furniture, inventory, and tools.

Property-insurance policies typically come in two basic forms: All-risk policies cover a wide range of incidents, except those designated in the policy; peril-specific policies cover only those perils listed in the policy. Sarah Hughes of Martha’s Vineyard Insurance says peril-specific policies are generally cheaper, but they are rarely used because they leave you exposed.

Home-based business insurance

If you have a home-based office, don’t assume that you are covered by your homeowner’s policy. But you may be able to add riders that cover things like property damage. “The important thing is to be totally open with your insurance agent,” says Bill Brown of Martha’s Vineyard Insurance. “For instance, if you’re an electrician and you keep inventory in your garage, you should make sure it’s covered in the event that the garage burns down.”

Business vehicle insurance

Commercial vehicle insurance allows you, as an owner, to protect any company vehicles that carry employees, products, or equipment. If your employees use their own cars for company business, you should have nonowned auto liability to protect your company in case the employee does not have insurance or has inadequate coverage.

Workers compensation insurance

“Workers comp” pays medical expenses and a portion of lost wages if an employee is injured on the job, regardless of whose fault the accident was. And in the event that the worker dies as a result of a work-related accident, the insurance provides compensation to the employee’s family. On the other hand, in return for this coverage, if an employee receives workers-comp benefits, the employee forfeits the right to sue for the incident.

Cyber insurance

Bill Brown says that cyber insurance has become a “hot button” on the Island today. There have been several cases of businesses and organizations being hacked, in some cases where their computer is held for ransom. Brown says that the cost for cyber insurance is still reasonable, especially considering the exposure a business can have.

Umbrella policy

You could say that an umbrella policy is insurance for your insurance. In other words, if you have unusually high losses and you exceed the limits on one of your policies, an umbrella policy can cover those extra losses. For the typical business, the umbrella policy would provide protection over and above general liability and auto liability policies.

Every business or organization is different, so if you sit down with your insurance agent or broker, he’ll be able to identify exactly the type of insurance that makes sense for you.