Experiences From The Storefront

If you own a business you know the learning curve never stops. The toughest lessons to learn are those that cost you money. For most small business owners that means just about every mistake costs you money. Not having insurance can be a disastrous mistake for your business and yourself personally.

Here is case study by, Mary G. Watson,  a small business owner who learned the hard way.

Ten years at a multi-national company gave me a good business start-up capital for the business I was planning to set-up – a small boutique for my own clothesline. I had it all planned from the space rental down to the seamstress and the materials needed for the business. Within a month after I stopped working, I launched my boutique.

My boutique is located adjacent to a commercial bank. It worked for me as the bank customers flow into my boutique before or after they go to the bank. Business is doing fine. Until that busy afternoon when we were all shocked by the commotion happening next door. The bank was being robbed and there were gunmen firing at everyone in every direction, including my store. It was a horrific day because my seamstress was accidentally hit by a stray bullet.

My horror from the event escalated to an undetermined height when the doctor told me that my seamstress is at risk of being paralyzed, for life. I did not understand all the other things the doctor said because my mind is racing against the thought of doomsday. Is she my responsibility? Will the bank pay us for the store damage and her injury? I trembled at the thought that I should be responsible for her. She works for me and I should have coverage for that. I shouldn’t worry.

I had business  general liability insurance as required by law. I purchased it merely to comply with the requirements without thinking of how it could help me in a situation like this.  The business liability insurance covered part of the property damage since the bank paid us some amount for that, too. What the insurance did not adequately cover was the bodily injury part because I did not set a high limit for this. The insurance I purchased could cover for the medical bills while in the hospital but not after she gets out of the hospital.

Apparently the insurance broker failed to illustrate this scenario to me when I was discussing the insurance requirements of the business. I had my fault, too. I checked my policy for any clause I could use to get the insurance to cover for these exponentially huge medical expenses. Unfortunately, my coverage limit is just too low.

It should have been clear to me that a small business like mine should have adequate if not maximum business liability coverage same as other businesses. This should take care of unexpected situations like this. Knowing that a small business needs a general liability insurance to cover for expenses related to injuries, damage to property, personal injury or advertising injury or any other claims filed against the business, is not enough. I should have gone further to check on the following:

• What is the coverage limit I should get for my business which is a low risk business?
• If I set the limit at a million dollars, will it be enough to cover a lifetime medical care like what happened to my seamstress?
• How protected are my personal assets and funds?
• Is there business disability insurance for personnel?
• If my business liability insurance include employees or worker’s compensation coverage?

While it is difficult to determine the right amount of coverage for any business, it puts the business on the safe side if the coverage is set a little over the minimum limit in which case somewhere around a million dollars. The insurance broker should have been more emphatic about this and I could have given it more thought.

When buying insurance for your business, finding the right insurance broker or agent will be accomplished by throwing some important questions to the broker:

• What is the company’s Moody or AM Best rating? This will tell you if the insurance company is reliable and stable. A high ratings mark means the company is trustworthy.
• What type of businesses does the broker handle or specialize into? A good background, knowledge and expertise on the business will help you go about your business insurance transactions with so much ease.
• Is the broker a hands-on agent? Will he personally handle your insurance transactions? It is ideal that your agent will help you all the way and not leave you to a co-broker.
• Does he have a list of his clientele? A confident and competent insurance agent will have no problem with this.

And since my business liability insurance has no adequate coverage for the medical care of my seamstress, lest I get sued by her family, I opted to close shop, sell whatever I can, leave a reasonable amount for myself from what is left from my MNC savings, pay her family a good sum and put everything to rest.

Fortunately, her family understood my situation and agreed to the amount I offered which left me with not much to start with again. It was a costly insurance lesson for me and I think all starting business entrepreneurs like me should have a better understanding about business liability insurance and its importance in ensuring your financial solidity even after any accident or claims lawsuit, etc. Get the right insurance coverage to avoid having a financial crisis like I did.

About the Author: Mary G. Watson is a freelance writer for www.liabilityinsurance.org.