Cover Your Assets

If you get sued, will your current liability coverage be sufficient? For most growing businesses, the answer is probably no, but increasing your liability limits can be costly. An affordable way to supplement your existing policy is with an umbrella policy that pays when your primary one runs out, says Greg Boots, attorney and partner with Anderson Business Advisors PLLC in Kent, Washington.

Usually, you'll get your umbrella policy from the company that provides your underlying insurance, and the terms will typically mirror your primary coverage. Be sure you understand what's included and what's not. "If an item is specifically excluded in your under-lying policy, it will not be covered by the umbrella policy," Boots explains.

Your insurance carrier can help you analyze your risks and determine how much additional coverage you need. As you grow and your risk exposure increases, you can increase the limits of the umbrella policy. Annual premiums typically range from $100 to $300 per million dollars of coverage.

"It's essential that every small-business owner have an umbrella policy to cover potential litigation," Boots says. "We're not only looking at the potential injury to the plaintiff, but we're also looking at your defense costs in regard to the litigation. Why risk everything you've worked hard for when you can cover yourself for a few hundred dollars a year?"

Jacquelyn Lynn is a freelance business writer in Orlando, Florida.