Are You Covered? Finding the right business insurance to weather any storm.

With insurance, as with so much else in life, the devil is inthe details.

If you own a house or a car, you may already have insurance thatcovers you in the event of theft or an accident. But if you own asmall business, the fine print on those policies could expose youand your assets to catastrophic losses--and even confiscatorylawsuits.

Remember Murphy's Law: What can go wrong willgo wrong, and at the worst possible moment. "Murphy is aliveand well and living in every small business," warns VirginiaBeauchamp, vice president of the National Association for theSelf-Employed (NASE) in Washington, DC. "Everybody needs tounderstand that a sole proprietor is responsible for everythingthat happens in his or her business."

In fact, typical insurance coverage leaves wide gaps when itcomes to protecting sole proprietors and small-business owners.Loopholes such as these can put you temporarily--orpermanently--out of business:

• While traveling to see a client, your car is rear-ended andtotaled as you sit patiently at a stoplight. Even though you'renot at fault, you still may not be able to collect any insurancemoney, because your policy specifically excludes coverage foraccidents that occur while using your automobile in the course ofbusiness.

• A fire in your kitchen spreads to the spare room, where youroffice is, destroying important files and seriously damaging yourcomputer equipment. The claim for your equipment is denied, becauseyour homeowner's insurance doesn't cover business-relatedlosses.

In both scenarios, adequate coverage could have been availableas "riders"--or extended agreements--to your existingcoverage, and for relatively inexpensive annual premiums(generally, a few hundred dollars or less).

"Close to 80 percent of sole proprietors and small-businessowners are not insured to the full extent they should be,"says David Hanania, founder and president of the Home BusinessInstitute (HBI), a national network of small-business owners inWhite Plains, New York.

Nevertheless, many small-business owners get blindsided, eitherbecause they don't read the fine print in their existingpolicies, or because they're too busy to take out the insurancecoverage they really need.

"Insurance is an item these busy people don't get toquickly enough, especially if they feel they don't have anyliability exposure," Hanania explains. "But in thelitigious society we have, they may wake up one day and find theydo."

But the growth of small and homebased businesses is urginginsurance companies to offer more affordable coverage forentrepreneurs.

How much protection you should have depends on many factors,including a reasonable assessment of your risks, the vulnerabilityof your assets, the amount of protection available and how muchcoverage you want and can afford.

Freelance writer Christopher Kenneally answered the question:"Can You Start In 30 Days?" in the July issue ofBusiness Start-Ups.

Health Insurance

Unless you're lucky enough to have a spouse whose employerprovides medical benefits for your entire family, health insuranceis the most obvious form of insurance an entrepreneur needs.

Non-group health-insurance plans are more expensive than thegroup plans available to businesses. This holds true whether youpay for traditional indemnity coverage or choose to enroll in ahealth-maintenance organization (HMO). For example, an indemnityplan with Blue Cross and Blue Shield of Massachusetts that covers afamily of three or more, does not include dental care and carries a$200 deductible, costs nearly $6,700 in annual premiums.

National associations such as HBI, NASE, the IndependentBusiness Alliance (IBA) and the American Entrepreneurs Association(AEA), however, as well as state and local businessassociations--with tens of thousands of members each--can offercoverage at more affordable group-plan rates. And as a consolationfor paying for your own health insurance--unquestionably, a majorbusiness expense--the IRS now allows self-employed businesspeopleto deduct 40 percent of health-insurance premium costs. For moreinformation on the specific IRS guidelines, request IRS Publication533, Self-Employment Tax, and IRS Publication 502,Medical and Dental Expenses, by calling (800) 829-3676.

Disability Insurance

It's every businessperson's worst nightmare: a seriousaccident or long-term illness that can lay you up for months, oreven longer. Disability insurance, sometimes known as "incomeinsurance," can guarantee a fixed amount of income--usually 60percent of your average earned income--while you're receivingtreatment or are recuperating and unable to work.

Spending scarce insurance dollars on disability insurance,though, can lend a false sense of security, according to Hanania.Disability insurance only pays recipients for one year, and theymust prove a loss of profit in order to receive any money."People are better off taking out term life insurance,"Hanania says. (Term life insurance is the industry's leastexpensive form of coverage.) Nevertheless, IBA'sdisability-insurance benefits extend up to five years for anyillness, and up to age 65 for victims of accidents.

Business Insurance

Recent growth in homebased business has led more and moreinsurance underwriters not only to offer business-relatedriders--usually for an additional premium of a few hundreddollars--to existing homeowner's and automobile policies, butalso to develop specific products for the small-office/home-officemarket.

Many business insurance policies with annual premiums of a fewhundred dollars now cover on-premises business liability (should,for example, a delivery person slip and fall on your steps), aswell as loss of office contents, computer and business equipmentand even data reconstruction. A typical plan may protect you for upto $15,000 on office contents, $10,000 on computer-relatedequipment and $500,000 for on-premises business liability, all fora $275 annual premium.

Business consultants should also consider liability insurancefor so-called "errors and omissions." For example, asoftware consultant hired to analyze a firm's customer listmay, through negligence or accident, cause the data to be lost--andbecome liable for the retrieval or reconstruction costs.

Insurance isn't a good place to cut corners; doing withoutit could cost you more in the long run.

Run For Coverage

Finding Small-Business insurance isn't easy. Start with acall to your industry association, the local office of the SmallBusiness Administration or your state's insurance division. Thefollowing associations and organizations also offer small-businessinsurance:

• American Entrepreneurs Association (AEA): Available benefitsinclude comprehensive major medical coverage, dental insurance,term life, disability income insurance and HMO and PPO plans,depending on your location. For more information, call (800)482-0973, or write to 2392 Morse Ave., Irvine, CA 92614.

• Home Business Institute (HBI): Offers home-business liabilityprotection, group medical insurance and life insurance. For moreinformation, call (888) DIAL-HBI, or write to P.O. Box 301, WhitePlains, NY 10605-0301.

• Independent Business Alliance (IBA): Offers a wide variety ofbusiness-related insurance policies, including medical and dental;on- and off-premises liability; office contents andcomputer-related equipment; professional liability coverage;business interruption; and disability insurance. For moreinformation, call (800) 559-2580, or write to 111 John St., NewYork, NY 10038.

• National Association for the Self-Employed (NASE): Memberbenefits include health, dental, accidental death and disabilityinsurance. For more information, call (800) 232-6273, or write to1023 15th St. N.W., #1200, Washington, DC 20005.

• Small Office/Home Office Association (SOHOA): Offers a range ofinsurance programs. For more information, call (888) SOHOA-11, orwrite to 1765 Business Center Dr., #100, Reston, VA 22090.

Contact Sources

Home Business Institute, P.O. Box 301, White Plains, NY10605-0301, (888) DIAL-HBI

Provident Mutual Life Insurance Co., P.O. Box 1717,Valley Forge, PA 19482-1717