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Professional VS Ordinary Negligence

Posted on November 7th, 2023 by Cassandra Love10 mins read

Professional VS Ordinary Negligence text overlaying image of a person under stressAny business can make mistakes, but companies that offer industry specific expert services or consulting are more vulnerable to negligence claims when they make a mistake. If your company gets sued due to a mistake or misleading information, it could hurt both your reputation and your bottom line. Negligence suits are one of the most common and expensive types of claims companies face. Negligence claims fall under two categories, ordinary, and professional. Knowing the difference between the two can help you avoid a costly lawsuit. 

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Ordinary Negligence

Ordinary negligence is defined as a failure to use ordinary or normal care. It usually refers to a careless error that has caused harm to others. Ordinary negligence can be filed against any business or even individuals. And it is the basis for all personal injury lawsuits. Because they did not follow the duty of care, a person or business could be held accountable for physical or financial harm caused by the negligent mistake. Four things must be proven to establish ordinary negligence:

Duty of Care

The first thing a plaintiff has to prove is that you had a duty of care toward him or her. This usually means that you have a duty to take reasonable care not to hurt the plaintiff. However, states can change this standard of care by law for certain relationships, like a doctor-patient relationship. Usually, a person owes someone else a duty of reasonable care if they can see how their actions could hurt others. For example, a driver owes a duty of care to everyone else on the road by not texting and driving. A store owes a duty of care to their customers by putting a “Wet Floor” sign over a spill. In personal injury claims, duty of care is almost never disputed because it’s just about proving that there was a duty of care owed to the plaintiff, not whether or not it was broken.

Breach

If the client can prove that you had a duty of care to him or her. The next question is whether or not you broke that duty. A breach happens when someone doesn’t act with the same level of care that a normal person would in the same or similar situation. This is where someone needs to prove that you broke the duty of care. Using the examples above for instance, an ideal person wouldn’t speed or drive while drunk. So, a driver who did either of these things would have broken their duty of care to other people on the road. For businesses you wouldn’t ignore a fall hazard, you’d put up a caution sign or rope the area off. If you do ignore it then you’ve broken the duty of care.

Causation

Next, the complainant must prove that your breach caused him or her harm. That is, the harm would not have happened if you had fulfilled your duty of care. Also, the breach must be the direct cause of the injury. This means that the law must agree that the breach is linked enough to the injury to make you legally responsible.

Damages

The last step is for the plaintiff to prove damages. Lawyers and courts say that negligence without damages is “negligence in the air”. For example, a driver who speeds may be guilty of a crime. But if the violation didn’t hurt anyone else, the state can’t hold him or her responsible for negligence. In personal injury cases, plaintiffs often try to get paid for their medical bills, lost wages, property damage, loss of quality of life, and physical and mental pain and suffering. So, say they slipped on the wet floor but had no injury from the fall. While you caused the fall you didn’t cause any injuries that need compensation. 

Professional Negligence

Unlike ordinary negligence, the rules for professional negligence usually only apply to businesses that offer specialized skills and services to their customers or clients. When a professional doesn’t do what they should for their customer or client. This can include not doing a job with the right amount of skill and care, giving bad advice, or not acting quickly enough. 

 

Professional negligence can happen in any job. Such as with doctors, lawyers, accountants, engineers, builders, and other people who provide professional services. Professionals are required by law to do their jobs with a certain amount of skill and care. If they don’t, they could be held responsible for any harm that happens to their patients or clients. There are two common types of professional liability:

Breach of fiduciary duty

When you don’t act in the best interests of your client, you break your fiduciary duty. This can include making bad decisions, not giving important information, not telling the client about conflicts of interest. Or pursuing opportunities meant for the company without telling the client, and using insider or non-public information in a stock market transaction.

For a client to make a legal claim for a fiduciary breach, they have to prove three basic things:

 

  • There was a fiduciary relationship and responsibility
  • A breach happened
  • The breach caused damages to the client

Misrepresentation

Negligent misrepresentation is when you say something that you should have known wasn’t true but didn’t with the intention that your client will rely on it and suffer losses because of it. Some examples of misrepresentation are making false statements or promises in a contract or overstating the value or quality of goods or services. The misrepresentation doesn’t have to be in writing. It can be verbal. It can also mean not telling your client about all of the facts. There are 5 components to prove a misrepresentation claim:

 

  • There was an important comment about a certain product. And the comment led the client to sign the contract or make a decision
  • You knew that the information wasn’t entirely truthful or that you purposefully did not provide all of the facts
  • You made the statement or gave the advice with the intention that your client would rely on it to make a decision or enter into a contract
  • The client did in fact rely on that information

It’s not always easy to tell if a comment was a fact or someone’s opinion. And this can be a point of contention in a misrepresentation case. The court will look at how a reasonable person would have understood the information.

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How To Avoid Professional Negligence Claims

If you offer the kinds of professional services that often lead to professional negligence claims. It’s important to be proactive and take steps to lower your risk of being sued. Let’s talk about a few of the best practices that could help you significantly reduce the risk of a lawsuit.

Contracts

Whether it’s a new client or an extension of a project you’re already working on, you should always insist on a clearly written contract that explains the nature and the limits of the job. It’s important to include every detail you can about the job. Having a clear contract will lower the risk of a negligence claim because your exact promises or the possibility of certain portions of the contract may not work out are listed.

Expectations

It’s easy to get carried away when you’re trying to get a client by making promises you’re not entirely sure you can keep. Even if you do have every intention of making it happen, there’s always the possibility of things not panning out. This is also a very easy way for a professional negligence claim to come about. Make sure you give your clients realistic expectations when you speak with them about how things will work out. Make sure to warn them about possible negative outcomes as well. This will help you avoid awkward and possibly expensive situations where your client feels they were cheated and should be compensated.

Communicate

It is very important to have clear communication with your client. If you let them know about problems and changes in a timely manner, they will think you are more responsible, even if the news is often bad. Changes that come up quickly and out of the blue may make the client upset and more likely to sue you for professional negligence. Keep in touch with your clients often. Even if you have nothing new to say, let them know that you are still working on their project and are fully committed to it.

Records

Unfortunately, a lot of cases of professional negligence start with “he said, she said” claims. The best way to deal with this is to keep careful records of all the professional services you provide. Email is always better than the phone for making deals and decisions because you can keep track of what was said and what was agreed upon. If you prefer to do business by phone or in person, record your talks with clients. If you don’t want to do that, get an email confirmation of what was agreed upon so you have a copy of what was said.

Learn

Keeping up with the latest changes in your industry will help protect you from professional negligence claims. Also, it’s important to keep up with changes to the way state rules govern duty of care.

How To Protect Your Business

Even when you’ve done everything to avoid a negligence claim, they can still happen to anyone. That’s why it’s important to be proactive and get ahead of possible claims by having a good risk management plan and the right business insurance to protect you. Professional liability insurance, which is also called “errors and omissions” insurance, will cover these kinds of cases. It will protect you financially from accusations of negligence, malpractice, errors, and omissions that could happen while you’re giving your clients professional services.

 

When a claim of professional negligence is made, your E&O policy will pay for your legal defense, judgements, and settlements up to the limits of the policy. It’s important to know that professional liability insurance is a “claims-made” coverage. This means that the policy had to be in effect when the event that led to the claim happened and when you told the insurer about the claim. Also, it’s important to remember that professional liability plans have things they won’t cover. One of the most common is when a professional does something illegal or hurts a client on purpose.

Call EZ

In general, all of the big insurance companies offer professional liability insurance. If you already have business insurance, talk to your insurance company about the possibility of adding professional liability to your coverage. But working with an insurance agent is your best bet. The agents at EZ are well-trained and work with some of the best companies in the country. We can look at all your policy choices and work with your budget to make sure your business has all the coverage it needs. If you would like to see quotes online simply enter your zip code in the box above. If you would like to speak to an agent now call 877-670-3538 today to talk to get a free quote.

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Workers’ Compensation For The Self-Employed

Posted on October 27th, 2023 by Cassandra Love10 mins read

Workers' Compensation For The Self-Employed text overlaying image of a self-employed woman in a cast looking at her policyAlthough workers’ compensation is generally for employers to have for their employees it also covers you if you’re self-employed, such as an independent contractor. Just because you work for yourself doesn’t always mean workers’ compensation is optional for you. Almost every state requires that companies give workers’ compensation insurance to their employees. Each state has a list of companies and employees that need to be covered and a list of employees or owners that are exempt. So, if you run a business as a sole owner, your state may not require you to buy workers’ compensation insurance. However even if you’re not required by law to have coverage, your clients might.

 

Depending on your industry, clients may add it to their contract with you that you need to carry workers’ comp. For example general or subcontractors typically have to have workers’ compensation for someone to hire them to do work for them. This is because workers’ compensation policies typically don’t extend to any contractors you hire on temporarily. Most health insurance policies don’t cover accidents that happen at work. Let’s say you work for yourself and have health insurance. You hurt your back at work when you picked up a big box. If you got hurt at work, your health insurance might not pay for your hospital bills. This means that you have to pay for all the costs and fees connected to your injury.

 

If you work as a freelancer, the same thing will happen. Even if you have health insurance, you should still have workers’ comp coverage. It can help you avoid a situation that will ruin your finances. You may also need it if you hire freelancers or independent contractors for specific projects.

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Self-Employed Workers’ Compensation

It might seem strange to buy workers’ compensation for yourself, but it happens all the time. Many companies won’t hire you as a self-employed worker unless you have workers’ compensation insurance. This is because, if you get hurt on the job, you might be able to sue the company to pay for your medical bills. Even though you’re an independent contractor, businesses know that the courts will probably order them to pay.  Unless they buy workers’ compensation for you or you have it for yourself. A company can legally refuse to hire a self-employed worker who doesn’t have sufficient workers’ compensation insurance.

 

If you are self-employed as a sole owner and get paid through a 1099 instead of a W-2, you might not have to get workers’ compensation insurance. People often think that you only need workers’ compensation if you have people working for you. But that’s just not true for some kinds of businesses. 

Why Independent Contractors Need Workers’ Compensation

Most state rules don’t require independent contractors to have workers’ compensation insurance. But you may still need to buy this policy for a few reasons.

1. Clients Require It

Your clients may want you to have workers’ compensation and other types of small business insurance to protect them from danger. If you get hurt at work, they could be held accountable and have to pay for your medical bills. By asking you to have workers’ comp insurance, they know that if you get hurt on the job, they will be financially protected. When you buy a workers’ compensation package, your clients save money because they don’t have to pay for your protection. But make sure you’ve taken that cost into account when you set your fees.

2. Unexpected Injuries

You could get hurt at work even if you don’t do any hard work. A software worker could get carpal tunnel syndrome from years of typing on a keyboard. Working inside a computer, a person who fixes computers could cut their hand and be out of work until it heals. Workers’ compensation pays for medical care when you get hurt on the job, even if it’s because you tripped in your office. This includes going to the doctor, getting medicine, and going to physical therapy. If you get hurt at work and have to take time off, workers’ comp will pay you some of the money you would have made.

 

This may seem like something that would be covered by health insurance. But insurers can turn down claims for accidents that happen at work. Medical bills can also add up quickly. And if your employee takes a long time to get better, workers’ compensation payments can save your business. So, even when it’s not required, independent contractors and single proprietors may choose to buy this coverage for themselves.

3. The Law

Outside of the construction business, most state laws do not require independent contractors or self-employed owners to have workers’ compensation. States have strict rules about who can be an independent contractor, and companies who misclassify their workers could get in trouble. Even if you call yourself a “freelancer,” you might still have to carry workers’ compensation if you’re really an employee. This is the responsibility of the employer, and most states let one-person businesses choose not to have workers’ compensation benefits.

 

However, if you are required to have insurance for yourself or your employees and you don’t buy a policy, you could be fined significantly or be held responsible for their medical bills if they get hurt on the job. It’s important to learn about the rules in your state about workers’ compensation. Some states require protection for every kind of employee connection. Including 1099 employees, independent contractors, full-time and part-time employees, and freelancers.

Self-Employed Workers’ Compensation Exemption

In some states, you can get out of having to get workers’ compensation if you are a sole proprietor. A workers’ compensation exemption is a statement that you don’t need insurance because you don’t have any employees. For example, you can’t renew your general contractor license in California unless you have proof of coverage or a valid waiver for sole proprietors. To get a workers’ comp exemption for a sole proprietorship, you’ll need to fill out the right form for your state, take it to be notarized, and generally pay a small fee. You won’t have to pay for workers’ comp, but if you get hurt at work, you might have to pay out of pocket to cover your bills.

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What If I Hire An Independent Contractor

When you hire your own contractors or subcontractors, you take on the responsibilities of a big employer. In some situations, like when an employer’s business has a lot of natural risks, it may make sense to require contractors and subcontractors to carry their own insurance so you don’t have to.

 

Your lawyer can help you decide if it’s a good idea to ask the people you’re doing business with for workers’ comp. They can tell you not only about the rules and laws where you live. But also how to change your job contract to include language that says coverage is required. Even if a worker has a 1099 status, like a 1099 contractor, the company is still responsible for paying any workers’ compensation claims. Legally, 1099 contractors only need workers’ compensation coverage if their boss requires them to have it. However, it may be in their best interest to carry a certificate of insurance to protect themselves and get contracts with future clients.

Other Self-Employed Insurance Options

While we’re talking about workers’ comp, it’s important to note that sole owners often need to buy other types of business insurance.

General Liability

Liability insurance will protect you financially if someone sues you for damages after slipping and falling in your coffee shop or breaking an expensive vase while you’re cleaning a client’s home. General liability insurance also pays for slander claims. This kind of safety can be bought as a separate policy or as a part of a policy for a business owner.

Professional Liability

Listen, everyone has flaws and makes mistakes. In this case, professional responsibility is helpful. It’s insurance that protects you if a client gets hurt because of a job you did for them or advice you gave them. It is also called errors and omissions insurance, which is a more popular name. Professional liability insurance covers cash losses in case of injury or damage. While general liability insurance covers injuries and damage to property.

Cyber Liability

In the business world, there are always physical risks like getting hurt or losing something. There are, however, risks that come with using technology that could hurt your business. Hacking and data leaks are just two examples. Hackers are very interested in the names and medical records of your customers that you store on company computers. In order for your business to quickly get back on its feet after a data breach or cyberattack, it is important that it has data breach or cyber liability insurance.

Business Owner’s Policy

By mixing two types of coverage, a business owner’s policy (BOP) protects your small business from a wide range of claims. Its coverage includes both commercial general liability insurance and commercial property insurance. The “general liability” part of a BOP protects your business in case someone sues you or your company. General liability insurance protects you from lawsuits if something like a customer slipping on a wet floor, a faulty product damaging a client’s property. Or a claim that your goods or services hurt someone. It can also protect you from claims related to libel, slander, and some types of advertising.

 

The property part of a BOP helps protect your business’s buildings, tools, furniture, and stock. Whether you own them, rent them, or lease them. It helps pay to fix or replace things that were stolen, damaged, or destroyed while they were in your care. Even if they didn’t belong to you. It can also pay for things like rent, salary, and other bills while your property is being fixed or replaced after a fire or another covered loss.

Working With EZ

Being self-employed or a a freelancer gives you more freedom and a better mix between work and life. One downside is that you’ll have to take care of your own insurance. This is something you must do. If you don’t have the right insurance, an accident or emergency could put you out of money. So, people who work for themselves and don’t have insurance are taking a chance by not getting it. EZ can help, though! We can give you free, quick quotes on business insurance, and we can also help you find the best plans for you. Enter your zip code in the box below or call 877-670-3557 to talk to a qualified agent.

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Is Employer Liability and Workers’ Compensation the Same?

Posted on August 21st, 2023 by Cassandra Love8 mins read

is employer liability and workers' compensation the same? text overlaying image of a businesswoman comparing plansIf you’re running a business, you probably know that you need workers’ compensation insurance to protect both your business and your employees in the event that they sustain an injury at work. Not only that, but most businesses have to have workers’ comp insurance in most states. But you might have also heard of employer liability insurance and might be wondering whether these are two separate types of policies, and if you need both.

So, we’re here to clear things up. Workers’ comp insurance and employer liability aren’t technically the same, but they do go hand-in-hand. When you buy workers’ compensation insurance, employee liability insurance is part of your policy. Employer liability is the part of your policy that protects your business from going bankrupt if you face a lawsuit and are liable for an employee’s workplace illness or injury.

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Workers’ Compensation Insurance

You are probably more familiar with the term workers’ compensation than employer liability. Since, as we pointed out above, you most likely need this type of insurance to operate your business. And even if it wasn’t mandatory, this type of policy would be incredibly important: workers’ compensation insurance will pay for an employee’s medical expenses as well as a portion of their lost wages if the employee becomes ill or sustains an injury on the job.

For example, your workers’ comp policy would pay for medical care and lost wages if an employee gets an injury while doing heavy lifting, or after slipping and falling on a wet floor. It would also pay out if an employee got sick from long term exposure to dangerous chemicals on the job. 

Workers’ comp insurance, like any other type of commercial insurance, comes with its own set of things it covers, as well as conditions and exclusions. Workers’ compensation insurance typically covers:

  • Medical care resulting from accidents that happen to workers while they are at work
  • Lost wages (within limits) after an employee is injured or becomes ill because of their job
  • Ongoing care needed as a result of an employee’s illness or injury
  • Funeral expenses, paid to the worker’s family if the employee passes away from their injury or illness
  • Treatment for repetitive stress injuries

Employer Liability

Now that we’ve looked broadly at workers’ compensation insurance and what it covers, we can take a closer look at employer liability insurance, which is included in a workers’ comp policy. This embedded policy is meant to cover your legal fees if an employee alleges that you were negligent in preventing, or even treating, the injury/illness that they are receiving workers’ comp payouts for.

For example, if an employee is injured while using a power drill, and workers’ compensation doesn’t cover all of their medical bills, or they want to seek damages for emotional distress, for example, your employee can seek more compensation in other ways. They can sue you for not properly maintaining the tool. 

A claim like this can cost you a lot of money. But your employer liability insurance will cover the cost of any settlements or judgements made against you. And it’s important to note that whether or not you are liable, you are still responsible for covering the cost of defending yourself against any claims brought against you. So that makes it extra important to have proper employer liability coverage. Since it will also cover the cost of your defense.

But getting employer liability insurance is fairly straightforward. As we pointed out above, workers’ compensation usually includes employer liability as part of the policy. So, you’ll be getting a 2-for-1 deal, just make sure you have the right coverage for your business. If you’re unsure what you need. Speak to an EZ agent about how workers’ comp works in your state, and what kind of employer liability coverage your policy should have.

Types of Workplace Injury Cases

Claims for injuries sustained on the job can take many forms. let’s look more specifically at what employer liability covers. The following are examples of situations where you may benefit from having employer’s liability insurance. So, that you would not have to pay the costs of litigation. Or any eventual settlement, judgment, or damages awarded by the court out-of-pocket.

 

  • Consequential bodily injury – Imagine an employee has a serious accident that could end his or her life. The stress of the situation also causes a heart attack in a member of his immediate family. The other family member could actually sue your business for monetary damages. Since their condition was a direct result of your employee’s work injury.
  • Negligence – If your employee sustains an injury at work. They can claim that the accident was because your company did not have adequate safety measures in place to prevent it.
  • Third party over-action – If an employee is hurt on the job, they have the option of filing a lawsuit against a third party (like a machine manufacturer). The other business may in turn decide to file suit against you. And claim that you did not properly maintain your equipment, and this improper maintenance caused the accident. 
  • Dual capacity – Let’s say your business designs and builds a piece of machinery. Say your employee sustains an injury while using this equipment. Your employee has the right to sue you in the capacity of their employer as well as the manufacturer.
  • Loss of consortium – This type of lawsuit is typically filed by a worker’s family member if an employee dies or suffers a catastrophic injury (such as neurological damage) that prevents him from working or performing their everyday duties and functions. 

The Key Differences

Now that you know the basics of both workers’ compensation and employer liability insurance, it’s time to dive into the key differences between the two. These policies complement one another, but they do cover different things. When workers’ comp stops paying, your employer’s liability policy kicks in. Both policies cover injuries that happen on the job, but in different ways. 

Here are some key differences between the two policies:

  • Workers’ compensation protects employees, and employer liability protects a business from lawsuits filed by third parties.
  • The state’s wage rate determines workers’ compensation insurance payouts. There is also a maximum amount. But payouts from employer’s liability insurance have no limit.
  • When compared to workers’ compensation, employer liability coverage is more extensive because it covers a wider variety of claims. 

 

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The Cost

As you saw above, you can get both of these coverages in a bundle as workers’ compensation insurance. So, let’s take a look at what that might cost. In general, the amount your business will have to pay for workers’ compensation insurance is typically calculated per every hundred dollars of your company payroll. While it’s impossible to give an exact figure without first taking into account the variables unique to your business. You can typically expect to pay anywhere from $0.60 to $2.27 per $100 of payroll for workers’ compensation. 

In general, the amount you will end up paying can be affected by things like:

  • The state your business operates in – Please see our state-by-state workers’ compensations guides for more specific information on how this coverage works in your state. And how much you can expect to pay.
  • How many employees you have – The more employees you have, the greater the risk of injury in your workplace. Just by sheer numbers
  • How much you pay your employees – Again, your insurance company partially determines you rate on every $100 of payroll.
  • If you have seasonal workers
  • The type of work your business does – If all of your employees are office workers, your risk (and your cost) will be much lower than if your employees work with dangerous equipment or chemicals.
  • Claims history – Workplaces with few or no workers’ comp claims will be able to enjoy lower rates. So, make sure your workplace is as safe as possible!

It’s important to note that you might not technically need workers’ comp if you have few (or no) employees. In some states, employers with fewer than five employees do not have to carry workers’ comp. For example, in the state of Alabama, only businesses with five or more employees are mandated to carry workers’ compensation coverage. 

With that being said, coverage is mandatory in most states for any company with even one worker. So, check out our state-by-state guides to workers’ comp. Then speak to an EZ agent for help finding out what your business needs and how much you can expect to pay for a policy.

How EZ Can Help

It is important to keep in mind that both your business and your employees will benefit from having workers’ compensation insurance that includes the right amount of employer liability. If you have any further questions about the specifics of workers’ compensation or employer liability, a knowledgeable EZ agent is available to answer them now. We help you find the best plans and our help is free! We can give you free, instant quotes, just enter your zip code into the bar above. Or speak to someone right now, call 877-670-3538.

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What Is Hazard Insurance?

Posted on August 19th, 2023 by Cassandra Love8 mins read

What is hazard insurance text overlaying image of orange caution tapeKeeping your business’s doors open depends on a number of factors. But it’s clear that maintaining your business’s property and equipment is a huge part of that. If these assets are damaged in a fire or natural disaster, it might be difficult for your business to recover. So, you need to protect them. The best way to protect your business and be able to recover some of the costs associated with repairing or replacing your property, is to carry enough hazard insurance. Otherwise known as commercial property insurance.

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What Does Hazard Insurance Cover?

Hazard insurance covers both the building that your business owns or rents, as well as the equipment that it uses. Depending on your policy, hazard insurance will generally cover the cost to repair or replace the following items:

 

  • Personal property
  • Tools and equipment
  • Inventory
  • Furniture
  • Computers
  • Accounts receivable
  • Documents
  • Outdoor landscaping

 

It will cover damages to the above due to:

 

  • Fire and smoke damage
  • Theft and vandalism
  • Some weather-related events such as hail, lightning, snow, sleet, or ice
  • Explosions
  • Aircraft or vehicles
  • Sprinkler leakage
  • Building collapse
  • Water (in certain specific cases)
  • Civil unrest or rioting

 

Damages caused by floods, earthquakes, acts of terrorism, nuclear attacks, or damage resulting from war are typically not covered by hazard insurance policies. You will need a separate insurance policy to protect your business from these occurrences.

Does My Business Need Hazard Insurance?

Even though business owners in many states are not required to have hazard insurance. It is still a good idea to get it because it can assist in covering the costs of damages that you would otherwise have to pay for out of your own pocket. 

 

And while you might not be required by your state to have hazard insurance, in many cases if you want to borrow money for your business from a financial institution, you will most likely be required to have a particular type of hazard insurance policy. For instance, loans from the Small Business Administration (SBA) may require evidence of business hazard coverage.

 

If you’re looking to take out a loan for your business, you can read more about this topic here.

Do I Need Hazard Insurance if I Have a Home Business?

If you run your business out of your home, your homeowner’s insurance policy might not be sufficient to cover the business-related property that you keep in your home. This means you’ll probably want to have a separate policy. 

The Cost

The price of hazard insurance will vary widely depending on a number of factors, including:

 

  • The age of your building/property – If the workspace that you own or rent is older, you’ll typically pay higher premiums because repairs to older properties tend to be more expensive.
  • The value of your building/property – The higher the total value of your assets, the higher the premium for this coverage will be.
  • Whether you choose a cash value or replacement cost policy – With a policy that pays out based on the actual cash value of your property, your payout will be determined by how much your property was originally purchased for before it was damaged. But if you have a policy that pays out based on replacement value, you will be covered for how much it would cost to buy a brand new version of the item that was damaged. Because of the effects of depreciation, cash value insurance is typically more affordable than replacement value insurance.
  • Coverage limits – As is the case with the vast majority of insurance policies, your monthly premiums will go up as you add more coverage.
  • Lender requirements – A lender may require that you have a certain amount of property insurance coverage before they will approve your application for a loan. The more insurance your lender requires, the larger your premium will be.

Hazard Insurance for a SBA Loan

The Small Business Administration (SBA) helps small businesses get the credit they need by putting the government’s name on loans made by commercial lenders. The lender provides the loan, and if the borrower doesn’t pay back the loan, the SBA will cover up to 85% of the loss. 

 

To get a small business loan from the SBA, you need to show that you have hazard insurance. Having this type of policy shows that you own real assets that can be taken if you can’t pay back the loan. For example, if a construction company wants to borrow money to buy a piece of equipment but can’t pay back the loan, the lender can take ownership of the equipment.

Types of Hazard Insurance SBA Might Require

In order to be eligible for a loan from the SBA, you will have to show that your business has adequate insurance coverage. This could mean having general liability coverage as well as commercial property insurance/hazard insurance. Keep in mind that depending on the kind of loan you want to get, the Small Business Administration might require you to have other types of insurance coverage, such as workers’ compensation.

 

Specifically, the Small Business Administration requires the following when it comes to hazard insurance:

 

  • The minimum required coverage amount is 80% of loan principal.
  • Your business’s name must appear on the insurance policy.
  • Your DBA name must be included in the policy if you use one.
  • You must show proof of the required insurance within 12 months of receiving your loan. If your business does not already have it when you apply for your loan.

Is Hazard Insurance Tax Deductible?

The Internal Revenue Service considers business insurance premiums to be an ordinary and necessary business expense. So, yes it can be tax deductible. But there are other factors to think about when determining if your hazard insurance is tax deductible.

 

If you have a home-based business, you may be able to deduct some of your operating costs from your taxable income. Insurance premiums can fall into this category, along with utilities and home office essentials. For instance, you can deduct half of your annual hazard insurance premiums if your home is used for business purposes in excess of 50% of the time.

 

If your company suffers losses in an area where a federal disaster declaration has been issued, you may be eligible for deductions. If you have hazard insurance and your insurer only pays a portion of your claim, for instance. You can deduct the amount of your claim up to $500 per incident.

 

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Other Types of Business Insurance You Need

What, where, and how you do business will determine the specific types of coverage your company needs. The following are some examples of common types of business insurance policies, other than commercial property/hazard insurance:

 

Workers’ Compensation

Workers’ compensation, which is also referred to as “workers’ comp,” is a type of insurance policy that is mandated by law. It provides benefits to employees in the event that they sustain an injury while performing their job. Employees can receive financial compensation, medical benefits, or both from the fund. Which fills the role of an insurance policy for disabled workers. Different states have different regulations regarding workers’ compensation, so check out our state-by-state guides.

General Liability Insurance

Standard liability claims made by third parties (people who are not affiliated with your company) are covered by general liability insurance. This type of commercial insurance policy will pay for your company’s legal defense expenses in the event that your company is sued for causing bodily injury, damage to property, or injury to reputation. This includes everything from hiring an attorney to paying for court-ordered judgements and settlements. As well as any other costs that may arise.

Business Owner’s Policy

General liability and commercial property insurance are the two main components that make up a business owner’s policy, or BOP. Which is essentially a bundle of the two (or more) types of commercial insurance. With a BOP, you will be protected from financial loss and covered for any claims that would be covered by either of those two types of policies. One simple policy can protect your small business from a variety of significant legal risks. 

Commercial Property Insurance

As covered above, this type of policy typically includes coverages for the most common hazards. It safeguards both the structure and the contents of your business’s property.

Commercial Auto Insurance

If your business uses vehicles, you’ll need commercial auto insurance to cover things like liability, accidents, medical bills, personal injury protection, and uninsured motorists. It’s similar to a personal auto insurance policy. But commercial auto insurance has different eligibility requirements, coverage, exclusions, and limits than personal auto insurance.

Working With EZ

Our insurance agents work with the leading insurance companies across the country to ensure that you have access to the best coverage options for your business and its employees. In fact, we can save you hundreds of dollars annually by tailoring our search to find you exactly what you need, at the best price possible. If you have any questions, please do not hesitate to contact us at 877-670-3538.

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What Is An Umbrella Liability Policy?

Updated on August 16th, 2023 by Cassandra Love9 mins read

If you’re a small business owner, there are probably a lot of things that worry you. One of them might be the amount of liability insurance you should have. Since facing a major lawsuit could mean losing everything you’ve worked for. This, of course, is the worst-case scenario. Since the likelihood of being hit with a lawsuit that your current insurance policy won’t cover is fairly low. But, even so, it’s better safe than sorry – and this situation is entirely avoidable with an umbrella liability policy.

Umbrella insurance is a supplemental form of liability insurance that kicks in when you exhaust your primary policy’s liability limits. In the following, we’ll examine the specifics of this type of liability insurance. Including what it is, who needs it, how much it costs, and what it doesn’t cover.

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How Does an Umbrella Liability Policy Work?

If you choose to purchase an umbrella liability policy for your business, you will actually be getting two different types of coverage: liability and defense. Even though you might already have a general and/or professional liability policy for your company. Umbrella policies provide additional coverage that extends beyond the boundaries of your primary insurance.

So, if your business faces a lawsuit and you are liable for damages that are greater than the limits of your commercial insurance policy, an umbrella policy will help you to pay the remaining amount. That means you won’t have to sell any of your assets. Or use any of your savings to pay the additional expenses out-of-pocket. 

It’s important to note that since umbrella policies are supplemental coverage. You can’t purchase one of these policies without first having primary liability insurance.

What Does an Umbrella Liability Policy Cover?

Commercial umbrella liability policies work pretty much the same as traditional commercial liability policies. It also provides protection against the same types of risks. To be more specific, an umbrella insurance policy will give you supplemental coverage for the following:

 

  • Slip and fall injuries – If you have general liability insurance and also purchase commercial umbrella insurance. Your supplemental policy will cover any excess legal costs in the event that a third party sustains an injury on your company’s property.
  • Third party property damage – The addition of commercial umbrella insurance to a general liability policy will help to pay legal fees associated with the destruction or damage of third-party properties.
  • Car accidents – If you have a commercial auto insurance policy or a policy that covers hired and non-owned vehicles. Adding commercial umbrella insurance to those policies can help cover costs in the event that someone sues you for damages caused by one of your vehicles.
  • Employee injury lawsuits – Having an umbrella policy on top of employers liability insurance (which is typically included in workers’ compensation insurance) will help pay for employee lawsuits brought on by work-related injuries caused by employer negligence.

What Isn’t Covered?

Although umbrella insurance can increase the liability limits of several other policies. It does not offer the complete safety net that a small business may require. 

Umbrella policies do not cover the following:

 

  • Damages within the primary policy’s limits – Umbrella liability insurance does not kick in until the limits of the primary policy have been exhausted. As with any insurance, it only covers things up to the policy’s maximum.
  • Business property damage – Damage to your company’s property due to things like fire, theft, or certain types of weather can be covered by the commercial property insurance included in a business owner’s policy (BOP) or commercial package policy (CPP). Umbrella policies are extensions of existing liability insurance and you cannot buy them separately for property.
  • Professional errors – Malpractice insurance, also known as errors and omissions insurance (E&O) or professional liability insurance, protects professionals from legal action stemming from their own negligence or those of their clients. Excess liability insurance, also known as excess E&O insurance, is very similar to umbrella insurance. You can use it to increase the limits of this type of policy. But umbrella liability insurance will not cover this type of negligence.
  • Employee theft – If you want to protect your company financially from employee theft or fraud against customers or clients. You’ll need commercial crime insurance, also known as a fidelity bond.

Who Needs an Umbrella Liability Policy?

In general, the more face-to-face interaction your business has with your clients and customers, the greater your liability risks. In addition, if your employees are using dangerous equipment or heavy machinery, your business faces even more risks. 

If the above is true for you, and you believe that the cost of a claim could exceed your liability limits, purchasing commercial umbrella insurance is something you should seriously consider doing. This coverage may be of useful for your business if:

 

  • You’re a general contractor and your client needs more coverage – Umbrella insurance is a stopgap measure for contracts worth more than $2 million. If you’re a general contractor, and your existing general liability policy has a $2 million per-occurrence limit, but your client contract requires a $5 million per-occurrence limit. You would add an umbrella policy with a $3 million per-occurrence limit.
  • You’re in contact with the public – The possibility of a customer sustaining a physical injury is increased when your establishment is open to the public. For instance, during business hours, wholesalers frequently use various pieces of machinery to restock the shelves of their warehouses. When using this kind of machinery in the presence of customers, there is a risk of injury. If someone gets hurt while on your property, you could be liable for expensive medical bills and lawsuits that exceed the limits of your general liability insurance. 
  • You do work off site – Working away from the physical location of your company can also increase the liability risk it faces. For instance, if your employees are performing work at the residence of one of your customers, there is an increased possibility of property damage. 

 

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The Cost of Umbrella Liability Policies

The range of umbrella insurance policies available is very broad, with a significant gap between the lowest and highest limits of coverage. This makes sense, since no two businesses share the same set of risks. There are businesses that choose to purchase $1 million in supplemental coverage, and businesses that might even choose to purchase $100 million or more in coverage. The amount of coverage you choose, as well as other factors related to the type of business you run, the amount of employees you have, and your annual revenue, will determine how much an umbrella policy will cost you.

With that being said, prices can vary widely even between seemingly identical businesses. And keep in mind that without knowing your business, we can’t give you exact quotes, so speak to an EZ agent to find out what you can expect to pay. But to give an example, let’s say your small business is looking for $1 million in coverage. With a $1 million policy, the highest premium costs average around $208 a month, or $2,500 for the year. Generally businesses with higher risks pay the most in premiums; this typically includes doctors, lawyers, and construction companies. On the opposite end of the spectrum, for less risky businesses such as cleaning services, you would pay around $33 a month. Or $400 for the year.

How Much Coverage Do I Need?

If you have a business that is contracted out by clients, and you have a contract with a client that requires a liability limit higher than $2 million, you will typically purchase an umbrella policy to meet that limit. It’s not unusual to see contracts worth $5 million or more. In that case, you buy a $3 million umbrella policy in addition to a $2 million primary policy. Otherwise, the amount of coverage you choose should be tailored to the specifics of your business and its industry.

Keep these three things in mind as you browse umbrella insurance quotes:

 

  • Your coverage should match your assets – To have enough coverage, your coverage needs to match your assets. So, if your entire company’s net worth is $1 million, that’s how much coverage you need.
  • Umbrella liability starts at a minimum of $1 million – You cannot purchase an umbrella liability policy with a coverage limit of less than this amount.
  • Umbrella liability coverage comes in increments of $1 million – You can only increase your liability coverage in increments of $1 million, allowing you to acquire precisely the amount of protection you need.

The Difference Between Umbrella Liability and Excess Liability

There is a common misunderstanding that commercial umbrella insurance and excess liability insurance are the same thing. You can purchase excess liability insurance to supplement either – and only – your existing general liability insurance or errors and omissions insurance (E&O) policy. Your supplemental plan will only provide extra coverage to the specific plan you purchase it for. For example, if you buy excess liability for your general liability policy. It will only provide extra coverage for your general liability claims. But if you purchase an umbrella policy, you will have extra coverage for all of your other liability policies in one supplemental policy.

Working With EZ

Get in touch with an EZ agent if you want to compare commercial insurance policies and prices quickly and easily. If you need assistance making sure your business has enough coverage our agents are available to assist you at no cost. We’ll take a look at your long-term financial plans and insurance requirements, then recommend the best policies for you. Enter your zip code in the box below to get a free instant quote. Or give us a call at 877-670-3538 to speak with a live agent.

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As Your Business Rebuilds, EZ Can Help You Save

Updated on August 8th, 2023 by Cassandra Love3 mins read

Let’s face it, the pandemic has put a lot of strain on small businesses, many of whom are now struggling to survive. If you’re a small business owner, you might have had to let some employees go, shift around their duties, or even consider shutting down for a while. All of this will have  changed the way your business operates, and you might have to work to get it  back to how successful it was previously. There is no doubt that at this time you will want to save as much money as you can, and this probably includes looking for ways to save on commercial insurance. It is possible to focus on rebuilding your business while saving on commercial business policies, including worker’s compensation insurance, with help from an EZ agent. Here are some tips to consider when rebuilding.

Assess The Damage

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Unfortunately, your business might have experienced a lot of financial hardship in the past year. You’re not alone: many businesses have had to take a loss during the pandemic. Assess the damage by comparing this year’s numbers with last year’s, and considering your total assets. Include the impact of losing employees and reducing their hours or changing their roles. Remember, with changes in operations or employee positions come changes to your commercial insurance policy. You might need to lower your liability limits, change your worker’s compensation policy, or change/add policies. 

Reconsider Your Business Plan

The business plan that you had pre-pandemic is most likely looking a lot different right now. Focus on a new business growth model, whatever that might mean for your particular business. Do you need to focus more on marketing? Hire more employees? Make changes to how your business is run?

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Consider taking out a loan to help you recover some of your losses.

Consider A Loan

If you took a huge financial loss, consider looking into a loan. There are many small business loans (SBAs) you can consider, including the government’s pandemic-related Paycheck Protection Program, which provides funding to help business owners keep their employees. Getting a loan can help you invest in your business, or keep you afloat while you create a new business plan.  

Save On Business Insurance

As mentioned, when you lose employees or shift their positions, it can completely change how much you pay in premiums for worker’s compensation insurance. You could be spending more than necessary, and the same goes for your commercial insurance policies. You want to make sure that you are properly covered, and if you have changed how your business operates, you need to do the same for your commercial insurance policies!

Develop A Time To Rebuild

Understand that it will take some time rebuilding your business back up to what it used to be. Take your time and create a realistic timeline for your priorities. Just remember to add protecting your business to the top of that list!

If you are interested in comparing commercial insurance policies, an EZ agent can help. With us, you will work with one agent in your area who deals with the nation’s top-rated insurance companies. We will assess your company’s needs and make sure that, as you focus on rebuilding,  you are completely covered. To get free instant quotes, enter your zip code in the bar above, or to speak to a licensed agent, call 888-615-4893. No hassle or obligation.

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