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I'm just getting my NJ business started. Do I need insurance right away?
Yes, because the chance that you could suffer a
loss begins with the first day of business. You can't get help after the fact. If
you suffer a loss and have no insurance or have improper or insufficient coverage,
there is very little, if anything, your insurance agent can do to help you. You
must be prepared for the risks that are inherent in any business and the losses,
sometimes catastrophic, that they can cause.
Also, many states and local jurisdictions require that businesses be insured to
begin operating. And if you rent space for your business, your landlord probably
requires that you be adequately insured as well.
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I don't have any major business assets. Why do I need insurance?
Every business has some property. And, when you think about it, your
business is your property. Just like your home and your automobile, your business
needs to be protected from loss, damage and liability. In addition, your business
is your source of income, so you need protection from the potential loss of that
income.
Generally, there are two types of insurance - property and liability. Property insurance
covers damage to or loss of the policyholder's property. And if somebody sued for
damages caused by you or your possessions (other than a vehicle covered by your
insurance policy), the cost of the suit - both defending it and settling it if necessary
- would be covered by your NJ liability insurance.
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Get free help with business insurance quotes below.
It can be. Many smaller businesses are now insured under NJ package
policies, know as Business Owner Package Policy that cover the major property and
liability exposures as well as loss of income. A common package policy used by many
NJ smaller businesses is called the Business owners Policy (BOP).
Generally, these package policies provide the smaller-business owner more complete
coverage at a lower price than separate policies for each type of insurance needed.
Your agent can help you decide which policy or policies are right for your business.
Additional coverage for property, liability or perils or conditions otherwise excluded
(e.g., flood protection) can be purchased as endorsements to a standard policy or
as a separate, second policy called a difference-in-conditions (DIC) policy.
Because businesses vary, it is impossible to have a standard policy to cover all
contingencies. Also, some businesses, regardless of their size, do not fit the profile
of a standard business owners policy. For example, restaurants, wholesalers and
garages have special liability needs that are not met in the standard business owners
policy. Your insurance agent can advise you of the best policy (or policies) to
protect you and your business.
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Your business may not possess all the following types of property, but you can use this list to make sure that you have considered all the property categories and any insurance coverage that may be warranted:
Buildings and other structures (owned or leased)
Furniture, equipment and supplies
Inventory
Money and securities
Records of accounts receivable
Improvements and betterments you made to the premises
Machinery
Boilers
Data processing equipment and media (including computers)
Valuable papers, books and documents
Mobile property such as automobiles, trucks and construction equipment
Satellite dishes
Signs, fences, and other outdoor property not attached to a building
Intangible property (good will, trademarks, etc.)
Leased equipment
To establish the amount of insurance you need on each, your insurance
agent can help you review the types of property you own and their uses. Some of
these items are covered in the basic policies. For others, coverage can be added
by an endorsement, or rider. And some, like money and securities, may not be covered
by a standard commercial policy and may require a second, separate policy.
What types of property insurance should I consider buying?
The best thing to do is to take a complete inventory of all your
business property, determine their value and decide if each is worth insuring. Then
check to see that the items on the inventory list are included in the basic business
property policy and covered for the correct amount. If not, ask your agent about
the cost of purchasing additional coverage to meet your needs.
You also need to consider your business situation. Are you planning a major expansion?
Does your inventory have a decidedly peak season (like a toy store in December)?
Or does it fluctuate throughout the year (like a clothing store)? Is your liability
limit high enough in light of the new job contract you just signed? Business policies
are designed to be added to or subtracted from to meet your needs. Be sure to discuss
changes to your business with your agent so that he or she can be sure your policy
still provides adequate coverage.
Some common additional coverages for business property include (although this list
is by no means all-inclusive):
Boiler and Machinery Insurance
Even if you do not own a boiler, you may need this coverage. The term "boiler and machinery insurance" is gradually being replaced with terms such as "equipment breakdown" or "mechanical breakdown" coverage. This insurance provides coverage against the sudden and accidental breakdown of boilers, machinery or equipment, including computer systems and telephones/communication systems. Coverage usually includes reimbursement for property damage, expediting expenses (e.g., express transportation charges), and business interruption losses.
Builders Risk Coverage
Covers buildings in the course of construction. Depending on the policy, this coverage can be for either the building's value at the time of loss or its full value at the time of completion.
Building Ordinance Coverage
Provides coverage when a community has a building ordinance stating that when a building is damaged to a specified extent (usually 50 percent), it must be completely demolished and rebuilt in accordance with current building codes rather than repaired. Special attention is required when establishing the amount of insurance.
Business Interruption Insurance
Covers the loss of earnings as a result of damage or loss of business property. Reimbursement for salaries, taxes, rents, and other expenses plus net profits that would have been earned during the period of interruption can be included.
Commercial Crime Coverages
Covers money and securities, stock and fixtures against theft, burglary and robbery both on and off the insured premises and from both employees and outsiders.
Debris Removal Coverage
Covers the cost of removing debris after damage from fire or other covered peril that requires debris removal before reconstruction of the damaged building can begin. This is not part of fire insurance coverage and must be added as an endorsement.
Fidelity Bonds
Covers business owners for losses due to dishonest acts by their employees.
Glass Coverage
Provides coverage for glass breakage such as store windows and plate glass on office fronts.
Inland Marine Insurance
Primarily covers property in transit such as from warehouse to warehouse or warehouse to retail store, as well as other people's property left on your business premises, such as clothes left at a dry cleaning business or an employee's personal effects left in the company locker room.
Insurance for Loss of Lease Income or Value
Covers the loss of income when rental property is damaged or destroyed
and the loss of value when the owner of the rental property also used some of its
space for business. If the tenant of the destroyed or damaged building is forced
to rent space elsewhere at a higher cost, this is called loss of lease value.
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How much property insurance do I need to buy?
There is no one answer to this because each business is different.
You can consult with your NJ Insurance agent on the monetary limits needed to cover
your potential for loss. Obviously, a one-person accounting firm will need to purchase
less insurance than a store with a substantial inventory. But each will need to
make sure that all necessary business property is covered, that the limits of liability
are sufficient to protect the owner and the employees, and that loss of income is
protected.
In addition, each business has unique needs and situations that must be handled.
If the store happens to be located on a flood-prone area, the owner should invest
in NJ flood Insurance. The accountant may wish to purchase reconstruction-of-accounts-receivable
insurance to cover the loss of accounting records. The costs of reconstructing those
records, money borrowed because of delayed payments due to the records being lost,
and lost payments from those clients whose records cannot be reconstructed are all
covered.
NJ Liability protection also will vary from business to business. A retail business
is more at risk for potential suits than a business that is not open to the public.
Also, in some states, courts tend to respond more positively to lawsuits, increasing
both the likelihood of successful lawsuits and the amount of damages awarded. In
today's lawsuit-conscious society, higher liability limits are extremely important
and relatively inexpensive. Your agent can help you decide how much coverage is
needed for your particular business.
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Who decides how much my NJ business property is worth?
Property insurance can be purchased on the basis of the property's
actual value, on its replacement cost, or on an agreed amount. The differences between
the three are:
Actual Cash Value
The replacement cost of the item minus depreciation. For example, a new desk may cost $500. If your 7-year-old desk gets damaged in a fire, it might have depreciated 50 percent. Therefore, you would be paid $250 for it.
Replacement Coverage
The cost of replacing an item without deducting for depreciation. So today's cost for a desk of a size and construction similar to the 7-year-old one damaged by fire would determine the amount of compensation. If it costs $500 today, that would be the replacement coverage.
Agreed Amount
Art objects, antiques and other unique items are usually insured at an amount agreed upon when the policy is being written. An appraiser values the goods to be insured and the business owner and the insurer agree upon an amount that the insurer will pay if the goods are destroyed due to an covered peril.
Check your NJ Business Insurance policy. If you prefer replacement
coverage and do not already have it, this coverage can be added to your policy.
Inflation-guard coverage, which automatically increases your insurance amount a
certain percentage, protects against rising construction costs. Your agent can advise
you of the costs involved.
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What kinds of events does NJ business insurance cover?
NJ Basic property insurance policies generally cover losses caused
by fire or lightning and the cost of removing property to protect it from further
damage (e.g., removing inventory or equipment from a damaged building so it won't
be stolen). "Extended perils," including windstorm, hail, explosion, riot and civil
commotion, and damage caused by aircraft, automobiles or vandalism, are usually
covered in a standard policy. Other important perils, often not covered and considered
"optional" in almost all standard policies, include earthquake and flood damage,
building collapse, and glass breakage.
Property insurance can be written as either "named peril" policies or so-called
"all risk" policies. A named peril policy provides coverage for those perils specifically
named in the policy. An all risk policy covers loss by any perils not specifically
excluded in the policy. The term "all risk" does not mean that all perils will be
covered and, to avoid confusion, is often replaced with the term "special form"
or "special causes of loss" coverage.
Check with your agent on the perils covered by your policy. If you wish, additional
coverage can be added.
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Everybody seems to be suing everybody else these days. What if someone sues my business?
No business can afford to be unprepared for a lawsuit. New Jersey
Liability insurance protects your business assets when the business is sued for
something the business did (or failed to do) that contributed to injury or property
damage to someone else. Liability coverage extends not only to paying damages but
also to the attorneys' fees and other costs involved in defending against the lawsuit
- whether valid or not.
The standard business owners policy provides liability coverage, as does a separate
policy known as a commercial general liability (CGL) insurance policy. Generally,
commercial liability insurance, whether purchased in a separate policy or as part
of a standard business owners policy, will cover bodily injury, property damage,
personal injury or advertising injury. The medical expenses of a person or persons
(other than employees) injured at the business or as a direct result of the operations
of the business are also covered.
Usually excluded from both types of liability insurance policies are suits by customers
against a business for nonperformance of a contract and by employees charging wrongful
termination or racial or gender discrimination or harassment.
Check with your NJ Insurance Agent about the best liability protection covering
all types of situations that may arise in your business.
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Yes, but in addition to covering the vehicles you own for liability, medical payments, uninsured motorist coverage, comprehensive and collision, it also covers you when you rent a car and when your employees are operating their personal cars for your business. Be sure to review your auto exposures with your agent. For NJCAIP Quotes and Qualification go to NJCAIP.NET.
Will I need to protect my employees in the event they are injured on the job?
Yes, and in most states there are legal requirements that must be
met, and for which you may be responsible. State laws vary, but most states require
that you carry some form of workers compensation insurance. This protects the employee
and also offers you the business owner a degree of immunity from lawsuit by an injured
employee.
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I keep one auto strictly for business. Do I need a separate policy?
Yes. Whether you have one vehicle or several, you will need a business
automobile policy. Such a policy covers any motor vehicle used in your business
including cars, vans, trucks and trailers pulled by trucks, and offers coverage
if they are damaged or stolen. It also covers liability if the business vehicle
is in an accident and the driver is at fault. This policy is not for truckers or
commercial garages. They have special liabilities and must secure special policies
that deal with their different needs. Businesses that have a fleet of vehicles will
of course have different needs than a business with one or two, and their policies
will reflect these differences.
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I just signed a 3-year lease to open my business. Why does my insurance agent want to see my lease?
Whether the business lease is for a building or for equipment, the
agent needs to determine who is responsible for insuring the leased items - you
or the lessor. For leased buildings or building space, there are other factors to
be considered, such as who is responsible for plate glass coverage and whether your
landlord requires tenants to carry minimum amounts of liability insurance, and the
extent of a hold harmless agreement. These and other situations covered in the lease
affect the amount and kinds of insurance you need.
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My business requires that I store gasoline on the premises. Do I have to have special insurance?
Yes, if your business transports, stores or uses toxic materials,
you are required by law to have a special environmental liability policy. If these
materials should be discharged accidentally into the water or leak onto the ground
due to a covered peril like fire, the cost of extracting the pollutant from the
business premises is covered up to the dollar amount set forth in the property section
of your policy.
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The standard business owners policy contains coverage for loss due to fire, including coverage for property of others the insured business was repairing, storing, or otherwise servicing in order to earn money. The coverage only applies, however, if the business is legally liable. Thus, if lightning causes the fire, the business is not responsible because lightning is out of the control of the business owner. There are other policies, called Bailee's policies, that provide even broader coverage for your customers' possessions. A Bailee's policy is often useful to help maintain good customer relations.
Shipping companies often carry insurance to cover their losses. However,
the shipping company's insurance may be too low or you may have difficulty collecting
on a claim after signing for the shipment. Therefore, "property in transit" insurance
is available to cover your property being transported by truck, rail, ship, or other
means of shipment. Also, the firm you hire to transport goods and the contract you
sign with them may affect your need for coverage. Make sure you check with your
insurance agent.
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I work out of my home. Will my homeowners insurance cover my business?
Yes, but on a very limited basis. Loss of business property is usually
reimbursed up to $2,500 in the house and up to $250 for business property damaged
or lost away from the premises. Even if your business is a sideline such as a craft
studio, these limits may be too low to cover all the equipment and materials you
have accumulated. It's also important to know that no business liability coverage
is included in a standard homeowners policy. Your insurance agent can help you ascertain
what, if any, additional coverage you need. This additional coverage may be added
to your homeowners policy or found in a separate commercial policy.
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What is coinsurance all about?
Most business policies include a "coinsurance" clause stipulating
what percentage of the total value of your property must be insured in order to
be fully reimbursed for a loss, even a partial one. (Most losses are partial.) If
you insure for less than that amount, your insurance company may impose a "coinsurance
penalty" on your claim.
Here's how coinsurance works:
Let's say you have a building insured that you believe would cost $100,000 to replace
and a coinsurance penalty in your policy of 80 percent. You insure the building
for $80,000, thinking you have fulfilled the coinsurance clause. A fire loss causes
$60,000 worth of damage, so you submit a claim. Your insurance company subsequently
determines that the replacement cost of the building is actually $150,000. To determine
how much to pay on the claim, the insurer divides the amount of insurance you purchased
($80,000) by the amount you should have purchased (80% of $150,000 or $120,000).
The result (two-thirds, or $40,000) is the amount of your claim the insurer will
pay.
Thus, even for a partial loss within the monetary limits of your policy, you will
receive only two-thirds of the amount claimed. If the building had been insured
for at least $120,000, the insurer would have reimbursed you for the full amount
of the loss.
You should check with your agent to make sure you have adequate coverage. Adding
an endorsement to the policy that automatically increases policy limits to keep
pace with inflation is a good idea.
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As a New Jersey retailer, do I need to worry about product liability?
As long as you do not alter the products you receive from manufacturers
for resale, you have only a secondary liability. The product manufacturer is the
first liable party. General liability insurance usually covers this secondary liability,
but you should check with your agent to be sure your business is adequately covered.
Recognize, too, that your liability policy will pay
defense costs, whether or not a judgment is rendered against you.
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Employee benefits generally include health
insurance (sometimes including dental and vision benefits),
term life insurance, and possibly a retirement
program. Group disability insurance
is also available, although employers and employees opt for this benefit less frequently.
NJ Employers can provide coverage for their NJ employees alone or for the employees
and their families. Cost is usually the determining factor. With the high cost of
health insurance in the United States today, employers are more likely to ask employees
to pay some or all of the costs of health insurance for their families and sometimes
for the employees themselves.
Depending on the size of the group to be insured, the business may serve as the
policyholder for the group's insurance. However, for many smaller businesses, the
insurer will pool them together in a multiple-employer trust. The trust itself,
rather than any single employer, is the policyholder. This enables smaller businesses
to benefit from the lower premiums and other services enjoyed by large groups.
Smaller new jersey businesses can also sometimes obtain employee benefit insurance
through their trade or professional association. Your best bet as a small business
operator is to find a way to join a larger pool seeking benefits. Check with your
agent on the options available to you.
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Can I do anything to
lower my New Jersey insurance premiums?
Remember that all insurance premiums are based on the risks involved. The insurance company evaluates the situation to determine the risks - or potential for losses - and bases its rates on the results. Therefore, deliberate steps you take to lower your risks not only can help safeguard your business but also may make you eligible for lower insurance rates. Consider these steps:
Maintain adequate lighting throughout your business premises.
Keep electrical wiring, stairways, carpeting, flooring, elevators, and escalators in good repair.
Install a sprinkler system, smoke and fire alarms, and adequate security devices.
Keep only a small amount of cash in the cash register.
Keep good records of inventory, accounts receivable, equipment purchases and the like. Consider keeping a second set of records off-site, such as with your accountant, insurance agent or at home.
Make sure your employees have good driving records.
Make sure your employees know how to lift properly and use all necessary safety equipment, such as goggles, gloves, and respirators.
Consider using the services of a risk manager. Such an outside consultant can advise you of any safety or environmental regulations you may have overlooked or not been aware of and talk to your employees about safety practices.
You may also wish to raise your deductible where appropriate to lower your insurance premiums. How high to raise the deductible should be governed by how much you can afford to pay out of pocket. Be careful not to raise it so high that you cannot cover it should a loss occur.
Finally, make sure your agent is familiar with your business and the risks inherent in it. He or she should be able to advise you on risk management techniques and their benefits to both you and the insurer.
Who keeps an eye on the New Jersey insurance companies?
Insurance is a heavily regulated industry. Every state including
New Jersey has some sort of Insurance Department, Insurance Administration or State
Insurance Agency that regulates and monitors every insurer operating within the
state's borders. In addition to approving rates, your state's insurance department
is involved in all insurance matters on behalf of private citizens and businesses.
It also issues operating licenses to insurers and agents, based on their ability
to meet the state's requirements for conduct and knowledge about insurance issues.
Your insurance company and agent work closely with your insurance department to
make sure you are getting the best and fairest possible service within the state's
guidelines. If you ever have difficulty settling a claim, work with your agent to
resolve the difficulty. However, you can also contact your state's insurance department
if you wish to know more about your options and rights as an insurance consumer.
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What should I look for in a New Jersey Insurance Agent?
Agents are there to help you. At the most basic level, any agent
should be able to answer all of your questions about insurance, provide you a thorough
assessment of your insurance needs, and offer you a choice of insurance products
to meet those needs. Also, any insurance company should provide you with prompt,
quality service in the case of a claim. If not you file a complaint with the NJ
Department of Banking and Insurance NJDOBI.
Just as important is the level of professional confidence and personal comfort you
feel with the agent. Many people stick with the same insurance agent for decades,
even generations, however the need for competitive pricing has begun to erode this
type of long lasting relationship system of doing business.
An important, but sometimes overlooked, factor to keep in mind is that there are
two kinds of insurance agents: those who represent only one insurance company and
those who represent more than one insurance company.
Agents offering through their agencies only the policies of one insurance company
often are referred to as "captive agents," because the company they represent does
not allow them to offer their customers competitive alternatives.
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