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Safety Net
Insurance will protect your business and
your greatest asset—your employees. Best of
all, it doesn't have to cost an arm and a leg.
It's one of those things you hate to
think about, let alone pay for. But if
you're a small-business owner and
have one or even a handful of
employees, insurance is one of those issues
you have to make time for.
The question for most small-business
owners is not "do I need insurance", but
rather, "what kind of insurance do I have
to carry?" The answer varies, of course,
depending on your business. There are,
however, a couple of absolutes.
Businesses that are using a storefront or
office space should invest in property
insurance to protect their assets. In addition,
liability insurance is necessary to
cover any claims related to someone getting
hurt at their establishment or to
cover damage to the property of others.
Workers' compensation insurance,
which pays for the medical bills of
employees' work-related injuries, is
required in most states. Businesses that
use vehicles on the job need to carry
commercial automotive insurance,
while companies that dispense advice—
marketing communications shops or
law firms, for example—should have
some flavor of Errors & Omissions
insurance, which provides coverage if
there is a claim against you or one of
your employees for failure to adequately
perform professional duties.
Aside from the have-to-have list, there
are discretionary types of insurance coverage
that many small firms should, and do,
maintain. Many types of coverage, like
health and dental policies, are crucial for
attracting and retaining employees. There
are other policies like supplemental insurance
and group life that are affordable by
most small businesses and can be instrumental
in keeping the right kind of
employees happy and committed to their
jobs—and ultimately, your firm's success.
Here are a couple of suggestions from
insurance experts on how to get the most
mileage out of your insurance dollars:
Health care. It's one of the first questions
that will be asked during the hiring
process—do you have a health care policy
and what kind of coverage do you offer?
Providing health care coverage is one of the
most costly endeavors for any company—
often, it can run as much as $6,000 per
employee annually. One of the best ways to
get coverage for employees and minimize
out-of-pocket expenses is to pay part of the
premium and require employees to shoulder
the rest. "I'm a big believer in sharing
cost," says Pat Hughes, president of WP
Hughes & Co., a Portsmouth, NH, consulting
firm that helps companies create
employee benefits packages. Hughes recommends
companies aim for paying 75
percent of medical and dental bills. He also
suggests small firms take policies with
higher deductibles—$750 or $1,000 a year
vs. the more standard $500 deductible, as
added savings.
Section 125 plans. This kind of offering
lets employees pay for their portion
of the health care bill with pre-tax dollars.
It's attractive to employees, and it
doesn't cost the business owner anything
extra, according to Chuck Newman, president
of The Charles J. Newman Co. LLC,
an insurance agency specializing in
employee benefits in Hawthorne, NY.
The reason? Every dollar paid into the
plan reduces the employee's taxable
income, lowering the burden on the
employer for the corresponding Social
Security taxes, Newman explains.
Supplemental insurance. Plans offered
by companies such as AFLAC Insurance
(you know, those ads with the quacking
duck that shows up in bizarre places)
allow employers to expand their benefits
package to such areas as cancer insurance,
short-term disability, and supplemental
hospital coverage without having to incur
additional cost. Employers simply make
the arrangements to have coverage available
for employees, and employees then
pay only for the coverage that they select.
Group life. With a minimal investment,
employers can offer their employees base
life insurance. A three-person firm, for
example, could get everyone a $50,000
policy for an investment of less than $200
a year. Says Hughes: "For short dollars, it's
an added value to your benefits package."
That's really the bottom line for investing
in insurance. For small-business owners,
it's the key to safeguarding their most
precious resource. "The thread that ties all
small businesses together is that they've
got to provide for their employees and
protect their greatest asset—human capital,"
says Hughes.
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