You are finally making the big step. After 20 or more years in the business, you are hanging out your shingle and starting your new coatings consulting company.
The only complaint of many start-up consulting firms is that they didn’t do it earlier; however, many of these same start-up firms did not have the information they needed about insurance. This is where an expert’s advice comes in.
Basic insurance for a small company may include the following six categories. Exact numbers will vary significantly depending on your business’s size, property, limits, and deductibles, among other things.
1. General Liability
General liability insurance covers office risks, including property. Insurance for a small office, including home-based offices, may run as much as $1,000 annually. The underwriter will want to know what you do, what your revenues are, and what your assets are. Coverage is for bodily injury and property damage (BI/PD), similar to your homeowner’s policy, responding to first-party loss (aka your possessions), and third-party loss (aka losses of others). Be sure to ask if a payment plan is available.
2. Professional Liability
This is also referred to as errors and omissions, or E&O. In many ways, this is where the most exposure lies for the professional consultant, who is held to a higher standard. Coverage is for your clients and your firm, with potential resources to correct or defend when mistakes or misunderstandings occur. Unlike general liability, this coverage does not need BI/PD to trigger response from the policy — just a demand for payment. Keep in mind that this type of coverage is written on a claims-made basis, so maintenance is important.
3. Automobile Liability
In this case, you are covering automobile property and risks. Usually a start-up firm does not own any vehicles; however, for a firm that does own one or more vehicles, hired and non-owned automobile coverage may be your company’s second biggest exposure, especially if employees or independent contractors are using their vehicles while conducting your business.
4. Umbrella Liability
An umbrella policy adds coverage over the primary package of general liability and automobile liability for higher limits at a more reasonable cost. Keep in mind that this can be considered either at the outset or added later as the company grows.
5. Workers Compensation
Workers comp covers employees for risks arising out of and in the course of employment. It varies by state and is a percentage of payroll. Sole proprietorships with no employees may forego workers compensation insurance at the outset. Even going forward, a sole proprietor may exclude him/herself from this coverage, but it may be an inexpensive form of disability insurance when workers compensation applies.
6. Cyber Liability
In this Internet age, it is crucial to protect businesses and individuals in the event of a variety of cyber incidents, including data breaches (involving customer personal info), business interruption, and network damage. The premium for this type of insurance can be as low as $500 per year.
Start With Peace of Mind
Remember, only the actual policy can describe the coverage. So, what are you waiting for? Once you’re properly insured, you can start your coatings consulting business with peace of mind.
About the Author:
Gretchen McAlinden has a varied insurance background, including insurance company experience, years as a risk manager for a Fortune 300 manufacturer and operating her own independent insurance consultant company. Today, she serves as president of Norman-Spencer International, serving her individual clients and driving the efforts of the Chicago-based company toward the development and management of unique professional liability programs with Errors & Omissions available for hundreds of professions and multiple associations. For more information, contact gretchen@normanspencer.com.