Editor’s Note: Protecting small businesses

Are your customers’ small businesses fully covered with all the insurance they need?

Apparently the National Association of Insurance Commissioners (NAIC) had doubts about the extent to which the nation’s small businesses are protected in terms of their insurance coverages. The NAIC in late April 2007 launched a comprehensive public education program to assist small businesses with information about business risks and insurance options. Under the banner of “Insure U for Small Business,” the campaign includes an online education site, public service announcements in English and Spanish, and community outreach by public information officers of state insurance departments.

As part of this effort, the NAIC in conjunction with Insure U conducted a survey of small businesses around the country (defined as businesses with less than 100 employees) and unearthed some troublesome statistics:

• Only 35 percent of small businesses have business interruption insurance, which covers expenses like payroll and utility bills that often continue after a major event (e.g., a fire or storm) shuts down a company. Because rebounding from a disaster can take a considerable amount of time, small businesses need to understand this risk and the available insurance options.

• Only 48 percent of small businesses carry commercial auto insurance. The others apparently rely on personal auto insurance. However, personal auto insurance policies typically have lower liability limits and may even exclude business-related liability.

• Only 59 percent of small businesses with fewer than 20 employees have workers’ compensation insurance, which the majority of states require for most companies.

• While 71 percent of small businesses say they are very dependent on one or two key people for their success and viability, only 22 percent have key person life insurance, a type of policy that enables a business to weather the death of a key employee or buy out the key person’s heirs if ownership rights are involved.

• Among home-based businesses — 22 percent of the NAIC survey — 48 percent depend on their homeowners insurance to protect their businesses. Yet, most homeowners insurance policies severely limit coverage of business property and may totally exclude business-related liability claims.

Walter Bell, NAIC president and Alabama commissioner has noted that, “Small businesses are a major engine for our national economy, employing millions of Americans and generating immense economic activity. … It is important that small business owners understand the array of business risks they face, as well as how to protect themselves with the right insurance coverage.”

Learn more about the Insure U small business program and survey results online at http://www.insureuonline.org/smallbusiness/.