14. I subcontract work to other contractors, but I have no employees — just my partner (half-owner). Do we need workers' compensation insurance on ourselves?
15. Does business insurance have to be bundled in a package including workers' compensation insurance?
Commercial Auto Insurance
17. Will my employees' personal autos be covered under a commercial auto insurance policy if they are using their autos for business?
Starting Your Business
19. We need insurance for our new contracting business and we don't have a lot of money. What will we need to start our operation?
20. What type of insurance do we need for our home-based consulting business? My partner and I work at home and we have one employee who works at his house. We have just incorporated. Would we be covered under our homeowners policies?
1. Do I need to pay the entire premium up front?Not usually. Depending on your premium size, most insurance carriers allow different payment plans. The company will bill you directly and give you the payment options at that time. Most are 25 percent down and eight or nine payments, or 12 equal monthly installments.Back to Top
2. What is property coverage?Building and business personal property (also called contents) coverage protects your buildings and equipment, inventory, furniture and fixtures. Some policies include breakdown and business income coverage.Back to Top
3. What is business income coverage?In the event of a covered loss, this coverage may reimburse you for the net income that would have been earned if fire or other covered causes of loss had not occurred. Losses due to down time or extra expenses needed to restore operations (such as additional property rental) may be covered.Back to Top
4. What if a dissatisfied employee destroys parts of my business?Some liability policies will cover a loss caused by an employee who commits a dishonest or fraudulent act that results in a financial loss to your business.Back to Top
5. What is a business owners policy or a BOP?A BOP is a package policy for small businesses that do not require extensive individual underwriting. It combines property and liability coverage in one policy and generally includes additional coverages at no additional premium. Most insurance carriers have customized BOPs for particular industries and services.Back to Top
6. Why does the insurance company ask what type of alarm system I have?Most insurance companies will allow credits to premiums for qualified alarm systems, because alarms can reduce the risk of theft. Ask your alarm provider or company to supply a certificate stating the type of alarm. Send the certificate to your insurance carrier.Back to Top
7. What is liability coverage?There are many different types of liability to be covered for a business. Business liability may protect you from claims arising from customer bodily or personal injuries. Other liability that could be covered: damage to the property of others, products-completed operations, advertising, premises operations, fire, legal liability and related legal defense costs.Back to Top
8. How does an umbrella liability policy work?In the event of a catastrophic loss, the umbrella policy provides excess liability limits. Once the underlying limits of the business auto, general liability and employers liability policies are exhausted, the umbrella liability policy would provide further coverage.Back to Top
9. How can my business be covered for wrongful termination suits or sexual harassment?Many insurance companies offer employment practices liability insurance (EPLI) as part of their business owners policy or as a stand-alone policy. EPLI can cover wrongful termination, sexual harassment, discrimination, mental anguish and other employment-related litigation.Back to Top
10. What is professional liability insurance?Otherwise known as malpractice insurance, professional liability insurance protects your business against claims resulting from professional services rendered by you to your clients. This type of insurance covers you and your employees in the event that someone claims you incorrectly performed or failed to perform your professional duties.Back to Top
11. When do I need to buy workers' compensation insurance?In most states, workers' compensation insurance is required when you have one or more employees.1 Usually, the state penalties for employers who do not purchase workers' compensation are very stiff. A few states do not require employers to carry workers' compensation insurance coverage.Back to Top
12. How much does workers' compensation insurance cost?Workers' compensation insurance pricing is based upon your employee payroll, the number and job classifications of the employees, classification of your business and past loss experience. The employer pays for the cost of the workers' compensation insurance.Back to Top
13. What does workers' compensation insurance do?Workers' compensation insurance pays for the rehabilitation, recovery or medical bills of employees' work related injuries, as well as lost time when they are off work due to a work related injury. Workers' compensation insurance is not a substitute for health or medical insurance, since employees are only covered for on-the-job injuries.Back to Top
14. I subcontract work to other contractors, but I have no employees — just my partner (half-owner). Do we need workers' compensation insurance on ourselves?Yes and no. The contractor to which you subcontract is required to have proof of workers' compensation insurance for all workers (including you) in case a claim is submitted. However, your contract for subcontract work and proof of sufficient liability coverage may suffice as a substitute to carrying workers' compensation insurance. The contract should include that you have no employees, you are sole proprietors and that it is a valid sub-contract.Back to Top
15. Does business insurance have to be bundled in a package including workers' compensation insurance?Some insurers bundle workers' compensation insurance with smaller policies such as a business owners policy (BOP). Some companies write workers' compensation insurance separately.Back to Top
Commercial Auto Insurance
16. What is commercial auto insurance?Insurance for automobiles, trucks and vans used for business purposes falls under commercial auto insurance. If you own a business and use personal vehicles for business purposes, you should consider a commercial auto insurance policy. Many personal auto insurance policies exclude coverage if a vehicle is used mainly for business.Back to Top
17. Will my employees' personal autos be covered under a commercial auto insurance policy if they are using their autos for business?Most commercial auto insurance policies cover the liability for your business for employees using their own autos for business. However, the employees' personal auto policies would be the primary coverage for damage to their automobiles.Back to Top
18. When should I drop the comprehensive and collision coverage on my old autos?If you have an outstanding loan on your auto, most lenders require comprehensive and collision coverage. If you or your business owns the vehicles outright, then the decision should be based upon your financial reserves and the value of the auto. Is the value of the auto close to the premium paid for comprehensive and collision? Do you have liquid funds that could be used to replace the vehicle if destroyed or stolen? Can you buy another vehicle of this type? These are some of the factors to consider.Back to Top
Starting Your Business
19. We need insurance for our new contracting business and we don't have a lot of money. What will we need to start our operation?Small contractor packages are readily available. Most are priced competitively and include the coverage you will need such as liability and equipment (property). If you have employees, some packages can include workers' compensation, depending upon your state. Pricing is based upon the coverage needed for your operation, your experience, previous claims and your payroll and revenue.Back to Top
20. What type of insurance do we need for our home-based consulting business? My partner and I work at home and we have one employee who works at his house. We have just incorporated. Would we be covered under our homeowners policies?Business coverage is very limited in the typical homeowners policy. Some homeowners policies have the ability to add business coverage. In most cases, the coverage is not adequate to cover an incorporated business with employees. A business owners policy (BOP) may be better suited for your business. Coverage will include liability for you and your employees, equipment, loss of income, and buildings (i.e., your home office). Since you have one employee, workers' compensation is needed in case of on the job injuries. Since you have a home-based business, the relative cost of a BOP is low.Back to Top
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1 In most states, workers’ compensation insurance is not optional; employers who do not have workers' compensation insurance coverage may be assessed serious penalties.
Wells Fargo Insurance, Inc. (Minneapolis, MN) is a licensed agency that represents — and is compensated by — the insurer based on the amount of insurance sold.