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Business Protection Bulletin

FIVE QUESTIONS TO DETERMINE YOUR BUSINESS INTERRUPTION EXPOSURE

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For many organizations, the loss of income coupled with continuing expenses after a fire or other disaster can be even more devastating than the damage itself.

To increase the chances that a loss will not shut operations down permanently, organizations must assess their exposures accurately by asking some questions.

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  • What is the most the organization could lose from a shutdown? Commercial Property insurance policies define “loss of income” as the sum of the expected pre-tax profit or loss and necessary continuing expenses. For example, if the expected profit is $300,000 and necessary continuing expenses are $100,000, the potential loss of income is $400,000. To calculate their exposure to business interruption losses, organizations should refer to their balance sheets, profit and loss statements, and cash flow statements. Insurance companies also have worksheets available to assist with the calculation.
  • How much insurance should be carried? Once the organization knows the dollar amount of its exposure, it must decide how much Business Interruption insurance to buy. The key considerations are the length of time the insurance is likely to apply and the coinsurance percentage the organization must meet. Coverage usually begins 72 hours following the damage to the property and ends when business resumes at another location or when the building should be repaired with reasonable speed, whichever occurs first. If the organization decided that the coverage period would be around six months, it could buy an amount of insurance that would satisfy a 50% coinsurance requirement. If the interruption would last longer, higher coinsurance percentage and limits would be necessary.
  • How long will it take business to return to normal? Even after operations resume, it could be some time before revenue returns to normal levels. Customers who had gone elsewhere during the shutdown might be slow to return. The standard insurance policy extends coverage for 30 days after operations resume, but some businesses might need more time than that, especially if their businesses are seasonal. For example, a seaside restaurant in New Jersey that makes most of its profits during the summer will need additional coverage even if it can re-open in November.
  • How much of the normal payroll expense will continue during the shutdown? The organization will need the continuing services of some employees while it attempts to re-open, but other employees might not be necessary. For example, accounting staff will be needed to pay mandatory expenses such as property taxes and collect receivables earned before the shutdown. Employees who stock shelves will not be needed if there are no shelves to stock.
  • Does the business depend on other businesses for revenue? A business can suffer a loss even if its own building is untouched. A loss that shuts down a key customer or supplier or damage to nearby property that causes authorities to close off access to the street can devastate a business’s bottom line (this happened to many businesses affected by 9/11). Special insurance coverage is available to protect against this possibility.

Our professional insurance agents can help you answer these questions and identify insurance companies that can meet coverage needs. With some effort and planning before a loss happens, an organization can emerge from a shut down and return to profitability.

ESSENTIAL RISK MANAGEMENT TIPS FOR SMALL BUSINESS OWNERS

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As every business owner knows, risk is an unavoidable part of doing business. However, it is manageable and controllable. Although it is a challenge that requires time and experimentation, finding a perfect balance between profitability and peace of mind is essential. It’s impossible to eliminate risk completely, so it’s important to set realistic goals. Policies that are enacted in an attempt to fully eliminate risk could actually hamper business growth.

The Importance of Risk Management. The common concept of risk management among small business owners involves simply purchasing regular insurance protection. Other aspects of protection often escape consideration. Risk management is much more complex than simply purchasing insurance and implementing rules. These are both necessary parts of every plan. However, there are many other things to consider.

Tips for Implementing a Realistic Risk Management Plan. It’s best to start with a simple plan that is easy to follow. The prime goals should be mitigation and management of business risks. After trying the plan, analyze it and make any necessary changes or additions. Consider the following steps in order to make a positive change:

1. Identify the Risks. There are some risks that are universal. However, there are also some that are specific only to certain types of businesses. It’s important to conduct a thorough risk analysis to identify them. The best way to accomplish this is to use a standard risk checklist. There is a Small Business Insurance & Risk Management Guide available from the Small Business Administration. This guide is helpful in outlining potential risks. While going through the list, pay close attention. Most business owners are able to think of other potential risks that are unique to their situation during this process. Some of the most important initial risks to consider include:

  • Property losses that occur from loss of use, physical damage or criminal activity.
  • Liability losses that happen to customers and are the fault of the business.
  • Business interruption losses stemming from fires, natural disasters or other unpredictable occurrences.
  • Key person losses or the loss of important employees, which results in a negative impact on the company.
  • Employee injury losses that occur when an employee is injured on the job and must be compensated.

2. Determine How Vulnerable the Company Is to Various Risks. Consider the various risks and how much each one would cost the company. Not all types of companies are as vulnerable as others. Companies with high vulnerability to expensive risks need to make those specific areas a strong priority in their risk management plan. The risks that aren’t worth worrying about should receive a much lower priority. Keep in mind that it’s not feasible to eliminate every possible risk. However, some need much more consideration than others. For example, a paper manufacturing company should consider the risk of employees losing limbs on dangerous presses in the manufacturing line before they become concerned with possible paper cuts to fingers of employees in the inspection department. As an overall rule, the cost of preventing the risk should never exceed the amount the estimated loss that might result from that risk.

3. Create a Contingency Plan. There is more to this aspect than purchasing insurance. Be sure to implement plans that place employee safety higher than efficiency. Install a security system to protect all property from theft and damage. Avoid transactions with unknown customers. Implement plans to train supervisors to minimize loss of key employees.

4. Purchase Adequate Insurance. In addition to purchasing enough insurance, it’s imperative to purchase the right types. Some of the key types of coverage to purchase include:

  • General Liability insurance, which covers the legal liabilities faced from injuries to third parties. Medical expenses, property damage and bodily damage are typically covered.
  • Professional Liability insurance, which covers allegations of malpractice, negligence and other errors in services.
  • Product Liability insurance, which covers the expenses related to injuries or damages resulting from a defective product. This is essential for all companies producing tangible products.
  • Commercial Property insurance, which covers loss and damage costs for business properties. Business interruption is typically covered by this provision.

5. Revise as Necessary. Be sure to review and update risk management plans regularly. Reassess risks and make any necessary changes. It’s important to have regular review meetings with department heads, owners and a risk management consultant. Be sure to inform the insurance company of any changes or new risks.

Business owners who plan to raise capital from investors must be especially vigilant in their risk management planning. Having a good plan and updating it regularly is important for gaining their trust and making them comfortable with the opportunity to invest.

Building Valuation: Closing the ‘Underinsurance Gap’

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When settling Building Insurance claims, it can be tough to determine the real cost of replacing or restoring damaged property. Unfortunately, the methods that policyholders, insurance companies, and agents usually use to set the right amount of coverage all have their weaknesses; according to insurance experts, this means some buildings might be underinsured by up to 40%!

This shouldn’t be a surprise. Basing the amount of coverage on the purchase price of a building doesn’t factor in possibly significant changes in the value of the location. The same problem applies with using real estate appraisals, which are based on the sale price.

Although setting coverage by estimating square footage and material costs can be fairly accurate, these methods depend on the validity of the data plugged into the formulas. What’s more, changes in zoning or building regulations can have a significant impact of the value of the building.

As a construction professional, you can’t afford to “guestimate” the cost of building repair or restoration after a loss. For example, you probably have a strong grasp of arcane and complex zoning and building ordinances in your everyday work.

We’d be happy to provide a complimentary review of the valuation of your buildings for coverage purposes and recommend any needed changes. We can then explore opportunities to improve the accuracy of building valuations for your clients — and ours, so that we can help close that 40% “underinsurance gap.”

Time to Review Your First Aid Kits and Fire Extinguishers

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How many times do you walk by fire extinguishers without checking those tags or past first aid kits without peeking inside to assure the contents are complete?

Most executives do not spot check these life saving tools.  That task is delegated to maintenance.  But these decisions are life and death, not simply profit or loss.  Show your employees you care; that you lead their safety program rather than follow pro forma insurance checklists.

Start your spring cleaning here: walk through your operation and stop occasionally to check if you can easily spot the nearest fire extinguisher.  Read the label.  Is it appropriate for the work area?

Stand at each fire extinguisher station and visualize successful deployment.  Is it easy and natural?  Can you travel unharmed to the nearest fire exit using the fire extinguisher to clear a path?

Observe any long pathways between fire extinguishers and exits.  Would another canister or different fire suppression device or system help?

Take some notes as you walk through the operation.  Review these observations with the person tasked to keep the equipment updated.

Repeat the above exercise with regard to first aid kits.  Are they easy to spot?  Easy to access one-handed?  Do they have instructions for calling emergency help?

These exercises do not require a great deal of time or scheduling.  Simply make a point of checking these items every quarter, something of an internal surprise inspection.

Add ten minutes every three months to your walk-through routine.  It doesn’t need scheduling or ceremony.  Simply observe, become conscious of the emergency response routine.  Are fire exits clogged with storage or debris?  Are aisles kept unobstructed?

Is a specific person charged with de-icing fire escapes?  As you walk through your operations, take notes of these questions.  Think through an emergency evacuation, then review the written plan for your company.  Does it make common sense?  Does it raise questions for your risk manager or safety specialist?

Does your at-hire training include safety orientation and procedures?  How about on-going communications on safety issues?  Both directions?

Corporate officers lead the safety culture.  Make these inspections in view of employees.  They will engage you if they have proper concerns.  They are a great resource.

Ways To Protect Your Electronic Devices In The Office And On The Road

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When settling Building Insurance claims, it can be tough to determine the real cost of replacing or restoring damaged property. Unfortunately, the methods that policyholders, insurance companies, and agents usually use to set the right amount of coverage all have their weaknesses; according to insurance experts, this means some buildings might be underinsured by up to 40%!

This shouldn’t be a surprise. Basing the amount of coverage on the purchase price of a building doesn’t factor in possibly significant changes in the value of the location. The same problem applies with using real estate appraisals, which are based on the sale price.

Although setting coverage by estimating square footage and material costs can be fairly accurate, these methods depend on the validity of the data plugged into the formulas. What’s more, changes in zoning or building regulations can have a significant impact of the value of the building.

As a construction professional, you can’t afford to “guestimate” the cost of building repair or restoration after a loss. For example, you probably have a strong grasp of arcane and complex zoning and building ordinances in your everyday work.

We’d be happy to provide a complimentary review of the valuation of your buildings for coverage purposes and recommend any needed changes. We can then explore opportunities to improve the accuracy of building valuations for your clients — and ours, so that we can help close that 40% “underinsurance gap.”

Spring Maintenance Tips For Your Commercial Property

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Now that the harsh winter weather has ended, it’s time to spruce up your commercial property. Here are several spring maintenance tips that reduce your liability and prep your property for warmer weather.

Inspect for Water Damage

Melting snow and ice can increase water flow around your property, so carefully inspect the entire building for water damage. Check the exterior foundation, interior walls and windows for moisture, leaks or condensation, and clear out and repair any damaged gutters and downspouts.

Check the Roof

Winter storms can damage your roof, but you may not notice the damage until the roof starts to leak. Perform a detailed inspection of the roof and note any repairs you need to make.

Touch Up the Exterior

Cold winter weather can cause paint to chip, and flying debris can dent siding. Walk around the building, note any damaged paint or siding, and fix the areas. Sometimes, a simple touch up is all that’s needed rather than refinishing the entire building.

Repair the Parking Area

If freezing temperatures created cracks or holes in the parking lot or sidewalks, fix the problem areas. You’ll also want to power wash the area to remove dirt, mud or other debris, repaint any faded lines and repair broken signs. With a clean parking area, you reduce liability and improve visual appeal.

Wash the Windows

Remove winter grime and buildup on the exterior and interior windows. Clean windows boost productivity and improve the appearance of your commercial building.

Boost Ventilation

Open windows and air out the stuffy building if possible. You may also inspect and clean the HVAC system and install fans or dehumidifiers in damp areas as needed.

Improve Curb Appeal

Fallen branches, debris and litter affect your property’s curb appeal and can create hazards for employees and visitors. Remove any debris, and trim trees, shrubs and bushes to reduce hiding places for burglars and future damage risks. Consider planting flowers and grass, too, as you improve your property’s curb appeal and safety.

Perform Pest Control

Warmer temperatures may attract bugs, insects and rodents to your property, so apply a pest spray around the building’s perimeter, and close any holes that may allow animals to enter the building. You may also want to treat any ponds, bird baths or other standing water with Mosquito Dunk or a similar product.

Assess Insurance

Your commercial property insurance protects your company, so schedule an assessment. Ensure you have adequate coverage for your needs as you look forward to the rest of the year.

This spring, you can perform maintenance on your commercial building to improve its appearance and functionality. These tips also reduce your liability and protect your employees and clients.

Common Payroll Mistakes That Cause Liability Concerns

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Completing your payroll in-house allows your company to save money. However, mistakes could increase your liability and jeopardize your business.

Identify common payroll mistakes and then fix them as you protect your company.

Employee Misclassification

Your business may hire non-traditional workers, including freelancers, consultants and independent contractors, to perform a variety of duties. These talented individuals provide an invaluable service as they multiply your workforce while saving your money.

Because you don’t have to pay taxes on independent contractors, you may classify regular employees in this category. You will face hefty fines, though, for this misclassification. Always be careful to label employees and non-traditional workers correctly.

Missing Records on File

For each employee, you must maintain accurate and detailed records. These records prove the identity of your employees and allow you to comply with various federal and state laws.

Ensure you store several documents for each employee, including their employment application, W-4, I-9 and pay stubs. Because guidelines vary, check the applicable laws to ensure you keep the right employment records on file.

Inaccurate Information on Pay Stubs

Data entry requires precision, and it’s easy to get in a hurry or accidentally hit the wrong letter or number on your keyboard. This mistake can cause you to include inaccurate information on pay stubs.

Pay stub inaccuracies can cause costly fines and penalties. Triple check that you have the correct data on each pay stub, including the employees’:

  • Official full name
  • Social Security number
  • Payroll details such as hourly rate and hours worked
  • All taxes, deductions and contributions

Delay Payroll Filing

You spend most of your time operating your small business and handle everything from hiring employees to customer service. Occasionally, you may be too busy to file your company payroll on time.

A delay in payroll filing affects your employees and business. Your employees will express displeasure, resulting in reduced motivation, goodwill and morale. Rushing can also cause you to make expensive mistakes. Plan time each week to prioritize payroll prep to keep your employees happy and to protect your business.

Complete Payroll by Hand

When you do your payroll by hand, you touch each timecard and calculate each salary. The personal touch may be okay when you’re first starting a business, but you could easily make mistakes and will face increasingly complex calculations as your company grows.

Consider automating your payroll process. Numerous reliable options decrease errors, could reduce payroll processing costs by 80 percent and give you more time to focus on running your business.

As you complete payroll for your employees, take care not to make these common mistakes. They increase your liability and could cause expensive fines and other costs.

Maintenance Tips That Protect Your Business Property All Winter

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Inclement weather, high winds and cold temperatures can wreak havoc on your business property and disrupt operations during the winter months.

Take time this month to perform a few maintenance checks that protect your property for the remainder of the winter season.

Roof

Exposure to high winds and heavy snow can damage your roof and cause leaks over time. Ice dams may also form as snow and water melt and refreeze. Carefully remove any snow deposits, then inspect the roof and make needed repairs.

Heating System

Your building’s heating system may seem to work fine, but perform an inspection to ensure it is indeed operating properly. Check for and repair leaks and clean the filters. Verify that the boiler and radiators also continue to function properly, heat evenly and don’t leak as you keep your building warm.

Foundation

Runoff water around your building can erode dirt and damage the foundation. Clear out gutters and downspouts and repair any broken connections to ensure water continues flowing away from your building.

Walls

With temperature fluctuations, your building’s walls may be vulnerable to cracks, and any holes can cause expensive leaks and allow critters to crawl into the walls. Walk around the exterior of your building to identify any problem areas, and then schedule necessary repairs.

Water Pipes

Exposed water pipes can quickly freeze or burst as temperatures plummet. While you probably insulated these pipes in the fall, recheck the insulation to ensure it’s still attached and functioning properly.

Sprinkler System

Your sprinkler system protects your building from a fire but is vulnerable to cold weather. Double check that the system, including hydrants, tanks and connectors, remain properly insulated and functional.

Exterior Lighting

Winter weather may affect the performance of your exterior lighting and cause bulbs to break or fixtures to crack. Replace any broken light bulbs or fixtures as you promote safety for everyone entering your building.

Sidewalks

Cold weather can cause sidewalks to crack, which affects safety. Seal all cracks as you protect your employees, customers and guests.

Entryway

Snow and ice make entryway stairs or ramps slippery, and the salt or ice melter you apply can damage entryway flooring and carpeting. Replace worn, frayed or damaged absorbent mats in the entryway, if necessary, and continue to monitor surfaces so they remain dry and safe.

Cold temperatures and harsh weather can adversely affect your commercial property. Perform these maintenance steps and update your commercial property insurance this month as you prepare for a successful last half of the winter season.

What To Do If You Make A Mistake On Your Small Business Tax Return

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Small business tax return mistakes can vary from simple math miscalculations to huge deduction errors. While the tax preparer you hire will have liability insurance that covers his or her part in any filing mistakes, you must take several steps to correct the mistake and prevent your liability, too.

Amend Your Tax Return

The IRS knows that mistakes can happen, which is why they allow you to amend your tax return. Essentially, this amendment corrects any mistakes.

Find the X Form

To amend your tax return, you need to know the form number of your original return. Then find the X Form. For example, if you filed a Form 1040, look for the 1040-X. Likewise, Form 94X corrects employment taxes, and Forms W-2C and W-3C correct employee earnings and withdrawals.

Complete the X Form

Generally, you will need to print and complete the paper version of the X Form, even if you electronically filed your original tax return. The X Form includes three columns you must complete accurately.

  • Column A – amounts from the original return
  • Column B – net increase or decrease of the original amounts
  • Column C – corrected amounts

Additionally, explain the changes on the back of the form. Be thorough and accurate as you share your reasons for amending your tax return.

Include Related Forms or Schedules

Your tax return amendment may also change information on the other forms and schedules you filed. Complete corrected versions of these forms and schedules, and attach them to the amended X Form. If you forget to submit all these papers together, you will experience a processing delay.

File the Amended Form

After you complete the X Form with accurate information, mail it to the IRS. It usually takes a minimum of eight to 12 weeks for the IRS to process amended small business tax returns.

Pay Penalties

While you do want to amend your tax return and correct mistakes, realize that you may also owe penalties. Interest typically accumulates from the due date of your original return. Pay any tax you owe as soon as possible to decrease penalties.

File an Amendment as Soon as Possible

You may file an amended tax return up to three years after you filed the original return. Because your fees, penalties and interest charges increase the longer you wait, file any required amendments as soon as you realize the mistake.

When you notice a mistake on your small business tax return, you may take several steps to correct it. Take these steps as soon as possible to reduce your financial liability and protect your business.

When To Contact Your Commercial Insurance Agent

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Your commercial insurance policies protect your business, making your insurance agent an essential resource for your company. While you may not have your agent on speed dial, you will want to contact him or her in several circumstances.

Verify Coverage Details

You can purchase a variety of different policies for your business, and need to understand your exact coverage. Contact your insurance agent to verify which types of coverage you have and your policy limits.

Update Your Policy

When you add a vehicle to your commercial fleet, sell a piece of equipment, move to a new location, or make other changes to your business operations, call your insurance agent. These updates could affect your insurance needs, policy and premium.

File A Claim

If you need to file an insurance claim, contact your agent immediately. You may call the agent’s office, send an email or text, or fill out an online claim form on the company’s website. Remember to submit pictures, too, as you get your claim process started.

Ask Questions About a Claim

After you file an insurance claim, you may have questions about the adjuster’s findings or the settlement timeline. Feel free to contact your agent and ask any questions you may have.

Discuss Your Bill

Whether you pay your insurance bill annually, semi-annually or quarterly, you may inspect your bill and realize that you have questions about one of the charges or fees. Most insurance agents remain transparent about billing, and they can explain anything you don’t understand about your insurance charges, fees or payment date.

Pay Your Bill

If you experience any issues when you pay your insurance bill, call your agent. You may also ask for a change in the policy due date or a change in payment frequency.

Initiate an Annual Review

You should receive a notice a few weeks before your commercial insurance policy’s renewal date. Ask your agent for a meeting to renew your coverage. During this meeting, discuss details about your business and the types of insurance you need, including coverage limits and cost, as you verify that you have the right insurance for your needs.

Request a New Quote

Based on your insurance policies you purchase and your loyalty to your commercial insurance company, you may qualify for discounts or a more competitive rate. Your agent can rework your coverage limits, check for discounts and give you a new quote that meets your budget.

Throughout the year, you may wish to contact your commercial insurance agent for several reasons. Always feel free to reach out and discuss your needs as you purchase the right coverage for your business.