Question:
I run a small restaurant, and in the last year, we took on about six new staff positions, and started a delivery service. To me, this feels like growth and expansion, but is this something I should talk to my insurance agent about?
Answer:
Most certainly, yes, as adding a delivery service brings up a lot of insurance issues. Anytime a company has a delivery service, you open yourself to some big risk exposures. This could cause you to lose your current insurance if they were to find out your company is operating a delivery without them knowing. Delivery services require a specialized coverage called a “hired non owned automobile policy.” This type of policy extends the general liability policy for a business to un-owned vehicles of employees. The vehicles are considered for lease, for rent or for hire. Generally, we recommend any business have this type of coverage, even if you have an employee run to the post office one afternoon for stamps. If the employee were involved in an accident and the injured party were to find out the employee was working on behalf of a business, lawyers could go after the business as a liable party.
As for adding six employees, you may have to adjust your workers compensation coverage. Georgia law requires businesses to carry workers compensation coverage if the business has three or more employees. However, the law also allows a business to exclude up to five owners of the business—the reasoning being that as a business owner, you are more likely to make a claim on your health insurance rather than your workers compensation coverage. Excluding owners from a workers compensation policy ultimately saves the business money, but it does shift the medical burden to the employee.
We recommend that start-ups have yearly reviews with their insurance agents, perhaps even quarterly when the business is in growth mode. With so much changing, it is important to determine that the policies coincide with the changes. For example, if you opened your doors thinking you’d offer a particular service, but the market provided you the opportunity to offer a different service to your customers, you need to make sure your business insurance policies cover your activities.
Most business policies are based on payroll or sales. Additionally, these policies are usually auditable, meaning at the end of the first year, an insurance auditor will take a look at your books, payroll and tax receipts to make sure that they match with the premiums you paid throughout the year. If you are short, you will owe the insurance company money. If you overpaid your insurance, there is no penalty.
But again, if you have a workers compensation policy for 10 employees and you have scaled back to five, without alerting your insurance agent, you are still paying for 10 employees. Just as you can be underinsured, a business can be over-insured. Often with an growing business, that money can be spent elsewhere. With regular insurance policy reviews, you can adjust your policies throughout the year without penalty.
At Henssler Financial we believe you should Live Ready, which includes understanding how the growth of your business often necessitates a change in your business insurance coverage. If you have questions regarding your business insurance the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.