Managing a small business involves risk.
A fender bender in the company car, or a customer slip on a wet office floor, can create business liability. Whatever’s gone wrong, there is a right way to handle business insurance claims.
A misstep during the claims process could result in your claim being delayed, or denied altogether. Here’s what to do when something happens at your business, and when you need to contact your insurance provider.
Stop further damage
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Don’t make a bad situation any worse.
In the event of damage to your building, inventory or other business property, you need to protect what’s left from further harm.
- In the case of fire or falling trees, cover or block any openings right away to protect further rain or debris damage to the interior of your building. This step will also prevent freezing damage if temperatures are falling.
- If flooding occurs, use a pump as soon as possible, and start shoveling out mud and removing undamaged furnishings and equipment.
- If you experienced a theft or break-in, do what you can to secure the premises and call the police.
Next, notify your insurance agent of a loss.
Call your agent
Some types of business insurance coverage allow you to file a claim online. However, it’s always best to have an insurance company agent handle the claim for you.
AFLAC sales agent Aimee Pfaff explains why. “Clients should always call their agent to file claims. Agents know the process to file claims, and we can review them for accuracy prior to sending to ensure prompt, accurate payment of claims.”
What you say to your insurance agent is also important.
Don’t admit liability
It may be tempting to offer up a “mea culpa” if your break room toaster oven started the fire, or your employee ran a stoplight in the company car—but business owners shouldn’t do it.
Your insurance policy may explicitly state that if you publicly acknowledge fault, you may default on your coverage.
“You don’t want anyone admitting fault, which is hard because even if you aren’t at fault, we all say we’re sorry automatically,” says Kathy Romonsky, owner of More Choices Insurance Agency in Roseville, Calif. “It is up to the claims department to determine who was at fault and what percentage each party is responsible for.”
Once your side of the claim has been paid, your insurance company may decide to go after the toaster’s manufacturer, or the other party in the automotive accident, for at least partial compensation of the total cost of the claim.
Once you’re reimbursed, you won’t be involved in claims activities. It’s important, however, to stay mum on the issue of who’s at fault.
To file a claim under your small business insurance policy, you need an inventory listing.
Create a complete inventory list
Prepare a complete inventory of what was stolen, destroyed or damaged—with receipts and other documentation—as soon as possible. Both your agent and your adjuster will ask for an inventory of what was lost or damaged. If you wait too long, you might forget to include some items.
“All carriers will ask for a detailed list of what was stolen, burned or destroyed,” explains Romonsky. “It is written in the policy whether you will need to produce receipts or records of your inventory.”
For this reason, it’s important to keep your computerized inventory records up to date, and backed up on the cloud.
Your agent can go to bat for you if an adjuster or insurance company makes unreasonable demands, like an unreasonably detailed list of inventory and supplies.
If you have a fire and smoke incident in your restaurant, for example, an adjuster may insist on a detailed list of all food items in your walk-in cooler, which would be burdensome, given the constantly changing status of the inventory. Your agent could help negotiate submission of your weekly orders instead, and an approximate value based on the average daily value of your fresh inventory.
Another example might be water damage in a quick-print storefront, where it would be unreasonable to expect the owner to know exactly how many reams of paper were on hand at the time of loss. Your agent can suggest logical alternatives for creating a substantiated inventory, so that the adjuster is satisfied and you receive fair compensation, based on your insurance coverage.
Getting back on your feet quickly
One of the most common problems in getting a claim paid is, well, getting paid. If your business insurance policy hasn’t paid your claim, it may impact your ability to operate.
If a claim payment is delayed, small business owners should ask the insurance agent about other policies they own. You may have other coverage that can cover some of your costs.
For instance, if the insurance carrier stalls while your company car is in the shop, check your policy to see if you are covered for use of a rental car. If you have this type of coverage, you cannot be penalized for using it after a loss, especially if claims service is slow.
Your business interruption insurance (which should be part of any good insurance package) will cover renting things like cash registers, computers and office furniture, as well as coverage to pay bills if you can’t operate. Take advantage of this coverage to keep your business running, especially if your claim settlement has been held up.
The insurance company wants to minimize its payout.
If the person handling your claim sees that it is for more than just one-time damage—that there are daily charges racking up—that can be a motivation to move quickly to settle the claim.
If you have a property coverage claim, documentation is also critically important.
Always keep careful records of any loss or accident. Create a folder containing police reports, repair estimates, hospital bills and copies of claim reports.
Document everything in writing. Write a follow-up letter confirming and repeating any telephone conversations with insurance company representatives. Include the date and the names of the people involved in the incident.
A certain amount of patience is required, but if things really seem to be dragging, lean on your agent. An experienced agent can help you cut through red tape, get an adjuster assigned to the case and speed up various other clerical tasks.
If the insurance provider is not responsive, you have other options to consider.
If you’re not happy …
If you can’t get your claim paid in a timely fashion, “My first recommendation is to call your agent and get them to step in as your advocate,” says Romonsky. “If that doesn’t work, ask for the claims supervisor. If that doesn’t work, call the insurance commissioner’s office because under the Fair Claims Practices laws, [insurance companies] have guidelines they need to follow.”
If you haven’t been using an agent and encounter difficulties getting your claim settled, find a public adjuster online. They are less expensive and more knowledgeable about insurance than many attorneys, and will help you navigate the process of getting your claim paid.
To fully protect your operation, you may need other types of business insurance. The right coverage for you depends on your industry, regulatory requirements and the number of workers you employ.
General liability insurance
A general liability policy provides coverage for third-party liability claims, including:
- Bodily injury
- Property damage
- Copyright infringement
- Liability claims, due to a defective product
This liability insurance policy does not cover business property damage, or protect you against claims of negligence.
Commercial property insurance
This policy covers business-owned property, and property that is leased by the owner. Property insurance covers real property, machinery, equipment and inventory. Commercial insurance protects your assets in the event of a fire, vandalism and several other types of events.
A business owner’s policy (BOP) combines general liability and commercial property coverage into one policy. BOP policy premiums are typically less expensive than the cost of buying two separate policies.
Many policyholders are required to carry errors and omissions insurance.
Errors and omissions (professional liability) insurance
This policy provides liability coverage if a third party claims a financial loss, due to negligence or a mistake. Many professionals, including lawyers, accountants and engineers, may be required to carry this type of liability policy.
If you manage employees, look into workers’ compensation insurance.
Workers’ compensation insurance
Most states require companies to carry this insurance for their workforce. This policy pays for medical bills and lost income when a worker is injured on the job. Workers’ compensation premium rates depend on the number of people you employ and your employee safety record.
If your workers drive cars, trucks or other vehicles, you’ll need an auto policy.
Commercial auto insurance
Your business needs may require workers to make deliveries to customers, or to work at a client job site. Auto insurance protects you if an employee has an accident in a company vehicle.
So, what are your next steps?
Protect your business
Meet with an experienced insurance agent to determine the right coverage for your business. Talk with industry peers about product liability, business claims and the average cost they pay for each insurance policy.
You face a number of business risks, including a data breach, a professional services lawsuit, or a competitor who claims an advertising injury and sues for damages.
Meet these uncertainties head on by getting the proper insurance in place. Talk with an insurance professional, and move forward with confidence.
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