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Disclaimer: Do not make insurance decisions based solely on the limited and brief information presented in this article. Read your policies, talk to an insurance professional and make your choices. This is not legal advice, consult an attorney for that.
It's Spring. Time for new beginnings, fresh viewpoints and throwing out the old junk - physically and mentally. Lets start with your Pizzeria Insurance. You will need some homework to do this right. I've listed the real basic insurance coverages you should be considering to run your business. There are variations galore and one man's risk tolerance is another man's poison. You will need to find out what makes you comfortable and makes business sense at the same time. My personal taste runs to good-sized deductibles and high limits which I think gives you the most bang for the buck. With that in mind, get a sheet of paper and make some notes to discuss with an insurance professional:
First: Review all named insurers on all your policies. This is so basic and so fundamental that it's often overlooked. On the front page of your insurance policies there is a section that is labeled "named insured." This just may be the most important part of any policy. This tells you just who the insurance company is making the ‘insurance contract' with and who has rights and responsibilities under that contract. If you leave out someone that should be included here it can be a disaster at the time of a loss. Let me give you an example: You own the building you are in as "Joe Smith" and you own your pizzeria business as "Joe Smith Inc." You can include both interests on your policies, but if you forget to include any those interests on the policies they may not be part of the ‘insurance contract' and be left out in the cold. This goes for all insurance policies you buy, and remember, it is your responsibility to get this right.
Next, your Business Owners Policy. This ‘catch all' insurance product is like one of those locking pliers that usually called a "vise-grip." Those things are great, you can do almost anything with them – including make a big mess when you use it wrong. Same thing here. Most Business Owners Policies (BOP) are non-standard. That means every insurance company has some variation on the same theme, and it's the variations that can make all the difference – so again, read your policy!
Now let's discuss your property insurance. This is where you get insurance for the things you own at the location stated in your policy. Make sure you buy enough insurance to get your property back again at current prices and do not cheapout on limits! Think of things like any buildings you own, your property in the building, or whether you own or lease. Remember crime coverage for loss of money. Also you want to be covered for loss of business income. If your location is damaged or destroyed by something the policy would cover, this is where you get insurance for the income you would have made if the bad thing had not happened.
Now here are some options to consider and remember these policies are non-standard, so things you may take for granted in one policy may be non-existent in another. Some of the things to look out for: Boiler & Machinery – also referred to as equipment breakdown." This is where you get coverage for things like refrigeration failure, electrical surge, short circuit etc. Make sure that Business Interruption is extended to cover this too! Spoilage - If the power goes out or the equipment fails, this is where you get coverage for the things in your refrigerated units that spoil. Electronic Data Processing (EDP) - This refers to your computerized equipment and can include something as innocent as your cash register and go right on up to your entire POS, security system, cameras, computer, printers and the like. Make sure you have this added.Liability Insurance - When you conduct any business with the public you generate a liability exposure. Things like "trip and fall" and products liability are pretty well on everyone's radar screen by now. The important thing is to have enough insurance. I like to think of $1,000,000 as a practical minimum these days with a high limit excess or ‘umbrella'that comes in over the basic $1,000,000 for catastrophe protection. Most policies out there do a decent job of addressing the trip and fall and products liabilityissues. Beyond that, it's all up for grabs. Here's a quick list of things you should consider adding on:
Employment Practices Liability - The whole range of hiring, firing, discrimination, and harassment issues finds insurance coverage here. This is not covered in most policies. You have to add it on or buy separate coverage. Employee Benefits Errors & Omissions - When you have an employee benefit plan, you as employer are usually responsible for administration. Make a mistake and you can be on the hook for it. Example: You forget to add an employee for coverage at the end of your normal waiting period. Before they are included on the plan, the bad thing happens, let's say a heart attack. This is where you get liability insurance for this little gem.
Liquor Liability - If you are involved in the manufacturing, distributing, selling or serving of liquor – you need this insurance. States vary widely on their statutes, but insurance policies almost uniformly exclude coverage. You buy it as an add-on or a separate policy. Intellectual Property Infringement - The world today revolves around Intellectual Property (IP). Things like patent, trademarks, copyrights etc are all considered "IP." Infringe on somebody's IP and you can be in a world of hurt. Once again, this is almost uniformly excluded from liability policies. This is where you can buy protection.
Non Owned Auto (Delivery Liability) - More about this one later, but suffice it to say, that I know of no insurance company that will knowingly include this on a Business Owners Policy unless there is a specific application supplement and a hefty premium charge. If you think you have this for $50 to $100 bucks…. you're dead wrong.
Automobile Insurance Policy: This policy can provide a combination of liability protection and physical damage coverage for loss due to damage to vehicles owned, maintained, or used by you. You can go as bare bones as you dare or load things up. Again, I like to think of $1,000,000 as a practical minimum these days with a high limit excess or umbrellathat comes in over the basic $1,000,000 for catastrophe protection.
Once again, do not cheap out on limits. This is the only policy that's going to stand up when you have an Auto Accident, make sure it has the muscles to do the job. These polices by definition include Auto Liability for bodily injury or property damage you do with the autos listed on the policy. You can also buy coverage for damage to your own auto regardless of who is at fault. On a state-by-state basis there may be coverage available for injuries you or your passengers sustain during an auto accident. Always sign an application for auto insurance and never sign an application that has false information, shaded information, half-truths or just plain lies. Tell the insurance company what you do and but the insurance you need.
Some points to consider: Covered Autos - There is usually a choice of what autos would be included for coverage. The usually choices being "owned & listed" autos "non-owned & hired" autos and "any auto." Of course, the most inclusive choice is "any auto," and I like this one. But some insurance companies just won't do it. Choose the broadest option available and follow the insurance company's rule. Make sure the policy really describes what you do. Do not accept a policy that describes your operations as "Pizzeria – No Delivery" if you actually deliver!
"Delivery Liability" - If you deliver, put this in ice burg-sized chunks. No further discussion needed. Do not try to use your personal auto policy to cover business exposures. If you use your auto in business, make sure that you either have a business auto policy or that the insurance company knows exactly what you do with the auto. Remember, they have been at this a lot longer than you. They can, and will, see through any subterfuge you can dream up.
Workers Comp - Most states require that every employer provide Workers Compensation insurance for their employees. This insurance provides coverage for accidents or disease arising from employment as prescribed by the state laws. Benefits can include lost wages, medical expenses, and permanent disfigurement/disability payments. The simple truth is that almost no one has "independent contractors" in the pizza business. The IRS has a 20-point test that is used to determine "independent contractor" status, and it's a good bet that almost every one of your workers will not qualify as an "independent contractor." I've heard almost every "urban myth, campfire story, insiders "secret" and just plain "b.s." line out there. The simple fact is that if your state requires Workers Comp, there's no legitimate way around it. That having been said, here are some points to consider:
Classifications – Every job has its own classification and every classification has its own rate. Make sure that payrolls are assigned to the correct classifications. I've seen the bookkeeper (clerical class) be assigned to restaurant code at 10 times the cost!
Experience Modification – If you've been in business long enough, you may have an experience modification applied to your account. If your experience is better than average you get a credit or worse, you get a debit. Guard that modification by running a safe shop and keeping losses down.
Employers Liability - Most workers comp policies have two parts. Coverage A is workers comp (statutory benefits) and Coverage B – Employers Liability. Coverage B is what provides insurance for workers comp lawsuits that go outside of Coverage A. The bad news is that most policies are issued with a basic limit of $50,000. The good news is that many companies will increase to $1,000,000 for about $100 annually!
Important note: If there is an "anchor location" that you rely on for flow of business, you can have a business interruption even if your location isn't touched! You must add that location to your policy to have insurance for this kind of "contingent" loss.
Breaking News: E-Coli contamination has hit some chain restaurants in the NorthEast. The potential is catastrophic. You need to know that the business shut down and resulting loss of income is NOT covered by most business interruption coverage forms! You can buy specific coverage, get in touch with your agent or contact us for more information Info@PizzaSure.Com
In summary, I have to tell you again that this is a brief discussion of the insurance available to you. There are policies out there for just about anything you can think of and no one expects you to buy every one - but you simply must take a good look at your business, the insurance coverage available and make some choices. My standing offer – feel free to contact me if you have any questions, I ‘all do my best to help you or at least put you in touch with someone in your state. Send an E-Mail to Info@Pizzasure.Com or call me at (201)945-3100.