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Business Builder: Covering Your Assets

Posted: September 25, 2013, 2:35 p.m. EDT


Will your current insurance policy adequately protect your business against all of life’s pitfalls?

By Anthony Stoeckert

No one opens a pet store in order to buy insurance, but maintaining proper coverage is one of those things owners must do to protect their business interests against damage to structure, loss of inventory, workers’ compensation claims and more.

"It’s important to protect your business from property losses, including building, equipment and inventory,” said Jeff Manley, co-owner of TailsSpin, which has locations in Savannah, Pooler and Macon, Ga. "A business liability policy is also critical to cover the business in the event of third-party liability claims or lawsuits. We find that it is necessary to budget accordingly to obtain the correct policies. We love what we do; we must always be able to protect it.”

What You Need
According to Mark Battersby, a small business insurance expert based in Ardmore, Pa., the basic business insurance package consists of general liability, workers’ or workmen’s compensation, auto and property/casualty, plus additional protection called an "umbrella” policy.

Nancy Smeltzer, communications consultant for Columbus, Ohio-based Nationwide, said all stores have different needs, depending on several factors, including whether the business owns or rents properties.

Further, different policies exist in regard to building and contents coverage.

"They will also want to ensure the insurance provides coverage for those claims they are held liable for through a general liability policy,” Smeltzer said. "If they have employees, the owner will want to consider purchasing a workers’ compensation policy.”

Other potential insurance needs include business auto insurance to cover losses resulting from commercial vehicle damage, according to Smeltzer. Other coverage she suggests protects against loss of business income, equipment breakdown and crime.

A business owner policy offers property and liability coverage under one policy.

"For the small retail pet store, this would typically be the policy an insured will want to inquire about with their agent,” Smeltzer said.

Choosing the Right Policy
Lauren Conrad, owner and vice president of marketing for Dogadillo in Austin, Texas, said she carries business owner and workers’ compensation insurance. Finding the right insurance package for Dogadillo started with a family friend who was an insurance salesperson from whom they purchased other insurance (home, car, etc.).

"But [we] also called several other insurance companies to compare pricing,” Conrad said. "We opened our store five years ago. We were contacted by many insurance companies just because they knew we were building and starting to open. We ended up with our family insurance guy, as all the quotes came in about the same.”

Rob Gaudio, co-owner of Pussy & Pooch Pethouse and Pawbar, which has locations in the Los Angeles area, said his business carries general liability and workers’ compensation. Additional locations and inventory have resulted in the need for increased coverage, and there have been instances where the coverage was necessary.

"We’ve used the workers’ compensation for claims when a groomer has been injured,” he said.

Changing Times & Needs
A store’s insurance needs can change for a variety of reasons: expansion, changes to the weather and other factors. TailsSpin’s Manley said his store carries business and property insurance, as well as provides health, dental and disability insurance to full-time employees. And recently, the business decided to add flood insurance because of changes in local weather patterns.

"These past summer seasons, our areas have experienced flash flood warnings multiple times,” he said. "We needed to cover all bases by adding flood insurance to our policies.”

Smeltzer added that increased use of technology has changed insurance needs for many stores.

"Operations may have more computers than they used to, so the need exists to ensure they have those pieces of equipment covered and accounted for appropriately,” she said.

Even philanthropic endeavors can add to insurance costs, according to Manley.

"We do many fundraising events throughout the year, such as our low-cost pet vaccine clinic, pet care and adoption fair, Pawrade and Woof Woof Run/Walk Over Pet Cancer, as well as hold weekly adoption and dog washes,” he said. "We are in constant communication with our insurance broker.”

Those policies, he said, have extended the business’ liability coverage for events, making it easier to hold those events.

"We are also able to extend the umbrella to the pet rescue agencies attending the events who can’t afford the insurance premiums, giving them an equal opportunity to participate to adopt their animals to forever homes,” he said.

Reviewing and Renewing
With changing needs and opportunities to save money by changing carriers or policies, don’t just buy a policy and let it ride.

"It’s a good idea for the insured to sit down with the agent once a year to evaluate changes and coverage in place,” Smeltzer said. "The agent and insured must be on the same page.”

Rick Preuss, owner of Preuss Pets in Lansing, Mich., meets with his agent every year; in fact, he typically talks to more than one agent to encourage competition—and discounts.

He said switching providers can be the right move when it involves significant savings, but there are other factors to consider in addition to cost.

"Realize that you don’t have a track record with that (new) provider,” Preuss said, adding that a long history with a provider can offer an advantage.

"A lot of times, a provider may bend a little because you’ve been with them for many years,” he said.

"They have history to work from, so if something pops up on the horizon that you weren’t expecting, they tend to balance that out with the history of activity that you had with them.

"If you switch, you don’t have a history with that new carrier,” he continued. "And with no history, that thing that you don’t see on the horizon happens, and if it’s a substantial consequence, that can negatively affect your quote more the following year. You have to weigh that against any potential savings a new carrier might offer.”

Gaudio said there are certain times when a store owner needs to reevaluate his or her insurance needs.

"When you experience inventory or revenue increases, need to buy more equipment or other assets for the business, move to a new location or open additional locations, and when adding new services, you need to make sure the coverage covers you for that type of service,” he said.

How Insurance Helps
A few years ago, Preuss had an experience that underscored how important insurance is. The company had purchased and renovated an abandoned building in a gentrified area. The building had a parapet, which passed inspection. Sometime later during a windstorm, the wall collapsed, resulting in a $30,000 repair.

"I’m not saying it would have put me out of business, but it certainly would have set me back because it was at the exact same time we went out on a limb to renovate this building,” he said.

"Regardless of insurance secured, it is prudent for every business owner to have well-conceived contingency plans so that in the event that disaster strikes, the business owner and its employees understand what measures are to be taken to mitigate loss and keep the business going,” Smeltzer said.

"Work with a trustworthy broker [and] carry enough coverage in case you have a major issue and need to replace everything,” Gaudio said. "Insurance is a must; you can’t operate without it.”

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