Risk & Insurance

All businesses need insurance. The questions are, "What kind?" and "How much?" and "Can I manage or reduce the cost while increasing the coverage?"

Every business should consider the following coverages:

1. Property and Liability (NNN Lease)
2. Government Mandated Coverages
• Worker's Comp for employees
• Automobile
3. Elected Coverages, for example: Business Interruption

Insurance policies usually are written in one of three forms.

Basic Form - coverage includes losses caused by fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles (but not loss or damage caused by vehicles you own or operate in the course of your business), riot, vandalism, sprinkler leaks, sinkholes and volcanoes. The policy defines these perils - and also lists some exclusions, such as nuclear hazards, power failures or mud slides.

Broad Form - coverage contains everything that's in Basic Form and adds protection from a few more perils, including breakage of glass (that is part of a building or structure), falling objects, weight of snow or ice and water damage. Again, these terms are defined in the policy and again, exclusions are listed.

Special Form - policies are constructed differently than Basic Form and Broad Form policies and offer wider and slightly more expensive coverage, Instead of listing perils such as fire and lightning, Special Form policies simply say that your business property is covered against all risks of physical loss unless the policy specifically excludes or limits the loss, This type of policy offers the most protection. For example, it's a convenient way to insure against loss by theft, which isn't covered by Basic and Broad Form.

As you already know, employees must pay for mandatory SDI (State Disability Insurance) and that the payment is withheld from the employee's paycheck and is matched by the employer.

Employers are not eligible for this mandatory program. However, an employer has a choice of enrolling in a California Disability Insurance option and/or getting supplemental insurance through your agent or broker.

The Coverage Benefits

If you make a successful claim you receive about $400 per week regardless of your income. This insurance only provides benefits for one year. You must be in the program for at least 7 months before you can file a valid claim.

The Cost

The insurance costs about $1,200 a year paid quarterly. The premiums are about twice as high as the State mandated program for SDI. This is because this program is run separately, with fewer contributors and higher claim rates. Owners are not eligible for the State mandated program. You cannot terminate the program until two complete calendar years have passed and must do so by filing a notice of termination before January 31st of the following year.

Who may choose this coverage?

• Registered Employers - an individual proprietor or partner
• Non-Employers - any self-employed individual or general partner who receives the major part of his/her income from the trade, business or occupation for which they are self-employed
• Spouse - of a self-employed individual who participates in the management and control of the business

Other Conditions

• You must be normally and continuously engaged in a regular trade, business or occupation AND intend to be in that trade for at least eight calendar quarters
• Your business cannot be seasonal
• You must par disability contributions for you (and your employees, if any) on time with no outstanding unpaid balance
• You cannot have been convicted within the preceding two years of any violation under Chapter 10 of the unemployment insurance code.