Insuring Success in Your Home-Based Business

These days, many employees are becoming home-based contractors for their former employer, or even striking completely out on their own.  You may be among them.

If you are, remember this: once you are on your own, you will not be covered by your employers’ insurance packages.   Because you are busy thinking of all you need to do to start up a new venture-whether you’ll be using familiar job skills or new ones entirely- insurance may be the last thing on your mind.

Think again.  If you forget an essential part of a computer program you are contracted to write and your client loses business because of it, the client may sue.  If your new personal shopping service supplies an item that injures a client…lawsuit!  In each case, an Errors and Omissions policy could have saved the day.

And then there is the possibility of fire, flood, theft…in short, all the usual risks of living, and then some.  As the owner of a small business, there are three ways you might cover those risks

1. Homeowner’s insurance endorsements: suitable for a small home business with minimal equipment and no business visitors or business deliveries. Beware: the Independent Insurance Agents of America (IIAA) advises against this minimal coverage.  Your personal agent might, too.

2. Home office policy/in-home business policy:  this offers business liability and lost income replacement, as well as other usual risk coverages.

3. Business owner’s policy:  This provides the most comprehensive safeguards similar to those found in commercial policies, but with prices designed for the home-office market.

If you are like most new home-business owners, you may think your homeowner or renter’s coverage will be enough.  That is too bad, because in many instances, your current homeowner’s policy won’t be enough.  It may even exclude business use of your home entirely.  Even if it does cover business use, it is likely to be for very small amounts, $2,500 on premises, and as little as $250 for losses off-site, such as a stolen laptop.

Plus there is the vital issue of business data.  Suppose a scenic stream runs across the back of your property…and it floods in a hurricane and floats the books, files, and software needed to run your business, bill your clients, and collect fees.  Unless those things are covered under a home office or business owner’s business policy, it is unlikely the loss will be covered at anywhere near what it will cost you to reconstruct all that information.

If someone slips and falls on the muddy walkway, trying to visit you the day after the flood for business purposes, your homeowner’s policy probably will not cover that, either. 

And then there is the issue of business slipups like those mentioned above.  No matter how good you are at what you do, no one is perfect.  You will want to consider coverage so mistakes do not put you out of business.

Before you begin your consulting arrangement or new business, sit down and discuss with your insurance agent all the risk factors you could be facing.  You may not be able to afford to cover every risk right away, so ask for your agent’s help to prioritize the risks.  If, for example, customers will not be visiting your office for a while, leave that liability coverage out for now.  But if you will visit customers and bring equipment along, cover this risk; you need that equipment to do business, after all, and your business will suffer it if is lost or damaged.

Remember to consider your vehicle use, too; will you use public transportation to visit clients, or your personal car?  Will your personal policy work, or would commercial insurance better provide the best protection?  If you are buying a van or truck especially for business needs, there is ample reason to consider commercial vehicle insurance.

Finally, consider the possibilities if you becoming ill or are injured and cannot work.  By going out on your own, you have lost the safety net of the disability insurance your former employer most likely carried.  If you have a working spouse, you may be able to delay obtaining disability insurance for a time, but it is one of the coverages most people feel a lot more comfortable having, working spouse or not.

Once you have prioritized and decided upon your initial insurance package, remember to speak with your agent periodically and to add those coverages that you put off for cash flow reasons, or simply did not need at the time.


Getting to the Heart of the Matter

Use questions like these to determine the nature of your new work arrangement or business and to help prioritize your insurance purchases:

·        What type of equipment do you have and how much did it cost?  How much to replace?

·        Is the equipment dangerous?

·        Does your business own any property?

·        Where do you conduct business–home or client offices or your own premises?

·        Do you need a vehicle for business?

·        Do you have or plan on having employees?

·        If you make an error, can a customer sue you?

·        If building damage happens, from fire to flood, will it shut down your business?

·        Do clients visit your home to transact business?

·        Do you take expensive equipment to client sites?

·        If you are injured and can’t work, where will you derive an income?

Workers’ Comp Claims for Mental Illness May Be Difficult to Diagnose, But Are Real in Today’s Workplace

When one thinks of workers’ compensation, images of workplace accidents and occupational diseases come to mind. Though the vast majority of workers’ compensation cases do involve claims for physical injuries and conditions, a small-but potentially growing-portion of workers’ compensation cases are based on mental or psychological claims, particularly related to stress experienced on the job.

Mental workers’ compensation cases fall into one of three categories: physical/mental, mental/physical, or mental/mental. A physical/mental claim involves a workplace physical injury that has progressed to a mental condition or disability; an example would be a back injury that lingers, and that results in the worker lapsing into clinical depression. A mental/physical claim involves a psychological condition arising out of the worker’s employment that has caused a physical illness; an example would be workplace-induced stress that causes ulcers. A mental/mental claim involves a psychological occurrence in the course of employment, which leads to a psychological injury or condition; an example would be an employee who witnesses a horrific workplace accident involving a co-worker, and who later develops a fear of operating the same equipment on which the co-worker was injured.

As with workers’ compensation claims that have only physical components, in order to be compensable, the claimed injury or condition must arise out of or occur during the course of employment. Some types of mental injuries are difficult to prove under this standard. For example, symptoms of physical ailments caused by stress (e.g., ulcers, heart attacks) may appear only after working in a stressful workplace for a long period of time. Furthermore, unlike claims based on a workplace accident, mental claims may not be linked to one particular incident, but rather to months or years of stressful working conditions.

Another example of the complexity of the cause-effect link in mental workers’ compensation claims is seen in claims based on post-traumatic stress disorder (PTSD). PTSD is a delayed psychological response to experiencing an extreme situation that overwhelms one’s usual ability to cope. Most commonly thought of in connection with soldiers and wartime, discussions of PTSD arose after the September 11 terrorist attacks. Though few would doubt the psychological impact of witnessing the devastation in New York or Washington first-hand, by definition, symptoms of PTSD do not appear for months or years after the event, making their connection to the workplace event difficult to assess.

Mental workers’ compensation claims represent a tiny percentage of all claims; estimates put claims with a mental component at about 1% of claims overall, although this figure varies by state. For a period of time in the 1980s and early 1990s, the incidence of claims with a mental component rose in some states, but stricter requirements imposed by state lawmakers, workers’ compensation boards, and courts stemmed this trend. In particular, mental/mental claims are least recognized.

Though workers’ compensation claims with a mental component represent only a small minority of claims today, the reality of the modern workplace should motivate all employers to be alert to their existence. White collar workers-who are most likely to claim an injury with a mental component-make up an ever-growing portion of the U.S. work force. Furthermore, today’s workplace puts great pressure on employees to be productive and cost-efficient. Many workers live with fear of job loss, as businesses continue to seek optimum competitiveness through “right-sizing.” All of these factors can breed stress.

All employers can take some basic steps to deal with increased stress levels in the workplace-

• Be alert to signs of stress among employees, and solicit input from employees and managers on this issue. Be aware that certain events, such as layoffs, may trigger stress levels in employees beyond what is to be expected on a day-to-day basis.

• Make employee assistance program (EAP) services available so that workers have ready access to help with dealing with stress.

• In the event of a severe workplace trauma, arrange for on-site intervention and counseling services.

Though these steps will not make a business immune from the possibility of a workers’ compensation claim with a mental component, they will, at the least, help make stress recognition and prevention part of the workplace ethic.