As discussed in part one of this two-part article on insurance, businesses have risk and that risk cannot always be eliminated. In order to hedge against the risks of doing business (and of life), businesses and individuals use insurance products to elevate some of the financial impact that comes with adverse events.

Judy Fourie of J. Fourie & Company, an insurance broker who specializes in group benefit plans (as well as individual health and life), and Lori Wright of H & M Insurance and Financial Services, Inc., a Nationwide insurance agent who works with businesses to identify precisely the insurance coverage needed, continue to give insight into what we should know.

11. When do companies need to get workers compensation insurance?

LW: Businesses need workers compensation coverage if they have employees or, at times, if they are working as a subcontractor. Generally, in the case of subcontractors, the primary contractor or vendor will require the subcontractor to obtain workers compensation coverage even if the business is a one person operation.

12. How can companies be strategic about implementing an insurance program?

LW: Businesses should consult with an insurance professional who specializes in the particular type of insurance they require. If you need business insurance, consult with an agent or broker who specializes in commercial insurance. If you require health, life or group coverage, seek out a life and health insurance specialist. These professionals should analyze the risk and prepare a program tailored to the particular type of business or risk.

JF: They need a trusted advisor, a professional, such as a financial consultant or insurance agent. A team of advisors can greatly help a company, because of the collaborative effort involved in directing the company in what to implement and when.

13. If someone is a sole proprietor, do they need different/more insurance than other legal business types? What about insurance needs for home based businesses?

LW: The type of entity a business is (whether it be a sole proprietor, corporation, etc.) really does not determine the amount of or type of coverage. Once again, all risks are unique. A home-based beauty salon would require a different type of coverage than a home based web designer. A salon would have a steady flow of clients on their property; a web designer generally would not. Different risk [and] different exposures [equals] different types of coverage.

14. As a business grows, do their insurance needs change, and if so, how?

LW: As a business grows, the insurance needs generally change. There could be an impact on the amount of property owned, which would increase the property coverage or the liability exposure may increase.

JF: It has been my experience that insurance needs change as a business grows. Health insurance is one of the first things a business gets because it helps them attract employees. As the business grows, they may want to add benefits and a retirement plan.

15. What is self-insurance?

LW: A self-insurer does not transfer the risk to an outside company or carrier, but sets up its own reserves to provide for losses.

JF: Self insurance is anything you pay out of your own pocket, where the risk could have been transferred to an insurance company.

16. What are FSAs and HSAs, and how can businesses use these to manage the costs of health insurance?

JF: Flexible Spending Accounts (FSAs) allow employees to reserve a specified amount of untaxed wages that can be used to pay for deductibles, insurance premiums, child care, etc. A Health Savings Account (HSA) allows an employee to contribute untaxed money to an account that can be used to pay first dollar health insurance expenses. An HSA has to be paired with a high deductible health insurance plan with no co-pays or drug card. The money in FSAs has to be spent by the end of the plan year, and—just announced this week—can be carried over 2 ½ months after the end of the plan year. Unused funds in an HSA can be carried over from year to year and ultimately used to supplement retirement.

17. Are there differences in insurance for renting commercial space as a standalone office versus locating in office suites, where there are shared common areas?

LW: Regardless of whether a business rents a commercial space as a standalone or a common area does not impact the premium or coverage.

18. What are the different types of life insurance and how does someone decide whether to take the "company" offered life insurance versus having a private policy?

JF: The two basic types of life insurance are term and permanent. Term has no cash buildup and can have a rate that is guaranteed for a specified number of years (up to 30). Permanent has a cash-value buildup feature and the premiums usually stay stable for the life of the contract. I do not recommend using company-sponsored term life insurance as the primary source of protection. Most people change jobs many times during a career and the term life from an employer does not extend into retirement. And unless an individual saves adequately, they can come up short at retirement, at a time when getting affordable life insurance can be challenging.

19. If a business has company vehicles, what type of insurance do you recommend? Does it reduce the premium costs if the company has specific practices and policies on who is allowed to drive the vehicles?

LW: Business automobile coverages also vary by risk. I certainly would not recommend that a business with a fleet of vehicles carry a $300,000 liability limit, where $300,000 liability may be perfectly acceptable for an individual contractor with no employees. It is always recommended that a business have specific practices and guidelines for drivers. Motor vehicle records should be obtained on all new drivers before hire. If there is a system of control regarding the drivers, there is less likelihood of claims. This will also help maintain the coverage with a preferred carrier and better rates, as opposed to a non-standard carrier with much higher rates.

20. If a business is currently uninsured, what the first thing you recommend they do to identify areas of potential risk?

LW: I like to meet with business owners and discuss thoroughly any possible type of exposure or risk that could impact their business. I work with them to develop an insurance package or program with the best coverage available at the most competitive rates.

Lori and Judy: one final question. You both are successful businesswomen in an industry that is often viewed as a “commodity” that competes on price. What advice do you have for new and existing business owners concerning growing your client base?

LW: I firmly believe enthusiasm and attitude are a huge factor. Also, networking can be extremely useful in getting you name and reputation recognition. In some cases, it's who you know.

JF: Stay as up to date as you can and don’t spend so much time working in your business that you miss new trends and opportunities to connect with other business owners, where many of these types of things are discussed. Be positive and cheerful and have a good sense of humor. People like to do business with people who are happy and enthusiastic.

If you have more questions about your personal or business insurance needs, you can contact our insurance experts directly.

Lori A. Wright is a commercial insurance specialist and associate agent with H & M Insurance and Financial Services located in Durham, North Carolina. She can be reached by telephone: main office (919) 544-0346 x 307 or her mobile (919) 672-9860.

Contact Judy Fourie, President, J. Fourie and Company, Inc. (insurance broker) located in Cary, North Carolina. Judy can be reached by telephone: (919) 481-1815 or by e-mail: judyfourie@jfourie.com.