Small Business Sentiment Soars

by Ruth Awad29. January 2015 07:44

two small-business owners

Optimism: it used to be measured in half-full glasses. But new research puts a number on small-business owners' recent sunny outlook.

The latest report by the National Federation of Independent Business [PDF] ranks optimism among small-business owners by asking about…

  • Plans to hire new employees.
  • Plans to make new investments.
  • Expectations for the economy to improve.
  • Expectations for higher sales.
  • Plans to expand inventory and the business.

So what did the survey reveal? On the whole, small businesses have a lot of confidence in their future. In fact, readings on the optimism index climbed from 96.1 in October to 98.1 in November (for reference, economists forecasted a mere 96.5).

This upbeat attitude is the highest level of recorded optimism since 2007 (i.e., right before the recession hit) and coincides with a recent high in small-business lending – no doubt a product of the rebounding economy. (Related reading: "7.5-Year High for Small Business Borrowing Bodes Well for Economy.")

The next question is: how will small-business owners put that optimism to work this year?

Pop the Champagne and Invest Accordingly

The Washington Post notes that 70 percent of small-business owners expect their overall financial health to be solid in 2015 and plan to invest back in their companies. That may mean…

  • Hiring new staff to help meet increased demand.
  • Expanding the business to offer new services or products.
  • Moving the business out of the home or to a new location.
  • Investing in new equipment and marketing.

But with all the celebrating and growing, it's important to keep your eye on other aspects of your small business's future, such as what you would do if disaster struck. Of course, that may not seem to mesh with the optimist mindset, but think of it this way: reducing your risk exposures is part of planning for your business's continued success.

So keep the champagne flowing, but remember that part of investing in your business means investing in small business insurance. The appropriate policies can help protect that new gear when it's lost or damaged, pay for your new employees' medical bills for occupational injuries, and safeguard you when a visitor suffers a bodily injury at your new office.

Making Significant Changes? It May Be Time to Update Your Policies

If you already have business insurance but you plan to make significant changes to your staff, product offerings, or property, it may be a good time to update your policies. That's because…

Also, if you plan to launch a social media marketing campaign this year, check your General Liability Insurance to make sure it covers lawsuits over advertising injuries (e.g., libel or copyright infringements that happen on social media).

To learn more about when to update your existing insurance policies, read, "When Is It Time for New Business Insurance Quotes?"

Analysis Shows Less than 3% of Small Businesses Have Cyber Liability Insurance

by Ruth Awad28. January 2015 07:38

cyber attack headline

The Advisen numbers are in, and they are pretty surprising: less than 3 percent of small businesses have Cyber Liability coverage. Or, to put a grimmer spin on it: over 97 percent of small businesses don't have coverage to deal with a data breach. Given today's growing cyber threats and the fact that many businesses see Cyber Risk Insurance as an important part of their liability protection, that number seems to be out of step with reality.

So what's the deal? If data breaches are as common and as pricey as the headlines and research say, why aren't small-business owners clamoring to get coverage? Why isn't the Cyber Liability market saturated with policyholders who know better than to let a breach break their banks?

Let's get some answers.

Top 3 Reasons Small-Business Owners Don't Have Cyber Risk Insurance

These are perhaps the most relevant explanations on why small businesses are slow to move on cyber coverage:

  1. Cyber Liability Insurance is a relatively new product. A lot of carriers are still revising policies to account for the changing landscape of data security. And more to the point, a lot of carriers may not even offer Cyber Liability products yet.
  2. Some people don't know Data Breach Insurance is a thing. Whereas policies like General Liability Insurance and Workers' Compensation Insurance have been around for centuries (literally), Cyber Liability Insurance is a recent policy created to help business owners address the costly aftermath of data breaches, which can be substantial. In fact, the average cost of a data breach for small businesses is $8,699.48, according to the National Small Business Association's 2013 Small Business Technology Survey.
  3. Many small-business owners gravely underestimate their cyber liability risk. There are still plenty of data breach misconceptions, chief among them that it's only big businesses that are vulnerable to cyber attacks. However, cyber crooks tend to target small businesses because they have much less IT security in place than their big-box counterparts. For more on that, read "'No Business Too Small' to Be Hacked, Says Security Expert."

So now that you have an idea about why Cyber Liability Insurance is underutilized, let's explore what this policy can do.

Cyber Liability Insurance: A Small Business's Knight in Shining Armor?

Ok, so you don't have to be a damsel in distress to draw on this coverage. But once a cyber thief storms your virtual castle walls, you'll breathe a serious sigh of relief when you realize your Cyber Risk policy can cover the cost of…

  • Notifying breached parties. Say your small retail business stores credit card information, customer names, and addresses on your devices. When your data is stolen, most state laws require that you notify affected parties about the breach. You might not think this cost is significant, but it takes a lot of extra time to draw up a list of names, check their contact information, and follow up that they received your notice.
  • Offering credit-monitoring services. One way to restore your customers' trust in your business is to offer to pay for credit monitoring to reduce the chance of fraud and stolen identities. If the breach affects enough people, your state laws may require you to offer this service.
  • Negotiating with cyber extortionists. Say a hacker holds your data hostage and threatens to delete it if you don't pay a ransom. Cyber Liability Insurance can help pay for negotiation costs.
  • Repairing your IT security. If you don't want a breach to happen again, you have to figure out how it happened in the first place. Good thing your policy can cover these costs because when you call in the experts, the fees add up.

Also worth noting: when a small business's bank account is hacked, the average loss is about $6,927.50. Unlike customer accounts, business accounts are not protected if they’re hacked. In other words: the bank has no liability to return any money stolen in a cyber attack. So imagine having to pay for breach notification, credit monitoring, and security repair costs out of pocket in addition to losing over $6k. More than likely, the hit would leave you flat broke.

So why not give yourself a financial safety net? For most very small businesses, Cyber Liability Insurance can be bundled with a Business Owner's Policy for about $500 per year (though your rates may vary depending on your industry and the services your business offers).

No Chugging Contests: One Way to Prevent Workers' Compensation Claims

by Ruth Awad27. January 2015 07:33

chugging in a saloon

Holiday office parties have a reputation for being a little chaotic. Even if booze isn't greasing the wheels, the excitement of impending vacation days is enough to get employees to cut loose. Sometimes, the merriment gets out of hand. Sometimes, it's just a chugging contest until someone almost dies.

Let's back up for a minute. In Utah, a man chugged an entire quart of non-alcoholic eggnog in 12 seconds flat at his holiday office party. Apparently, the eggnog chugging contest is a holiday tradition at his office, and the winner earns a $50 gift certificate to Ruth's Chris Steakhouse. The salesman, no stranger to competition, opened up his throat and let the eggnog flow.

In addition to winning the competition, he was admitted to the ICU over a severe case of pneumonia. Turns out, he accidentally poured some eggnog down his windpipe.

You might be shaking your head and saying, "That's what you get," but think about it this way: what if that man was an employee at your small business? Because the accident happened at a work function, your business could be liable for the medical bills.

If you have Workers' Compensation Insurance, your chug-sick employee could make a claim on your policy to cover these bills, and you may have to report the incident to your state's Workers' Comp board. Though this coverage saves you from paying out of pocket, your Workers' Comp policy is like any other insurance policy in that more claims mean higher premiums.

When you think about the situation that way, the real fool of the ordeal comes into focus: it's the people in charge who should know better than to sanction potentially dangerous office activities, even in the spirit of the holidays.

A Supervisor's Role in Preventing Workers' Comp Claims

People are going to do dumb things – it's just a fact of life. But that doesn't mean you're off the hook when you notice employees doing potentially dangerous stuff. In fact, your business is responsible for ensuring employees have a safe work environment.

That means…

  • Keeping your business up to OSHA standards to reduce the chance of employee injuries. Brush up on your responsibilities. Ensure that even if you overhaul the office for a festive event, walkways are clear, items are stored properly, and employees aren't engaging in potentially dangerous activities (e.g., climbing ladders).
  • Rejecting potentially dangerous team-building activities. You'd be surprised how many injuries a game of kickball can cause.
  • Planning office activities in advance. If you want to throw an office party or outing, great! These events can raise employee morale and foster a sense of community in your workplace. But be sure to plan activities in advance so that you have time to properly assess the risks. Office karaoke? Sure – a few flat notes are a safer bet than a business kayaking trip.

In short, one of the easiest ways to prevent workplace accidents and subsequent Workers' Compensation claims is to be proactive.

4 Things You Can Do When the Office Party Gets Out of Hand

If things start to get a little wild, be sure to…

  1. Rely on an additional event supervisor. If you have a smaller office, you may not think you need another pair of eyes to help you monitor the event. But when people start milling around and you get caught up in a conversation, it can be hard to stay vigilant. So why not enlist a supervisor's help before the party gets underway? You can ask an employee to volunteer or appoint someone you trust. Give the supervisor authority to intervene when the party gets rowdy.
  2. Step in. If you see an impromptu chugging contest in the works, be sure to shut it down before someone ends up in the hospital on your business's dime.
  3. Direct the group toward another activity. If you spot employees attempting a marshmallow-eating contest, why not point them toward the lively game of charades happening in the conference room?
  4. Send the rabble-rouser home. If a particular employee is acting out of hand and refuses to settle down when you or the event supervisor asks, remember that you can request the employee to leave. If they've had too much to drink, arrange for a cab to take the employee home.

For more tips on preventing work accidents, read, "How to Prevent Workers’ Comp Claims."

Time for an Insurance Inventory for Your Business?

by Ruth Awad26. January 2015 07:52

man taking inventory

Let's do a quick experiment. Close your eyes. Now, name your small business's valuable assets out loud. No peeking!

How did you do? You probably remembered the big things – your physical office building, if you own it. Your home office if you run a home-based business. Maybe your computers, tablets, and specialty gear (e.g., that fancy DSLR camera, your cash register, or your restaurant's culinary equipment).

But what you may notice is just how much you left out. This is the folly of relying only on your memory to recount your business's worldly possessions. And if you don't keep a thorough record of your small business's assets, you're going to have a difficult time if your property is ever lost, damaged, or stolen.

That's why insurers always advise that you take careful inventory of your stuff before you purchase Commercial Property Insurance. You want to be sure your major assets can quickly be replaced or repaired on your policy's dime if they're damaged in a covered event (fire, theft, vandalism, and some weather events). And that's why taking an insurance inventory of your business's property is essential. It ensures…

  • You don't accidentally leave yourself uninsured by forgetting to account for key assets.
  • The claims process goes as smoothly and quickly as possible.
  • You keep track of your business's physical investments.

So how do you take inventory, anyway? Let's review.

How to Make an Insurance Inventory: A List So Nice, You'll Check it Twice

An insurance inventory is pretty straightforward: it's simply a detailed list of all the physical assets your business relies on to operate. The devil is really in the details here. For example, on first pass, you might overlook your business's…

But in the event of a fire, those are also items you want your Property policy to be able to replace or repair. (Note: if your business owns vehicles, your Property Insurance can't cover them. You'll need Commercial Auto Insurance for that.)

The goal here is to be thorough. Perhaps the most efficient way to go about it is to walk through your business slowly and take pictures of everything. You'll also want to take notes because a solid inventory lists…

  • Item descriptions.
  • Serial numbers.
  • Purchase dates.
  • Estimated values.

Though taking pictures and digital notes is a perfectly acceptable way to document your assets, don't feel limited. You can also write everything down longhand, make a spreadsheet, or use an inventory app.

Here are some other reminders:

  1. Leave no stone unturned. Walk through your place of business a few times to double check that you've listed everything.
  2. Consider organizing your list by the room (e.g., lobby, office, kitchen, etc.). This will make it easier to quickly update your inventory if you need to.
  3. Make copies. If you use photos and digital notes, upload your inventory to the cloud and back it up on a thumb drive, too. If you take written notes, make several hard copies plus a digital copy. Be sure to store your thumb drive and paper copies in a secure location away from the office so they're not destroyed in the same disaster that necessitates their use.
  4. Save your receipts for business items. This way, you have proof of the item's value. Also, it can make filing taxes and taking business deductions much easier for your small business.

Even if you already have small business Property Insurance, you can always adjust your coverage to account for assets you previously overlooked or newly acquired. For more on that, read "When Is It Time for New Business Insurance Quotes?"

Do This Today to Lower Your Cyber Liability Exposure

by Ruth Awad23. January 2015 06:00

router

Quick question: did you buy a consumer-grade router for your small business? Something off the shelf, nothing too fancy?

If so, it may be time for an upgrade. According to a report by ThreatPost, over 12 million home routers have a vulnerability dubbed "Misfortune Cookie" that could give a hacker remote access to your device. Once attacked, the hacker could direct the traffic going to and from your router, leaving your business utterly exposed.

Here's what you need to know:

  • The vulnerability affects routers from leading manufacturers, such as D-Link, Huawei, TP-Link, ZTE, and Zyxel.
  • The flaw has to do with the devices' embedded webserver called "RomPager."
  • The flaw was fixed in 2005, but it didn't make it into consumer devices, exposing 12 million devices in 189 countries.

The risk is more than a privacy violation if you're a business owner – it's a data breach waiting to happen. The security researchers at Check Point say once a hacker has access to your router, they can install malware, make permanent configuration changes, and bypass any firewalls.

The result? The attacker can extract data from your business backup drive – e.g., private customer data that you are responsible for protecting. Once customer information gets into the wrong hands, you have to notify affected parties, pay for credit-monitoring services, and repair your business's bruised reputation.

In other words, that sweet profit margin you had before? Gone in a flash.

Luckily, there's a quick fix for this latest cyber threat.

One Small Step for Your Business, One Giant Leap for Its Cyber Security

If you run a one-person shop or a home-based business, it can be hard to see the value in investing more in the device that allows your business to connect to the Internet. Given the amount of sensitive information your business handles, investing in a commercial-grade router can step up your security considerably.

Whereas consumer-grade routers have some rudimentary security features, business routers have two Internet connections, advanced firewalls, and more. On the downside, these routers can be quite pricey for small-business owners and may offer more bells and whistles than you actually need.

If you're not ready to make the transition to a full-blown commercial router, there is one thing you can do to substantially improve your cyber security: install the firmware patch for your router.

Updating the firmware for your device is…

  • Simple (a quick Internet search should do the trick!).
  • Inexpensive or free, in most cases.
  • Necessary to reduce the risk of a costly data breach.

As a failsafe, be sure to carry Cyber Liability Insurance. Though no insurance policy can prevent a data breach, this particular policy can give you the resources you need to handle a cyber attack's expensive aftermath. It can pay for notifying customers about a breach, credit monitoring, PR measures to rebuild your reputation after a breach, and more. You can learn more about the coverage here: "Why Your General Liability Insurance Doesn't Cover Data Breaches."

For more ideas on how to amplify your small business's data security measures, read the post, "One More Way Customers Can Sue You."

Small Business Bills to Follow

by Ruth Awad22. January 2015 07:15

American flag

As a small-business owner or freelancer, you are part of a community that makes up a robust part of the US economy. In fact, according to the Freelancers Union, as many as 54 million Americans do independent work, which makes them small-business owners as far as the IRS is concerned. Plus, small businesses have provided over 55 percent of all jobs since the 1970s, according to the Small Business Administration.

But if businesses like yours have such significant economic impact, you may be wondering: why doesn't the government take notice? Where are the fat tax breaks? When do you get your slice of the pie?

Well, as you may know, our laws lag considerably behind the times. Maybe a change is afoot: small businesses are slated to get a little more attention from Washington this year in the form of tax bills and other proposals. But with the new Congress, it's anyone's guess how these bills will play out.

Let's take a look at some proposals that may impact your small business this year.

4 Key Areas of Small Business Legislation to Watch in 2015

According to a report by The Denver Post, the hot topics of legislative debate in 2015 will involve…

  1. Taxes. Both Obama and the GOP support a reduction in the corporate tax rate, which is currently 35 percent. Given that the majority of small-business owners operate as sole proprietors, such a change likely won't affect you. Sole proprietors report business income on personal tax returns, which is why SBO advocacy groups are pushing to lower individual taxes.
  2. Small-business tax deductions. The GOP wants to make the upfront deduction for the cost of computers and machinery permanent, which can be a good thing for small-business owners who don't want to fuss with deducting depreciated equipment for the next three to 20 years. Instead, you can deduct the cost of tangible business property that you use at least 51 percent of the time in one fell swoop. On December 16, 2014, Congress voted to extend the bill that increases the deduction to $500,000 (up from $25,000). The new bill also allows you to deduct off-the-shelf computer software.
  3. Healthcare law. You don't have to watch hours of C-SPAN to know that Republicans aren't the biggest fans of the Affordable Care Act. Now that the GOP makes up the majority of Congress, you can expect to see the ACA heavily debated this year. Of course, if a bill to repeal the law passes, Obama will ultimately veto it. Still, keep your peepers peeled for much ado about the mandate that companies with 50 or more employees offer insurance to employees who work 30+ hours a week. Read more about how the ACA affects small businesses in "Does Obamacare Affect Workers’ Comp Requirements?" and "What Obamacare Means to Your Business."
  4. Loans. Potentially good news if you're a woman and small-business owner: word on the street is that Democrats plan to reintroduce a bill to help you get loans backed by the Small Business Administration. Also, the SBA wants to make it easier for small businesses to borrow, which is why it's launching an online system to simplify and speed up the lending process. Read more about lending trends here: "7.5-Year High for Small Business Borrowing Bodes Well for Economy."

Want to get your democracy on? Track the bills that could affect small businesses at GovTrack.us.

What Not to Do: Workers' Compensation Edition

by Ruth Awad21. January 2015 07:25

employee unloading a box

Dollar Tree Stores is no stranger to run-ins with the Occupational Safety and Health Administration over its treatment of employees. This time, the discount retailer is under fire for willfully and repeatedly exposing its workers to unsafe conditions. Notably, inspectors saw falling boxes strike an employee, and now OSHA is pushing for a penalty against Dollar Tree to the tune of $103,000.

Before this most recent incident, Dollar Tree has been…

  • Fined more than $800,000 for similar OSHA violations.
  • Cited for 234 safety violations.
  • Accused of violating worker safety in 26 states.

As you may know, each workplace safety violation comes at a cost. For instance, Dollar General's failure to clear the work area around electrical panels is a $33,000 penalty. The improperly stored boxes? A $70,000 penalty. Because Dollar Tree's violations were deemed as "willful" – i.e., the company knew about the issue and ignored it (or just plumb didn't care) – the penalties are weighed more heavily. Ditto for repeat violations.

You may be saying to yourself, "I would never do such a thing to my employees!" And hopefully, you wouldn't because it's both illegal and expensive.

But here's the thing: during the bustle of the busy workday, it's easy to lose sight of how important and prevalent workplace safety issues are. Even though you have Workers' Compensation Insurance to cover expenses related to employee occupational injuries, the real hope is that you won't need to use that coverage. And that's why you can't let down your guard or let things slide (e.g., leaving walkways cluttered or spills unattended).

5 Workplace Safety Don'ts

Now that you're ready to step up your efforts to keep your employees safe and your business off of OSHA's to-watch list, let's take a look at what not to do.

  1. Don't assume offices are inherently safe. Sure, your employees may not work in a warehouse. But offices can still pose risks to employee health. For instance, if you have workers who spend the majority of their time typing away in front of computer screens, they could be at risk for eyestrain, repetitive motion injuries, and lower back problems.
  2. Don't skimp on safety investments. One way to limit workplace injuries is to invest in safety gear. For example, your cleaning business may supply employees with gloves and masks to protect them from the hazards of strong cleaning agents. If you own an accounting firm, invest in split keyboards and ergonomic chairs to reduce the chance of carpal tunnel and strains.
  3. Don't underestimate the power of safety training. Knowing the risks is half the battle. Ensure your staff is properly trained to cut down on possible work accidents and Workers' Comp claims. For example, if you own a small restaurant, your staff should be aware that slip-and-fall injuries are common in the kitchen, and you should require that they wear shoes that offer good traction. For more tips on preventing occupational injuries, read, "How to Prevent Workers’ Comp Claims."
  4. Don't overlook everyday dangers. As a small-business owner, you and your employees probably handle of lot of maintenance work yourselves. That means cleaning solutions, heights, and clutter can all become possible health hazards if the appropriate safety measures aren't taken. Be sure your employees know how to use cleaning solutions and ladders. Keep toxic substances properly stored, and make sure your building is ventilated.
  5. Don't forget to enforce safety protocol. Create written safety policies that outline how to avoid potential obstacles and injuries. Make sure your policies are in line with OSHA guidelines. For example, your policy may detail how to…
  • Store heavy objects (usually, at waist-level to aid in proper lifting procedures and to avoid items falling on employees).
  • Store materials in easy-to-reach places.
  • Keep walkways clear of clutter and media cords.

Remember that when a workplace accident does happen, your Workers' Compensation Insurance can cover the employee's medical costs and replacement wages. Most local laws require you to keep a record of the accident for Workers' Comp filing purposes.

If you have 10 or fewer employees, you're usually not required to keep OSHA records for work accidents unless a federal department requires you to. When a workplace injury ends in a hospitalization or fatality, however, it must be reported to OSHA. To learn more, read the post, "What Is the Health and Safety Act?"

Use Mobile for Business? Your Cyber Liability Is Probably Through the Roof

by Ruth Awad20. January 2015 07:22

small team using mobile devices

Despite the fact 33 percent of employees use only their smartphones to do work, 75 percent of employees say that mobile security is lax in their workplace, according to a report by HackSurfer. In other words: mobile devices are the perfect storm for data breaches. After all…

  • Businesses rely heavily on smartphones.
  • Businesses don't take the necessary security precautions to keep those devices (and the data stored on them) safe.

In case you think you're dodging a bullet by virtue of being a small-business owner, you should know those stats hold true for small businesses, too. But don't take our word for it. Keep reading to get the facts about your smartphone vulnerabilities.

Smartphones: Ease, Convenience, and Data Breaches

Smartphones can help you and your employees stay connected and work from virtually anywhere, but that convenience comes at a cost. For instance…

  • Bring-your-own-device (BYOD) workplaces have been linked to a rise in data breaches.
  • Smartphone users may fall prey to phishing email scams and malicious website or app attacks.
  • Connecting devices to unsecure WiFi networks increases the risk of data exposure.
  • Worker smartphones can be vulnerable to visual hackers – i.e., those who peer over shoulders to swipe sensitive data.

Considering that small-business data breaches are more common than big-business breaches, these risks are no small matter. To hackers, small businesses are a lucrative target and an easy hit, thanks to their lack of cyber security, which is why about 44 percent of small businesses report being hacked.

As far as real-world consequences, what do these risks amount to? Well, according to a report by Experian, 60 percent of small businesses that are hacked go out of business within six months. It makes sense when you think about it: small businesses distinguish themselves from corporate competitors by building trust and customer loyalty. When you suffer a data breach, your credibility gets called into question pretty quickly.

As for the cost, data breaches run small businesses nearly $8,699.48 on average. If your business's bank account is hacked, expect to lose an average of $6,927.50 – all stolen money that your bank has no obligation to return. Banks aren't legally required to insure business accounts against cyber theft like they are with personal accounts.

What Can You Do to Protect Work Smartphones from Data Breaches?

In short, you can do the following three things to reduce your small business's mobile cyber liability exposures:

  1. Educate your employees. It's time to make cyber security a priority rather than an afterthought. Inform your employees on the latest cyber threats so they are better equipped to avoid common pitfalls, such as phishing email scams and malicious apps. Require that employees connect to a secure WiFi network before they use their phones for business activities.
  2. Invest in security measures. It's never a bad idea to invest in software that automatically encrypts data before transmitting it to other devices. There's also antivirus and antispyware software available for smartphones. Do some research, and if you're stuck, consider consulting with an IT security professional for help.
  3. Carry Cyber Liability Insurance. This policy can help you pay for the costs associated with a data breach, no matter if it originated on a computer, tablet, or smartphone. You can easily add this policy on to your Business Owner's Policy as a rider, which can be as little as $50 extra.

For more smartphone security tips, read the post, "What Does the Blackberry Classic Have to Do with Your Business Insurance?"

4 Things to Check before Canceling a Small Business Insurance Policy

by Ruth Awad19. January 2015 07:32

businessman on a tightrope

These days, you're hard-pressed to find an insurance advertisement that doesn't promise the coveted Holy Grail of Lower Rates. It's enough to make any small-business owner wonder: Am I really getting enough bang for my buck?

And once you head down that line of questioning, the allure of canceling your existing policies may become more appealing. While it's never a bad idea to compare new insurance offers (especially before you renew your existing policies), it's an ill-conceived plan to throw caution to the wind and cancel your coverage outright.

Make sure you observe the following four steps before you cancel any of your small business insurance policies.

1. Weigh the Risks of Canceling Your Coverage

There's a reason we recommend that you look before you leap: when you cancel your insurance coverage before you purchase a replacement policy, you leave your business utterly exposed. Some policies give you a bit of a grace period (i.e., a coverage extension) if you're late on renewing your policy, but this may not apply when you cancel coverage. You're just out in the cold – shivering, uninsured, and vulnerable to any losses or lawsuits that come your way. This is what we mean when we talk about "gaps" in your coverage.

It's also worth keeping in mind that just because you haven't been sued up until this point doesn't mean you won't be sued over work you've done in the past. Every state has its own statute of limitations, so there's always the chance that a mishap on a past project can come back to bite you. While it may seem that the stars would have to align for that to happen right when you cancel your policy, be warned that bad luck never discriminates.

Lastly, if you're worried about keeping your insurance premiums low, know that stopping and starting coverage is usually a red flag for insurance providers. Do it enough times, and they may hike up your future rates.

The bottom line: you should almost always purchase another insurance policy before you cancel your current coverage.

2. Think Twice before Canceling a Claims-Made Policy

This step could be lumped in with the first, but it's worth discussing on its own. Think of your claims-made policies as the fickle orchids of the insurance world. Everything has to be just so in order to collect your benefits on these policies.

Typically, Errors & Omissions Insurance (i.e., Professional Liability or Malpractice Insurance) is claims-made coverage. That means in order to receive your benefits…

  • Your policy must have been in force at the time of the alleged incident.
  • Your policy must be in force when you file the claim.

Say these things are true: you're a CPA and you made a mistake on a client's taxes last year. You also had claims-made E&O Insurance at that point, but this year, you decided to retire and you cancel all your business insurance policies.

But that client isn't done with you. They decide to sue you for their financial losses that your work caused. For this hypothetical scenario, we'll say you live in a place where the statute of limitations isn't yet up. You think because you had insurance at the time, you'll have coverage for the lawsuit. You'd be wrong.

You should always consult with your insurance agent before you cancel your policy – especially if it's a claims-made policy.

Another consideration: if you want to shop around for a new E&O policy, remember that you can usually purchase "tail" or "prior acts" coverage. Tail coverage ensures you can report claims after your policy has been canceled. Prior acts coverage is usually purchased through your new provider and offers retroactive protection for past mistakes or work that hasn't been reported.

3. Understand that Cheaper Coverage Isn't Always Better

If you want to ditch your current policy because the rates are too high, you might want to first read this post: "5 Business Insurance Mistakes Costing You Money." Your agent may be able to help you tweak your coverage so that it better aligns with your budget and doesn't skimp on protection.

And that's the real consideration here: it's a fool's errand to cancel an insurance plan only to choose a different policy that's easier on the wallet but offers a fraction of the coverage. To pick up some pointers on how to compare coverage offerings, read, "Decoding Your Small Business Insurance Quotes."

4. Know When It's Time to Cancel vs. Adjust

Sometimes, you don't need to cancel your policy to get the results you're after. As a general and brief guide, these are the instances when you should cancel a policy and when you should adjust your coverage:

  • Cancel: You sell your commercial vehicle and don't plan to do any more business driving. If you no longer own the car, you aren't going to buy a replacement, and you aren't going to use a different vehicle for business errands, you may want to ask about canceling your Commercial Auto policy.
  • Adjust: You replace your car or buy new equipment. Talk to your agent, and they will ensure your Commercial Auto and Property Insurance policies are updated to protect your new assets.
  • Adjust: You move to a new business location. Just because you moved doesn't mean you no longer need coverage, even if your move was made in order to downsize (e.g., you're going to run your business out of your home). Call up your agent to adjust your commercial policies to fit the needs of your new digs.

For more pointers on adjusting your insurance policies, check out the guide, "When Is It Time for New Business Insurance Quotes?"

Your Home-Based Ecommerce Business: What You Need to Know in 2015

by Rieva Lesonsky16. January 2015 06:00

woman making jewelry

Today, starting a business from home is easier than ever and could be your smartest move if you’re looking to save on start-up capital. Technology makes a virtual business as seamless as a business operating from a commercial location, and customers have no idea (nor do they care) where you hang your hat – even if it’s on the spare bedroom door. According to Global Workplace Analytics, the most recent figures put the number of self-employed Americans working from home at 2.8 million.

Growing your ecommerce business from home makes sense because you don’t actually have to keep inventory on premises and most of your business is conducted via your computer. With some 191 million online shoppers in the United States alone, you won’t have to search very hard to find customers as long as you stay on top of ecommerce trends.

Here’s what you need to know to keep your home-based ecommerce business growing in 2015:

  1. High shipping costs can lead to cart abandonment. Studies have shown one of the top reasons for shopping cart abandonment is when consumers don’t find out about high shipping costs until the checkout process. That’s especially important considering big ecommerce giants often offer free shipping and can deliver goods to customers within a few days. If you’re just starting out, consider setting up a storefront on Amazon, Etsy, or eBay where you can use their resources to help you achieve faster delivery and lower shipping costs. If your customer base is your local market, play up the fact you can get them their products right away.
  2. Digital security is a top priority. Speaking of the checkout process, the assurance of digital security will be huge in 2015. With big companies getting their data hacked left and right, how can you assure your customers your ecommerce site is any more secure? Talk to your bank and technology providers to make sure they are following the PCI Data Security Standard (PCI DSS) and that you have the proper security safeguards in place to protect your customers’ payment information. The size of your business will determine the specific compliance requirements that must be met. Small businesses are prime targets for data thieves looking to steal payment information. Encourage customers to change passwords frequently.
  3. Mobile websites are a must. This year’s Cyber Monday sales reached $2 billion, making it the biggest online shopping day in history. This shows how important it is to have a mobile-friendly website. Because consumers turn to their mobile devices for product research before they buy, make sure your site is informative and simple to navigate with large, clickable buttons and forms that are easy to fill out.

As with any small business, it’s important to make sure you protect your home-based ecommerce business by purchasing business insurance. Homeowner’s policies may not cover business mishaps, and you definitely want to be covered so you don’t lose your business and your home.

Rieva Lesonsky is CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at rieva@smallbizdaily.com, follow her on Google+ and Twitter.com/Rieva, and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for Rieva’s free TrendCast reports.

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