Who Needs Workers’ Compensation Insurance?

‘Do I Need Workers Compensation’ And Other FAQs

If you’re considering starting a business, it’s important to have a comprehensive insurance package to protect your investment. Workers’ compensation is a type of insurance that provides protection not only for employees, but for the employer as well. Here are some frequently asked questions (FAQs) about workers’ compensation:

Do I have to purchase workers’ compensation? It depends on where your business is located. Many states require you to purchase workers’ compensation insurance if you have one or more employees; state laws also determine benefit amounts, provider options, and claim limits.

How does workers’ compensation protect employees? If an employee is injured while working, workers’ compensation helps handle the resulting medical bills and pays for lost wages. If an employee is killed on the job, workers’ compensation will provide benefits to dependents.

How does workers’ compensation protect employers? When employees use the workers’ compensation benefit, they automatically relinquish their right to sue you.

What if I have multiple businesses in different states? You’ll likely have to consult each state’s requirements to ensure that your policy is meeting standards all around. Your commercial insurance agent can help ensure your employees are covered no matter where they’re working.

How can I avoid workers’ compensation fraud? Questionable claims are on the rise. Protect yourself by hiring good employees and using background checks. At work, create a safety program, and ensure you communicate workplace best practices and benefits.


ENTREPRENEURS
How Do You Want to Structure Your Business?

Building_blocksMost small business owners start off as sole proprietors because it’s a simple structure. Establishing a sole proprietorship only requires a basic business license. While this is an attractive arrangement for someone seeking a quick start-up, it also has disadvantages.

The sole proprietor-the founding individual-owns the business, but has no one with whom to share liability.

One could do that in a partnership, which includes multiple owners who act as “agents.” But in terms of liability, a partnership may still leave business owners exposed-unless partners opt for a limited partnership, defined in Investopedia as: “Two or more partners united to conduct a business jointly, and in which one or more of the partners is liable only to the extent of the amount of money that partner has invested.”

Many entrepreneurs who begin as sole proprietors may scale up to a corporation. A corporation offers business founders the greatest number of safeguards against personal liability-and unlike its counterparts, makes it easier to continue doing business despite a change in leadership.

Though it exists separately from its owners, a corporation’s financial breakdown is far more complicated than other business structures. Entrepreneur James Timothy White writes in LinkedIn that the corporation’s structure, “while limiting the owners from personal liability…creates a ‘double taxation’ on earnings (corporate tax and personal tax).”

Whatever structure you, as the founder or cofounder of a business, select, it must dovetail with your goals and objectives and personal philosophy, as well as your financial situation. If you have partners, it should fit them as well. Launching a business is not for wimps, and the structure must support all of you in bad times and in good.


HOT BIZ TRENDS
Is an MBA Worth it? Maybe It’s About Skills You Already Have

MortarboardThe numbers of master of business administration (MBA) degrees granted annually has been increasing by 15% a year since the ’90s. That’s a lot of MBAs. But is that good for the economy and the grads themselves? The debate has been raging for years, and there doesn’t seem to be consensus.

Recruiters claim an MBA from a top business school is a huge advantage, and the $100,000+ is money well spent. The grad will be hired at a higher rate and recoup his or her investment quickly.

Natalie Kitroeff and Jonathan Rodkin disagree. In Bloomberg Businessweek they write: “Elite business schools are so expensive that it tends to takes their graduates longer, on average, to profit from their degrees than do those who choose less-selective, more affordable programs.”

On the other hand, Dale Stephens, writing in The Wall Street Journal, notes that, “If you aren’t accepted to Harvard, the argument against going to business school becomes even stronger…the return on going to lesser schools is very questionable.”

While some companies actively recruit for MBAs, The New York Times quotes Henry Mintzberg, a management professor at Montreal’s McGill University, as saying: “MBA programs train the wrong people in the wrong ways with the wrong consequences.” He adds, “You can’t create a manager in a classroom.”

In the final analysis, it may be Dale Stephens who makes the key point: “What matters exponentially more than that MBA is the set of skills and accomplishments that got you into business school in the first place.”


INSURANCE
How to Protect Against Intellectual Property Issues

Your building is protected from certain risks by property insurance; your employees, by workers’ compensation; and your vehicles, with commercial auto insurance. But what about risks associated with your business’s intellectual property (IP)?

Most business owners know protecting IP is crucial; one of the best ways to do so is with IP insurance. But how exactly does it work?

What is intellectual property? There are four types of IP (with definitions courtesy of Investopedia):

  • Trademark: “A symbol, word, phrase, logo, or combination of these that legally distinguishes one company’s product from any others. Any infringement on a trademark is illegal and therefore grounds for the company owning the trademark to sue the infringing party.”
  • Copyright: “The ownership of intellectual property by the item’s creator. Copyright law gives creators of original ideas, art, etc. the exclusive right to further develop them for a given amount of time, at which point the copyrighted item becomes public domain.”
  • Patent: “A government license that gives the holder exclusive rights to a process, design or new invention for a designated period of time.”
  • Trade secret: “Any practice or process of a company that is generally not known outside of the company.”

What does IP insurance cover? There are two types of coverage to help in the event of alleged IP infringement. One pays the costs of your legal defense if someone claims you stole their IP; the other, the cost of suing someone you believe has infringed upon or stolen your IP.

For businesses centered on ideas or inventions, IP insurance to protect them is essential. Typically, commercial general liability policies exclude IP coverage. Sometimes available as a policy provision, and commonly paired with Errors and Omissions (E&O) policies, there are also stand-alone IP insurance policies.

Who needs it? Any company whose core business is the development of new products should have IP coverage.

For larger businesses, IP insurance is essential because of turnover. Patents can easily expire without anyone noticing, typically after 20 years. IP protection through constant and proper IP designations (think © and ™) is a good preventive measure, but IP insurance functions like liability protection.

All companies should consider IP insurance to protect against claims, especially small businesses, since they are more vulnerable to the costs of legal defense expenses or judgments, where damages can run from $650,000 to $5 million.

Finally, all businesses face employee IP theft risks.

Do you need IP insurance if you’ve correctly registered IP and know your idea is original? If accused, you’ll need to prove ownership of your IP, and IP insurance can help fund the expenses to do that without unneeded and unjust financial strain.

How do I obtain coverage? You must know you haven’t infringed upon anyone else’s IP and be able to prove you’ve conducted an IP search and filed patents, copyrights, or trademarks. You also can’t have any claims or lawsuits filed against or by you.

Contact your commercial insurance advisor to help you navigate the issues around IP.

July 10th, 2015 by Lightship Insurance