DORA provides Small Business Guide to Insurance

Anyone who owns a business with employees – or has ever worked for someone else – in Colorado knows about Workers’ Compensation and Unemployment Insurance. Those are two forms of insurance required by the state.

But when are other types of coverage required? And how can small businesses be sure they have the coverage they need?

The state Department of Regulatory Agencies’ Division of Insurance is here to help. Really.

The Division has put together a comprehensive guide to the whole range of business insurance – required, recommended and maybe-a-good-idea-depending-on-your situation – especially designed for startups and small businesses. The Guide to Insurance for Small Business is available on the Division of Insurance website at www.dora.state.co.us/insurance/consumer/businessguide.htm.

“Growth in small businesses is a critical element to Colorado’s economic health,´ said John J. Postolowski, Interim Commissioner of Insurance, in releasing the guide. “The guide to insurance is one of many resources Colorado is providing to enable new and small businesses to succeed.”

The guide covers not only insurance that protects businesses’ investment in time, money and other resources and their workers, but also insurance that helps protect the busnesses’ customers as well. Should anything go wrong with goods and services, certain insurance may compensate people who interact with a business.

An insurance agent who is licensed to sell insurance or broker may offer a “package” that covers many small business needs, or design a policy with coverage designed for the particular business. It is important for the business owner to know what the policy includes – and what his or her business needs.

Required insurance

Workers’ Compensation – Colorado state law mandates that a business provides workers’ compensation coverage for all employees. This insurance provides prompt, partial wage replacement and covers medical expenses for workers injured on the job. The business must pay the full cost of this insurance. It is unlawful to deduct the cost of this coverage from an employee’s wages. (See page SBG – 7 for more information.)

Unemployment Insurance – All Colorado businesses with employees are subject to Unemployment Insurance tax. The underlying purpose of the unemployment benefits program is to help maintain the economic and purchasing power of the community by assisting the most exposed members of the community, the unemployed worker.

Unemployment Insurance is not regulated by the Division of Insurance, but by the Colorado Department of Labor and Employment. The CDLE has an extensive employer handbook to help determine if a business must pay Unemployment Insurance Tax and to determine whether someone is an employee of the business and eligible for Unemployment Insurance benefits.

Automobile Insurance – Any vehicles used by the company must be properly insured according to Colorado law, whether they are owned, borrowed or leased.

The minimum limits of liability required are:

• $25,000 per person for bodily injury
• $50,000 per accident for bodily injury
• $15,000 per accident for property damage.

Policies are not limited to these minimums and additional coverage may be purchased. A person who is injured in a car accident is not restricted to seeking only those amounts if the damages or medical costs are greater, and may attempt to collect additional damages or reimbursement for losses directly from the business or vehicle owner.

Professional Liability Insurance – required for certain professions. For other professions, it may be strongly recommended, if not required by law.  Professional Liability Insurance may be called “Malpractice” insurance for some professions (doctors and other health professionals) and “Errors and Omissions” (E&O) for other professions. This type of insurance can pay the costs to defend the professional’s reputation and cover the potential damages to anyone who was harmed by improper actions or negligence.

Lender-required insurance – If the business acquires a loan to purchase a building, vehicles or equipment, the bank or lender may require insurance to protect its investment. This is at the discretion of the lender, not the state.

Other types of business insurance

Depending on the type of service or products offered, a small business may purchase insurance coverage which includes:

• general liability;
• errors and omissions (E&O);
• property coverage for fire, water damage and more;
• spoilage of inventory;
• business equipment and equipment breakdown;
• inland marine for mobile equipment;
• crime; employee dishonesty, burglary & robbery;
• business interruption;
• commercial automobile and use of non-owned vehicles;
• property of others;
• employers’ liability;
• umbrella & excess liability;
• farm or crop coverage.

The Guide to Insurance for Small Business from DORA covers all these coverages, as well as flood insurance (not usually covered under property policies) and some of the requirements for employers under the federal Affordable Care Act. It also discusses the difference between actual cash value and replacement cost coverage, life insurance for key employees, and what can constitute a business interruption.

One of the most helpful features of the guide is its extensive collection of links to other insurance resources, some of which can be found elsewhere on this page.

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