By Jill Nagy
A critical part of launching a new business should be a meeting with an insurance agent to discuss the company’s needs, said Bill Bergan, an account executive with Amsure, the insurance arm of Adirondack Trust Co.
The new business will need the legally required coverages, such as Workers’ Compensation, disability, and paid family leave, along with coverages probably required by the lease for the business premises, such as general liability coverage and coverage for fire, water and other damage to the business contents, he said.
Much of that coverage is often packaged in a business owner’s policy, a comprehensive policy comparable to a homeowner’s insurance policy. Costs vary, depending upon the amount of coverage needed, but should be about $1,200 a year. Typically, an owner will want business interruption coverage as well.
Once those basics are covered, Bergan recommended adding two relatively new, critical, coverages: cyber insurance and employment practices insurance. Cyber insurance will cover costs of a data breach—notification costs, the costs of monitoring credit in the future, any claims or fines that are incurred.
“Everyone is a potential victim,” he said, noting that general liability policies do not cover losses connected to a security breach.
Bergan also suggested also adding a policy that will defend an employer from allegations of discrimination, wrongful termination, sexual harassment and the like or, if necessary, cover the cost of damages or fines. He has seen a growth in demand for such coverage in the past 10 years.
KPM Group’s Kyle Wessels agreed with those coverage recommendations. Cyber coverage, in particular can be “pricey,” he said, “But the alternative is very expensive as well.” “You gotta have at least something in place; everyone needs some level of it.”
Similarly, employment practices coverage “in today’s world, is very, very important. Everyone is on the defensive, petrified of getting sued,” he said.
Unlike typical insurance agencies, KPM emphasizes strategies to maximize tax savings and put extra cash into the pockets of business owners and, often, their employees as well. He refers to KPM as a “tax cost recovery firm … Employers are looking for ideas, strategies, and cash flow,” he said.
For example, KPM helps maximize deductions for depreciation through cost segregation. Instead of looking at a building as a whole, he said, they will break it down into its elements (walls, floors, wiring etc.) and depreciate each of those separately. Similarly, when valuing a building for insurance coverage, they can isolate parts of the building that need specific coverage
Wessells’ partner, J.P. Komorny, developed the cost segregation approach to depreciation in the 1990s. Section 105 of the Internal Revenue Code, which allows that approach, was written by Komorny, said Wessells.
Komorny founded the company in 1993 in New York City. After 9/11, “he decided it was time to get out of New York” and left for Saratoga Springs. Last October, the company moved its headquarters to Ballston Spa. Satellite offices in New York, Boston, Dallas and Denver are primarily sales offices.
Another type of protection recommended for businesses is succession planning, advises Michael Testa of the Tarella Financial Group in Saratoga Springs, a firm that specializes in succession and exit planning for business owners and executives.
People who chose to work for themselves work very hard to get the business going and growing, he noted. They tend to invest in the business rather than saving for retirement and expect to always have the business as a source of income. As owners reach their 60s and 70s, they face the question, “How do we exit the business?”