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Vol. 13 No.
6 |
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Minimize
your computer concerns
Suppose
you open your doors for business one morning only to discover
that water damage from heavy rains the night before shorted
out your computer equipment, leaving your automated systems
inoperative. Or, perhaps, an overnight power failure wiped
out a large portion of your critical electronic records.
Without warning, your entire business operation could be
in jeopardy. Fortunately, this type of disaster needn't
be a major setback for your company. By taking the right
steps now, you can get yourself "up and running"
with minimal delay.
1.
Insure yourself against electronic data processing losses.
Standard commercial insurance packages don't cover some
losses relating to computers and other electronic equipment.
Electronic data processing (EDP) insurance is specifically
designed to fill this gap. An EDP policy generally covers
your electronic data processing equipment, all your computer
data, and the disks or tapes on which it is stored, as well
as additional costs necessary to continue normal business
operations after a disaster. It can also cover any lost
business income due to the disaster. EDP insurance may include
protection against a wide range of threats including damage
from water or other liquids, rust, corrosion, mechanical
breakdowns, changes in temperature and humidity, power fluctuations,
sewer backups, theft, vandalism, and earthquakes.
2.
Back up your systems regularly. From customer records
to accounts receivable and payable, your company undoubtedly
relies on a vast store of electronic data. If this information
were lost, it could be expensive and time-consuming—and,
in some cases, impossible—to recreate. Make it a practice
to back up your critical data nightly and to store the backup
data in a safe, offsite location. It’s also a good
idea to keep a second backup copy from the previous day.
3.
Practice recovery drills. Even if you have the foresight
and commitment to back up your systems on a regular basis,
how quickly could you get your computers up and running
if disaster strikes? Do you know exactly how to restore
the data? Are you sure the technology you use for backups
is still compatible with your system and is not outdated?
The best way to answer these questions is to run a practice
drill occasionally. This will confirm your backup system
is free of defects, and that you are indeed able to respond
quickly in a true emergency.
In
today's competitive business environment you can't afford
to lose one day to a computer shutdown. If you are unable
to service your customers' needs, your competition will
be happy to do so. Businesses that plan ahead are in the
best position to keep disruption to a minimum. Following
these steps can help get your company "up and running"
quickly if disaster strikes. Stop by, or give us a call
today, for more information on an EDP policy.
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A
successful cafeteria plan provides "just desserts"
In
the past, employee benefits were part of a fixed "menu"
with no choice and no flexibility. However, for more and
more business owners, one method of attracting and retaining
valuable workers has been the use of flexible benefits such
as the Section 125 cafeteria plan. This plan allows employees,
with certain limitations, to independently select the benefits
that fit their respective needs, while providing employers
with a cost-effective method for offering a variety of benefits.
 If
you have contemplated using a cafeteria plan in your business,
one of your greatest challenges is to design a plan that
satisfies employees, yet is manageable and makes economic
sense for your business. Therefore, it's important that
you review all types of options with a qualified professional
to determine which items you should include on your menu.
There
are many benefits that can be offered to employees, and
among the choices typically made available are:
-
Group-term life and disability income insurance benefits
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A choice between traditional medical indemnity plans and
an HMO
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Elective 401(k) retirement plan contributions
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Flexible spending accounts (FSAs) for unreimbursed medical
benefits and dependent care assistance
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Cash or additional time off in place of benefits not needed.
Both
Employee and Employer Benefit
In
the most effective plans, both the business and the participating
employees usually share in the cost of optional benefits.
The employee's portion of the cost is typically made with
pre-tax dollars in the form of a salary reduction. This
type of arrangement benefits employees, because the monies
contributed are generally not subject to federal, state,
or local income taxes, and the employee's share of Social
Security and Medicare taxes.
Employees
find cafeteria plans a big plus, because they are able to
tailor their benefits to their specific situations. Each
benefit may be priced "a la carte," using a system
of credits, with some benefits costing more credits than
others. Employees are free to use their cafeteria plan credits
for the benefits they choose. For instance, an employee
who is covered under a spouse's health plan with the spouse's
employer will not need health insurance and may choose another
benefit in its place.
Employers
equally benefit from cafeteria plans because: 1) they are
able to provide a no or low cost benefit to attract and
retain employees; and 2) the reductions in employees' taxable
wages with such plans generally also reduce Social Security,
Medicare, and federal unemployment taxes. Taxation may be
avoided as long as plan participants make their selections
of qualified benefits before any cash benefit can be received.
Keep
It Simple
It's
important to select a menu of benefits providing enough
choices to meet employer and employee objectives without
building a system too complicated to understand or administer.
A good general rule is to keep the program simple. Too many
choices can produce errors, particularly in calculating
the credit use, since each credit is priced differently.
As you and your employees become more familiar with the
way the plan works, new options can be added.
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Did
You Know
Workers
Comp Statistics
Workers
compensation is an important, essential part of
running a business today, but it is expensive. According
to the National Council on Compensation Insurance
(NCCI, 2005), "lost-time claims"—claims
that warranted missing time at work—rose over
10% in 2004. The NCCI also reports that many "medical-only
claims"—claims that only require payment
of medical costs—become lost-time claims within
the first year from the injury.
If your
business holds patents or trademarks for intellectual
property and does business outside of the U.S.,
did you know that you are only protected in the
United States? According to the U.S. Patent and
Trademark Office (USPTO, 2005), less than 15% of
small businesses were aware of this fact. The USPTO
also reports that costs resulting from intellectual
property theft can run up to $250 billion or 750,000
jobs per year.
Small
businesses are a driving force in the U.S. economy.
According to the Small Business Administration (SBA,
2005), small businesses employ over half the private
sector and create 60% to 80% of new jobs. There
are more than 24 million small businesses in the
U.S., and they account for almost 99% of all employers.
Of all small businesses, franchises represent 3%
and home-based businesses represent 53%.
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For
Your Information
Free
E-News
Running
your own business can leave you with little time
for reading the latest news. With this in mind,
the government website www.firstgov.gov offers free
e-mail newsletters that can make keeping up-to-date
on the latest business trends as easy as checking
your e-mail. Covering areas of interest for all
types of businesses, topics include taxes, trade
information, and the latest statistics.
There
comes a time when every business owner must step
down. Whether you are retiring, selling your company,
or leaving the next generation to carry on your
legacy, there are many important matters to consider.
For some helpful hints on the best way to go about
addressing your particular situation, visit www.business.gov.
This informative website offers advice on everything
from creating a timeline for shutdown to managing
your finances.
ID
Theft and Your Business
While
identity theft affects millions of consumers, businesses
are not immune from this pervasive crime. The Better
Business Bureau (BBB) reports that many businesses
now receive information solicitations for possible
identity theft scams. One scam involves soliciting
a business over the phone for office equipment;
with the company's payment information, the business
could unsuspectingly become a victim of fraud. For
more information on how identity theft impacts businesses,
visit the BBB online at www.bbb.org.
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Know
the facts about professional liability insurance
Today,
claims of "negligence" seem to arise more frequently
than ever before. This is usually bad news for professionals,
since the failure to provide reasonable service can be cited
in many far-reaching situations  and
circumstances. Negligence may be claimed in conjunction
with a mistake, oversight, or a failure to deliver services
in accordance with standards set by your peers. In the past,
it was mostly doctors, lawyers, architects, and engineers
who had to be concerned about the implications of negligence
and protect themselves from potential lawsuits. But times
have changed, and now professionals ranging from software
designers to public relations consultants need to consider
the financial protection insurance offers in an increasingly
litigious society. More and more, professional liability
insurance (also called errors and omissions insurance) is
being sought as a solution to the liability risks facing
today's professional.
Disgruntled
customers/clients/patients can pursue a claim against you
or your business whether legitimate or not. In such situations,
it is not uncommon for plaintiffs to sue multiple parties,
in spite of their level of involvement in the particular
situation. Legal fees, not to mention lost working hours,
can be costly. Professional liability insurance can help
absorb these losses and expenses, as well as those incurred
by judgments or settlements.
Professional
liability insurance covers omissions, errors, misleading
statements, breach of duty, and other like claims arising
from services rendered. The terms, rates, and conditions
vary according to the issuing company, policy, profession,
and location. It's very important to thoroughly understand
the policy's terms and conditions before purchasing, and
long before a claim arises. Some key policy issues to address
include:
•
Are claims arising from governmental or regulatory agencies
covered?
•
What has to occur in order to trigger coverage? Will a written
demand, an allegation, or being served legal papers constitute
the accepted notice of a claim?
•
Will you be compensated for working hours lost as a result
of legal procedures?
•
Is there a deductible involved, and how does it relate to
legal fees?
Apart
from these questions, depending on your profession, you
may need to decide between the two types of available coverage.
Occurrence policies cover incidents that took place during
the policy period, regardless of when they are filed. In
contrast, claims-made policies cover claims meeting two
conditions: that the incident occurred during the policy
period, and that the claim also was made during the policy
period.
 Claims-Made
vs. Occurrence
Claims-made
policies provide coverage for incidents that have occurred
and for which claims have been made between the policy's
inception and expiration dates. Claims that occurred prior
to policy issuance are sometimes covered by "prior
acts" coverage, which is included in some policies.
However, such claims may be restricted by a retroactive
date, before which incidents are not covered. Liability
limits are determined according to the level of coverage
at the time the incident occurs. Claims-made policy premiums
are usually lower than occurrence policies, but if you cancel
a claims-made policy, extended reporting periods (or tail
coverage) will likely need to be purchased to extend the
discovery period, during which notice of a covered claim
may be filed. Extended discovery periods may be available
for anywhere from six months up to seven years. The cost
of tail coverage can be high and, consequently, occurrence
policies, when available, are usually preferable.
Occurrence
policies provide coverage for incidents that occur during
the policy period, regardless of when they are reported.
For example, if you had an occurrence policy in effect from
2003 through 2005 and an incident occurred in 2004, but
a claim wasn't filed until 2006, coverage would be provided.
The benefits of this policy, then, are that any incidents
that occur during dates of coverage will be indefinitely
covered. This policy does not require tail coverage, because
premium rates reflect the ability to report claims indefinitely
for events that transpired during coverage dates. Effective
liability limits are those that are in place at the time
the incident occurs, regardless of when the claim is made.
It's
a well-known fact that anything can happen. Mistakes can
be made and clients can make false accusations. It is up
to you to protect yourself and your livelihood. Doing so
may just be your best business move to date. Give us a call.
We would be glad to help you understand the complexities
of professional liability insurance.
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Copyright
© 2005 Liberty Publishing, Inc. All rights reserved.
The content of this newsletter is taken from sources
that are believed to be reliable. However, this newsletter
is not intended as a substitute for legal, financial, or
professional counsel.
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