As the economic impact of the COVID-19 pandemic continues to create chaos for many small business owners, you may be looking for ways to cut costs.
If you are considering taking a leave of absence now, or if you have already made a decision to do so, you should know how this may affect your business insurance. Most insurance companies know that you don't work as usual during a vacation. As a result, they may be equipped to help you find solutions, including temporarily adjusting or lowering your premiums.
We answered a few frequently asked questions to explain how the process can work:
Questions about vacation employees?
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How can I lower my general liability insurance payments?
This type of policy, also known as GL insurance, can protect you if there is an accident or injury from a third party at work, or if you or one of your employees cause property damage to a third party.
During a vacation, insurance agents know that you are not working as usual. You have reduced your workforce and set up limited working hours. Or you have closed your company completely. In any case, your goal is to get through a difficult time by temporarily reducing labor costs without having to layoffs.
Because employees may work less during a vacation:
- The risk for your company is lower. When fewer employees work, an accident or injury is usually less likely to happen. You may also use fewer tools and equipment – which means damage is less likely. For example, if you are a contractor who takes leave of absence and halves your business, there is less chance of an incident.
- There is a bigger financial constraint. Vacation days are often due to lost sales. In this case, it is most likely due to the fact that your company may be closed down or offer limited services. Fortunately, most insurance agents understand the situation and are usually willing to work with you to help you comply with your policy.
Conclusion: If you are considering a vacation or have already made the decision, you should speak to your insurance agent immediately. Explain how your payroll has changed, how many hours of employees are working (if you have them), and when you want to end your vacation (if you know this).
Most likely, your agent can work with your network operator to try to lower your premium. Depending on your situation, you may be able to suspend payments entirely.
Regardless, you should try to avoid terminating your policy. An abrupt cancellation can affect your ability to get insurance in the future. It can also leave you unprotected if an unexpected incident occurs.
Although business is currently limited, you never know what might happen in the future.
What should I do about employee compensation insurance?
If you have employees, you most likely have employee compensation insurance. This policy can protect you if an employee becomes injured or sick at work. For example, it can pay for ambulance trips, emergency rooms, medication, and even employee wages while they are recovering.
In many states, it is a legal requirement to take out employee compensation insurance if you have employees, even if you only have a part-time employee. However, if your employees are temporarily on leave, you may be able to contact your insurance agent to find out whether payments with your carrier should be temporarily suspended or reduced because your employees no longer work at or for your place of business.
During a vacation:
- You have reduced the risk of an accident or injury by restricting the working hours of the employees. Maybe you closed your company completely or asked the employees to take a few weeks off. In any case, your team on vacation may be at less risk of an incident at work than if everyone were still working.
- You may be forced to make regular payments. You may lose income due to COVID-19. It is therefore important that you reduce the additional costs. Fortunately, you can work with your agent and network operator to determine whether you can temporarily suspend or lower your policy payment options.
When you're ready to be fully staffed again, work with your insurance agent to adjust your policy. Together, you should discuss important changes that took place during your vacation, including:
- If you have lost employees and plan to hire again soon.
- When your company's sales have changed significantly.
- If you need to take another vacation in the near future.
- Everything else that has changed during this period
Remember, nothing lasts forever, and this usually includes a vacation. We live in a uniquely difficult time – for the public and for small business owners. If you have to take a break, this is a difficult decision. But the more you act with integrity and try to plan ahead, the greater your chances of success.
Simply Business, Inc. is not a law firm and does not offer legal advice. This article is for informational purposes only and does not replace professional legal advice. If you have legal questions, contact a lawyer.
Simply Business is an online insurance broker that specializes in one thing: protecting the business that our clients work hard to build. We enable our customers to choose exactly the insurance coverage they need so that they can expand their business again. Latest Posts from Simply Business (See everything)