FORTUNE Small Business:

Finding insurance for your business

What you'll need - and how much it will cost - depends on your line of business.

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Get small-business intelligence from the experts. Here's a chance for YOU to ask your pressing small-business questions, and FSB editors will help you get answers from the appropriate experts.
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(FORTUNE Small Business) -- Dear FSB: I'm in the process of opening a new firm, and I'm trying to find out what the estimated costs of Errors & Omissions Insurance, Group Health Insurance, and Workers Compensation would be. We're a small firm of four workers, all partners, looking for E&O coverage of about $750,000. Can you help?

- Evan K., Charlottesville, Va.

Dear Evan: Errors and omissions insurance is a type of professional liability needed only for specific professions, including insurance agents, architects, engineers, real estate agents and attorneys.

For medical doctors, professional liability coverage is referred to as malpractice insurance, says Otis Amory, president of the Charlottesville, Va.-based insurance agency Risk Protection of Virginia. Publishers need libel and slander coverage.

Most offices will not need E&O insurance, Amory says, as liability coverage for non-professional pursuits are part of a general business owner's package policy.

However, assuming E&O insurance is necessary and the risk of error is more along the lines of clerical support than the works of an architect or doctor, a basic policy for a firm with three employees should run $2,500 to $3,000 a year. Amory says it could run as low as $500 a year for residential realtors - or as much as $50,000 for administrative support services for a drug company.

Group health insurance is a very important employee benefit, and your partners can choose to share in the cost, Amory says. Health insurance premiums will vary by gender, age, size of group, type of occupation and loss history.

Assuming you have two male and two female professionals in good health in their mid-30's to mid-40's and plan to require a 20 percent co-pay, the monthly cost is approximated at $250 to $350 per person, Amory says. That's for a policy with a maximum out-of-pocket cost of $2,000, no maternity coverage and a minimal dental plan.

Workers' compensation insurance is intended to protect employees from work-related injuries or disease. The premium also varies depending on class of occupation. For example, a company of roofers will have a higher premium than an office of four that provides administrative support, Amory says.

Again, hypothetically, an administrative services office of four with an annual payroll of $120,000 should pay a premium of no more than $1,200 annually, Amory says.

Note that all small business owners should seek out a business owner's package policy to start. That generally includes commercial general liability, property coverage, business personal property, commercial automobile insurance, an excess commercial liability umbrella and a worker's compensation policy.

Keep in mind rates will vary drastically by class of business, your company's loss history, the limits of liability, revenues and salary schedules, Amory says. He advises that you contact a local provider to get an exact estimate.

"Asking questions is what insurance people do only second-best to lawyers," Amory says.  To top of page

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