Six Basic Types of Business Insurance You Might Need

Successful companies of all sizes readily address their insurance needs so they won’t later be caught off guard by either a baseless or valid legal claim. No matter how hard you try to provide flawless products and services to the public, there’s always a chance that a defective product or business transaction may render you liable for legal damages.

Although only certain types of companies must carry workers compensation, disability and unemployment insurance to meet federal guidelines, all businesses can benefit from protecting their company assets by purchasing basic and special types of business insurance.

Fortunately, there are only six basic types of business insurance that you and your business partners must carefully review while trying to protect your company against future legal challenges. All six are set forth below with additional information.

Six common types of business insurance

Before reviewing the following types of insurance, be sure to thoroughly discuss the precise nature of all your business transactions with your insurance agent.

  1. General liability insurance. This will provide you with legal defense support for a variety of alleged wrongs. For example, your company may be sued based on a personal injury claim or the alleged statements of one of your employees. For example, if one of your customers is seriously injured while visiting one of your offices or factories, this policy can help you compensate the injured party for all bodily injuries and medical expenses. In addition, this same type of policy could protect you if a court holds one of your employees liable for business libel or slander — for damages up to the maximum amount of coverage stated in your policy.
  2. Product liability insurance. Even some of the most reliable products on the market will occasionally malfunction and harm a consumer. For this reason, you must secure an ample amount of product liability insurance coverage for this type of claim.
  3. Professional liability insurance. If your company provides any types of services to customers, you must carry this type of policy – often referred to as “E and O” (errors and omissions) coverage. This policy will cover the costs of defending your company in a civil lawsuit that may be based on the alleged grounds of malpractice (often medical or legal). The insurance industry doesn’t view these types of claims as eligible for coverage under either general liability insurance or a homeowner’s insurance policy.
  4. Commercial property insurance. Industrial fires, floods, windy hail storms and other natural disasters can quickly destroy critical manufacturing plants, office buildings and valuable inventory. Always be sure to carry ample coverage under this type of policy — based on recent property value appraisals.
  5. Home-based business insurance. This type of policy is usually offered as a rider to a person’s homeowner’s insurance. It provides limited coverage for such problems as business equipment and inventory damages. This type of policy can also provide funds to cover liability claims brought by injured third parties.
  6. A business owner’s policy. This general type of coverage can let you bundle nearly all (or most) of your insurance needs into one policy. If you pursue this option alone – make sure it adequately protects you regarding all the most unique aspects of your company’s goods and services.

When discussing your insurance needs with your lawyer and insurance agent

Always talk about every reasonable type of harm that your business might suffer. Also, make sure you’ve chosen the best type of partnership or corporate structure to further protect your personal and business assets. Once you fully understand all the risks your company might face, find a highly respected business insurance broker. Always ask trusted business peers for their recommendations for this type of agent.

Finally, speak with your Houston business law attorney about all the specific types of insurance required by the state of Texas for a company like yours. And be sure to address all the federal government’s insurance requirements. Keep in touch with your insurance agent and lawyer throughout each year so they can each readily update you about new legal or policy requirements that may affect your current coverage during the upcoming year.

Please feel free to contact a Murray Lobb lawyer so we can talk with you about the legal aspects of obtaining adequate insurance coverage for all your business needs.

Not Having a Valid Will and Testament Can Become a Burden to Your Family

Many people assume that if they dies without a Last Will and Testament (“Will”), their property will just automatically pass to their spouse or children without any action required to be taken by their heirs, such as having to go to probate court. However, without proper estate planning, this is rarely the case.

While some assets in your estate necessitate having to go to probate court even with a Will, the process of probate court when you do not have a Will is much more time consuming and costly.

So long as there is a Will to probate that allows for independent administration, the probate process is relatively simple and straightforward and generally proceeds as follows: An application to probate a will is filed by the proposed Executor/Executrix with the probate court in the county in which you had your primary residence. Once the application has been on file with the court for a certain number of days, the Executor/Executrix will be allowed to set a hearing with the court where the court will appoint that person as Executor/Executrix, and that person will then take an oath. Once the Executor/Executrix has been appointed and taken their oath, Letters Testamentary (often called “Letters”) will be issued. It is these Letters that let third parties know the Executor/Executrix has the authority to act on behalf of your estate. Within three months after receiving Letters, the Executor/Executrix will be required to file an inventory, appraisement and list of claims or an Affidavit in Lieu of Inventory, which must be provided to all beneficiaries in the Will. Once Letters have been granted, your Executor/Executrix is able to take whatever steps and actions are necessary to administer your estate without any further court involvement.

When there is not a Will to probate, then there are several options that your family will need to consider and then decide on the best probate option based on the particular facts, circumstances and type of assets in your estate.

Dependent Administration: A dependent administration is the most common type of administration that is created when you die without a Will in place. In order to have your assets distributed, someone, usually a family member, must apply to the court to be appointed as dependent administrator. A dependent administrator MUST have court permission to take any action with regard to your estate such as distributing money, selling property, etc. The dependent administrator must also file an annual report every year that the administration is open, which is usually several years. Because of these factors, a dependent administration is very time consuming and costly to your family.

Independent Administration with Heirs’ Consent: There is a possibility that, if all of your heirs agree, they can ask the court to allow the agreed-upon applicant to serve as an independent administrator, without the requirement of court supervision (much like if you had died with a Will that allowed independent administration). However, this means that all heirs must agree upon the same person to serve as independent administrator and that all heirs are adults who have not been adjudicated incapacitated. While that seems easy enough, you will be surprised how the possibility of money can turn family against one another, and if you had a child who predeceased you but left grandchildren, then you may end up with a minor beneficiary who does not have the legal capacity to agree to such an appointment.

No matter if your family chooses to go the route of a dependent administration or an independent administration with consent, each of those options requires an additional step that is not required when you die with a Will. The court will be required to determine who are your legal and proper heirs, which is accomplished via a process called a “Heirship Determination” or “Judgment to Declare Heirs”.

In an Heirship Determination, the court will appoint an “attorney ad litem” whose job it is to determine that the heirs that are listed in the application for either dependent administration or independent administration with consent are true and accurate, that no heirs have been omitted, and to confirm that there are no unknown heirs. The cost for the attorney ad litem is paid by the decedent’s estate, and the costs can range anywhere from about $500 to a $1,000 or more depending on how much work the attorney ad litem is required to undertake to determine the heirs. However, as an estate has not yet been officially opened, the cost usually has to come directly out of the applicant’s pocket until the estate is opened, and then the applicant can be reimbursed by funds from the estate.

Even if you believe that you have taken all the steps necessary to have your assets pass directly to your heirs, it is important that you also execute a basic Will as a safety net for assets that are later acquired, assets that you forgot you owned, or in the event a direct beneficiary predeceases you. For example, 401(k) plans can pass outside of probate and directly to a specific beneficiary by listing them as a beneficiary on the required forms with your plan administrator. However, if you don’t list a beneficiary or the beneficiary you list predeceases you and you fail to update your beneficiary, then in order for your 401(k) funds to be distributed, the plan administrator will want authorization from the probate court. If you did not have a Will, then this would be accomplished via a Heirship Determination, at the minimum. However, if you had a Will, then this could be accomplished via the simpler and cheaper independent administration with the issuance of Letters Testamentary.

The extra steps that are required to administer your estate if you die without a will can be time consuming and a drain on your loved ones, both financially and emotionally.

At Murray | Lobb, we have the expertise in estate planning and probate matters to ensure that your passing does not become a burden on your family. We can assist you with executing a Will, updating a Will, executing a Statutory Power of Attorney, a Medical Power of Attorney and a Physician’s Directive (also known as a Living Will). While you are at our office executing your Will, be sure to ask us about the steps you can take to have most of your assets pass outside of probate and directly to your heirs.