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Small Business Insurance and COVID-19

How insurance can help small businesses prepare for the challenges of today and tomorrow.

small business insurance

For small business owners, the COVID-19 pandemic has presented an unprecedented trial, filled with questions and uncertainty.

From income loss to remote work and staff furloughs, small businesses have been forced to respond and adapt to this unique situation quickly.

At the end of 2020, the president signed a $900 billion stimulus bill into law, which includes important modifications to the Coronavirus Aid, Relief and Economic Security or CARES Act passed at the start of the COVID-19 outbreak to assist workers, families and small businesses affected by the economic downturn brought on by the pandemic.

The new bill includes approximately $325 billion in funding to the Small Business Administration, allocating $284 billion to replenish the Paycheck Protection Program or PPP loan, which provides forgivable small business loans to qualified applicants.

Under the bill, small businesses that had already applied for, received and exhausted PPP funds are eligible to apply for another loan if they have less than 300 employees and sustained at least a 25% loss in revenue during any quarter of 2020.

More PPP updates that small business owners should know:

    • Expanded list of expenses that qualify for loan forgiveness. This includes supplier and investment costs related to modifying facilities and obtaining personal protective equipment for safety.
    • Simplified loan forgiveness process for businesses that have borrowed $150,000 or less in PPP loans.
    • Confirmation that business expenses paid for with PPP loan funds are tax deductible.
    • In the original bill, small business owners had to choose between a PPP and an Employee Retention Tax Credit. The new bill expands and extends the ERTC and allows it to be used in conjunction with PPP, as long as it’s used for wages not paid with PPP funds.

The U.S. Chamber of Commerce put together a guide to help small business owners learn more about COVID-19 emergency loans.

Those interested in applying for a PPP loan should contact their lender for more information.

But how can your insurance help at this time?

Steven Holland, manager of commercial lines for AAA Insurance, addresses some concerns you might be having right now.

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The question that is top of mind is whether a standard Business Owner Policy will cover business interruption income loss due to COVID-19.

First, the bad news: Small business owners should not anticipate long-term coverage for business income losses.

“Our analysis of policy language on the standard Business Owner Policy Form is there will be little if any coverage for business income loss. If there is coverage found, it likely will be for remediation and/or extra expense coverage,” said Holland.

The good news is that AAA insurance agents have been working with clients to do everything they can to provide adjustments where they normally would not to help keep small business owners afloat.

Holland discussed a case where a customer who owns a restaurant hit particularly hard by COVID-19 called the commercial insurance team to see how he could lower his insurance cost.  “We reached out to the workers’ compensation carrier on his behalf to advise that the payroll for this client would be much less this year. The carrier did a mid-policy term adjustment saving the customer thousands … We also were able to set up a pay-as-you-go billing so that there will be no surprises at the time of policy audit.”

Restaurants, contractors, landscapers and electricians are among the top customers working with the AAA insurance team to protect their businesses. Now and always the priority of the agents is to shop their over 23 carriers for the best rate.

small business insurance

About Business Insurance

All businesses are required to have insurance. The protection you need depends on the industry that you are in. Small business insurance or commercial insurance is designed for field-specific risks. For example, landscapers and contractors must consider work-related injuries and coverage for any vehicles and equipment used for work, while a restaurant owner would also need to worry about commercial property.

The essential coverage for businesses is General Liability. This covers basic business risks and protects against third-party claims such as bodily injury or property damage.

Professional Liability will protect a business if a client believes they suffered a financial loss due to an error or omission on your part.

A Business Owner Policy packages all the above, as well as Business Interruption, into one. Business Interruption covers revenue losses in case of a disaster, specifically, if the damage of physical assets such as machinery or vehicles are cause for a loss of revenue. There is a lot of fine print and exclusions involved with Business Interruption, and it does not include income loss due to a pause in business caused by COVID-19.

Small business insurance coverage can also include Workers Compensation (mandatory in many states to cover employee lost wages and medical treatment if they suffer a work-related injury or disease), Cyber Liability to protect from cyber attacks and data breaches and Commercial Auto.

Read about four reasons your small business could use cyber insurance. 

The AAA small business insurance team serves as a trusted advisor to thousands of small businesses in the Northeast. Schedule a call to speak with one of our commercial experts to see how they can help your business.

For more information and resources for small business, go to uschamber.com/co.

This story was originally published in April 2020 and has been updated. 

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