GREAT 47 IDEA: Find a Good Independent Insurance Broker

Your insurance broker should be “part of your financial inner circle,” according to Richard Butwin, copresident and CEO of the Butwin Insurance Group in Great Neck, New York.

Meeting with a savvy insurance broker at least once a year can protect you and your business from disaster. Business-related insurance is not a luxury—it is a necessity, especially if you interact with the public, which most businesses do, either online or in person.

“During the meeting, you should describe your business, ask questions, and then let the broker design an insurance program,” said Butwin.

Most small companies are underinsured, which can be a big mistake. Have you heard of employment practices liability insurance? I hadn't. It protects your company if you are sued for firing, not hiring an applicant, or violating an employee's legal rights. (The policy covers legal costs, but does not cover fines levied by state or federal agencies).

What about business income or business interruption insurance? A comprehensive policy can provide money to keep the lights on and the payroll covered if your business is hit by disaster. (See Great Idea #23 on disaster recovery planning.)

Butwin said a small business owner who sells filters for camera lenses, was extremely grateful he listened to Butwin and bought this coverage. A few years ago, a worker in the office below left a hot plate burning—and nearly burned down the entire building. Firefighters saved the building, but everything was soaking wet and covered with a thick layer of inky soot.

Luckily, the business income policy covered the cost of cleaning up the office. They missed a few days of work but few customers even knew what happened.

“Brokers are supposed to diagnose a loss before it happens,” said Butwin, who also takes credit for encouraging a major travel agency client to keep paying for coverage related to telephone and Internet service outages.

A few months later, the hard drive controlling the agency's phone system crashed. Based on past bookings and telephone records, Butwin could prove how much money was lost and filed a successful claim.

His biggest claim involved a defunct car dealership. “A city water main broke and the entire building began to sink into the ground,” he recalled. Although the policy excluded claims related to underground water, he was able to prove that the water came from a broken pipe, not a natural spring.

Although it sold cars, most of the dealership revenue was generated from service and repairs. So, Butwin said, it was imperative that the service department reopen as soon as possible. It cost about $1 million for the dealership to move its service department across the street into a vacant building. They had to build a ramp up to the second floor, but the insurance company paid for everything.

“They were back in business within a matter of weeks,” said Butwin.

So, no matter what you do for a living, find yourself an experienced independent insurance broker and sleep better at night.