Unique insurance considerations for family-owned businesses.

Insurance considerations for family-owned and closely-held companies can be more critical in the success and continuation of the businesses than those for larger, publicly-owned companies. In most cases, family-owned and closely-held companies face similar exposures to both commercial and personal risks, but the threats to operations and principals can far more easily result in the deterioration and possible collapse of a private company's financial integrity.

Obvious Commercial Insurance exposures for any company are presented by Fire, Liability, Vehicles, and Workplace Injury, but today, family-owned and closely-held companies can also be greatly impacted by claims arising out of the norm of usual business operations, requiring coverages such as Directors & Officers Liability, Fiduciary Liability, and Employment Practices Liability to respond. While traditionally related to publicly-traded companies, Directors & Officers Liability can provide valuable protection for growing private companies, entering into acquisitions and other contractual obligations. Most principals of closely-held companies act as fiduciaries for the direction of employees' funds to all types of benefit plans, and in some cases, can be held personally liable for negligent acts in this duty.

A major difference between public and private companies is the critical importance of the principals to the day-to-day operations. A closely-held business may not survive a serious financial or physical event to a principal, who is often a key manager or sales person. Often overlooked is the adequacy of personal protection, for principals, in the form of Homeowners, including Personal Liability, and Umbrella Liability Coverages, to safeguard their assets. Without proper coverage limits, a principal may be personally impacted, which in turn may aversely affect the stability of a private company.

The economic value of a key principal to a private company should also be carefully assessed, including the importance of replacing this value, in the event the principal is no longer able to perform duties. Key Man and Disability Income Coverages can help offset this loss, and aid in the cost of filling the principal's position.

Information for this article was provided by White & company Insurance. Located in Santa Monica since 1952, for three generations, White & Company Insurance has specialized in writing insurance for family-owned and closely-held businesses. For more information, please contact Jeff Voorhees a t 310.393.9477, Ext. 153.