Whether selling jewelry or garden plants, bicycles or lingerie, retail establishments typically have some features in common.  For one, they usually have inventory that needs to be protected from physical perils, such as fire or theft.  They also have a good deal of store traffic from the general public, raising the risk of third-party bodily injury claims.

Generally, the most cost effective and efficient way to provide property and liability insurance for your small retail business is with a Businessowners Policy (BOP) specifically tailored to small retail stores. Though marketed under a variety of names, policies will typically have provisions similar to the property insurance and liability insurance sections of the BOP, with the option to add various other coverages that you may need.

Property Coverage

The BOP covers real estate your business owns. If your store rents or leases its premises, the BOP provides coverage, in the event of a covered cause of loss, for tenants' improvements and betterments. These are fixtures, alterations, installations, or additions that you have put into the space that cannot legally be removed from the landlord's premises.

The BOP insures your other business property (in addition to real estate) and your inventory. The policy recognizes that many retailers experience seasonal variations in value. For the majority, Christmas is the big selling season, but for others, the biggest season may be summer. The BOP accommodates seasonally fluctuating inventory value with an automatic 25 percent increase in your policy limit for business personal property, which includes inventory. The seasonal escalator applies only if you have insured business personal property to at least 100 percent of your average monthly values during either the 12 months preceding the loss or the period of time you have been in business as of the date of the loss, whichever is less.

The higher your inventory's value, the more attractive a target it is for thieves. Risk management can help reduce this risk, but can never entirely eliminate it. To protect from potential losses, you will probably wish to add Burglary and Robbery Coverage to your BOP. Employee dishonesty is another risk for which you can add protection. The BOP already covers your risk of accepting bogus money orders and counterfeit money, although you may want to add higher limits.

Depending on the nature of your retail business, other coverages that may be appropriate to add include:

• Spoilage: If you sell items, such as cut flowers or food, that must be kept under controlled temperature conditions to avoid spoiling or perishing, you can add spoilage coverage for the value of property spoiled as a result of a breakdown of the temperature control system due to conditions beyond your control.
• Food Contamination: If you sell food, there is a risk that it could cause food poisoning or transmit a communicable disease from an employee of your business. You can cover this risk with a Food Contamination Endorsement.
• Mechanical Breakdown: This option provides coverage for mechanical or electrical breakdown to your boilers, pressure vessels, refrigeration systems, piping and mechanical and electrical machines, and apparatus that generate, transmit or use mechanical or electrical power.
• Outdoor Signs: The basic BOP doesn't cover an outdoor sign not attached to the building, but you can add this coverage as a separate endorsement.

Another thing to consider is insuring your merchandise while it is in transit. Although it will usually be insured by the transportation company that is delivering it, the limit may not be high enough nor the coverage sufficiently extensive. You can add more coverage with a transportation floater.  This form of insurance covers your property while it is being transported from one point to another or in the care, custody or control of others.

Liability Coverage

The liability coverage in the BOP protects your business from many liability loss exposures. For most stores, a frequent risk is that a customer could be injured in a slip and fall accident. While the BOP covers your liability in such accidents, up to the policy limit, it's also important to manage the risk to keep insurance claims down.

As a seller of products, there is also the risk that someone could sustain bodily injury or other harm from something you sold. This risk, too, is covered by the BOP.

If your business involves selling on the Internet, you can find out more about insurance issues on the e-commerce page of this Web site.

Business Vehicle Insurance

Your personal auto policy probably provides coverage for some business use of your vehicle. A personal auto policy is unlikely to provide coverage, however, if the vehicle in question is used primarily in business. It will not provide coverage for any vehicle owned by a business. For those vehicles you must have a business auto policy.

Should you be driving your personal auto for a business purpose and get into an accident for which you are liable, an injured person could sue you personally. Will your personal auto policy have enough coverage to pay all the damages? If not, a lawsuit may be filed against your business. If you use personal vehicles for business, you want to be sure you have high enough limits to protect your business. You should discuss this with your insurance agent.

Workers Compensation Insurance

States have varying rules about when an employer must provide workers compensation insurance. If you have three or more employees, you should check with your state department of workers compensation to see if you are required to provide workers comp insurance.