"So, your business insurance policy won't pay off because the Sunday morning break-in was preceded by a Saturday evening party?" Sound ridiculous? It actually happened to one small business owner! It was right there in the policy: "This policy is void if the premisis are used for activities other than the designated business." In a letter to the business owner, the insurance company said: "Permitting an employee to use the premises for a promotion party where liquor was served voids the business coverage."

If you think this a random incident that could never affect your business, maybe it's time to read your business insurance policy!

There just aren't that many companies insuring small businesses, and those that are tend to be pretty picky about what and whom they insure.Home office businesses are especially vulnerable, and if you're counting on your comprehensive home policy to pay off, you better read that one also! Your best bet may be to purchase an umbrella policy to provide top coverage, but watch out here as well.

Here is a set of guidelines to use in determining just what you need in the way of insurance along with some suggestions on how to locate an insurance company that will cover you.

LIABILITY INSURANCE
One of the two main coverages in most business policies, liability insurance pays your legal costs if someone is injured on your property or by one of your products, but it doesn't cover you if your product is judged defective because of poor workmanship. How much should you have? A minimum of $1 million, but ask about larger policies. Sometimes they cost but a few dollars more.

PROPERTY/CASUALTY INSURANCE
This is the second main plank in any standard business policy and covers damage to your company's property from fire, storm, theft and other perils. Make sure your policy provides "all risk" coverage. This means it will cover anything not specifically excluded. "Replacement cost" coverage costs more than "actual value", but if your items are depreciated to nothing, that's what you will receive. Most of these policies contain a limit or cap on the total amount they will pay. Make sure the cap will actually cover the replacement cost of your property in case of a major disaster.

BUSINESS INTERRUPTION INSURANCE
This is often added as a rider to a standard policy and pays for the expense of rebuilding your accounts receivable data base, cleaning computers, renting temporary offices and similar costs associated with a disaster.

AUTO INSURANCE
"I contract out all my deliveries" may not be a legal excuse if your delivery service causes pain, injury or damage while doing your business. Make sure you are covered, maintain a high deductible (if you can afford the first costs) and select your business partners and employee drivers with care.

UMBRELLA POLICIES
You NEED this coverage, and it is very inexpensive. Unbrella policies have a high deductible which is usually covered by the underlying policy, and many place tight restrictions on what the basic policy must contain. Ask for at least a $5 million umbrella policy, and also ask about a $10 million policy--it may be very inexpensive.

WORKER'S COMPENSATION
Mandatory in most states, this insurance covers your employees if they are hurt on the job. It is NOT health insurance. Only purchase what is required by law, and follow your insurer's guidelines on safety in your facilities.

OTHER INSURANCE
Chances are your business policy will not cover you for earthquake, flood, war or other major disasters. If your area is suceptible to these hazards, either move or look to pay a lot of money for this type of coverage.

FINDING A GOOD INSURER
First decide on what coverage you require, then determine the minimun dollar amount you need. Next, call every insurance company in the book, not just the one or two that say they provide business insurance. If you are a home-based business check out several homeowner policies other than your present carrier.

Provide each insurer with a list of your minimun requirements, and ask them to quote you a price. Don't believe them if they say, "Well, we have a minimum amount on that part." Anything and everything is negotiable. Be prepared to add such things a security locks, alarm systems and similar items to reduce your overall insurance costs. Doing this will cost money, but it will reduce the long term cost of your policies even more. When you receive your policy, obtain legal advice to determine whether the terms of the contract are what you asked for. If not, send it back without payment and try again.