Starting a new business involves risk, which is why many entrepreneurs buy into established franchise brands - they get instant name recognition and a pre-established business plan. Los Angeles-based Gaspar Insurance, which is the exclusive insurance provider for several major franchise chains, has drafted a new business owner checklist to help entrepreneurs and franchise owners.

"We provide all-inclusive insurance packages to a variety of local and national businesses, both franchise and otherwise, and even the sharpest business people often don't know how to protect their own business," says Timothy Gaspar. "From frozen yogurt chains to global import/export companies, modern businesses face incredible challenges in today's risky economy and litigious society. It pays to learn what options are available for business owners."

1. EPLI: Your employee sues you for harassment even though it's totally unfounded, are you covered? Unless you have EPLI (employment practices liability insurance) probably not. EPLI Insurance protects you from lawsuits from employees arising from sexual harassment, wrongful termination, wage & hour disputes, discrimination, etc. Even a totally unfounded lawsuit can cost $40,000 or more to defend. Coverage can be standalone or an add on to your business insurance policy and premiums run from $300 to several thousand dollars depending on your industry and number of employees.

"Angry people can do mean things that you wouldn't expect." Gaspar warns. "We've seen more than one instance where a scorned employee or client has made really nasty accusations, and defending against an accusation, even one that is completely fabricated can easily cost upwards of $50,000 or more."

Professional Liability and Employment Practices Liability policies defend you against these allegations whether they have merit or not.

2. On the Road: Do you ever send your cashier to the bank or your receptionist to the office supply store? If your employee gets into an accident while running an errand, the business owner is liable. Make sure your business insurance includes non owned and hired auto insurance under your liability. This coverage is very inexpensive (around $100 a year) and well worth it. When you think about how common an auto accident is, especially in an unfamiliar vehicle, there's no logical way to excuse a lack of auto coverage.

3. The Standard: If you find yourself saying "My employees are all 1099, I don't need workers compensation," think again. Unless your independent contractors have their own workers compensation coverage, you need to have workers comp. Most states also levy serious fines for going without this coverage - so don't skip it.

4. Products: Many policies limit coverage of your property while it's outside your business location, particularly if that property is outside the U.S. If your business ships goods to customers or if you regularly have supplies shipped to you, Ocean/Marine & Transit Coverage is something to think about.

Product liability is also an important coverage to carry. "One of our insureds is a large candy manufacturer with distributors all over the country. The company gets calls on a regular basis with accusations of all kinds of non-food items being found in the candy. People say they've found bolts, screws, poison, rodent heads, you name it in their food." Gaspar explains. "Typically the accusations are made with a suggested sum of money that would make the customer happy. These are turned over to the insurance company for a real investigation and needless to say, these claims are found to be meritless.

A company without product liability can waste valuable time and money fighting these kinds of ridiculous false claims without the support and investigators of an insurance company behind them.

5. Asset Protection: Your business might use ovens, computers, or band saws, what happens if your machines stop working? "One of our clients owns a medical office that does ultrasounds for its clients." Gaspar tells us, "One day their $500,000 ultrasound machine broke unexpectedly threatening to completely shut down the operation." The "mechanical breakdown" portion of the business policy paid $150,000 to fix the machine and $100,000 in lost income due to the office being closed for a month. What's more, this claim happened just one month after the policy was purchased.

"We've had other instances of businesses in jeopardy due to unexpected occurrences. "Gaspar says. "A $25,000 sign blowing over costing a gas station client not only that but about $40,000 in lost income, which we were able to have paid by insurance. "Sometimes events that aren't even in your business can wreak havoc." A burglary in the building next door to one of my customers shut them down for a week while police investigated!" When you speak with your insurance representative, make sure they explain how your coverage can help you if something happens to a nearby business which effects your company.

Many small businesses are partnerships between friends or family. These people are assets just like a building or a vehicle. Often times one person puts up the capital while the other provides the inspiration for the business. If something happens to either party, the business is in serious jeopardy. With any business partnership involving two or more people, life insurance is a must.

6. Insurance against Bad Customers?: Believe it or not, you can insure against deadbeat clients. This insurance covers you for clients that don't pay their bills, stiff you or skip out of town on a bill. There is a catch though, generally the insurance carrier will have oversight on who you extend credit to. Vendors that have shaky credit or less than stellar financials may not pass muster, but in those cases you probably wouldn't want to extend credit to them anyway.

Another kind of bad customer is the "False Injury Lawsuit" type. Gaspar gives the example of one of his clients which had an incident in which a woman came into the business and slipped and fell. "The incident was caught on tape and clearly showed the woman walk around the store until nobody was looking and then literally throw herself to the floor." says Gaspar. "She made sure that an employee of the business saw her once she was down. She didn't want any medical attention or help at the scene but surprise surprise the next day her attorney called the store about the incident. The attorney said $1500 would make the whole claim go away and take care of "medical bills" for the fall."

The business owner turned the claim over to insurance and they filed with the carrier. Contrary to popular belief, insurance companies don't hand out money quite that easily. The insurance company offered to review the claim as long as a doctor was interviewed and the "victim" came to the insurance company for an interview. Needless to say, this was last the client heard from the lady and no money was every paid. The insurance company made it clear they would not be an easy target. This is exactly what general liability is for, it gives you someone that "has your back" when a bad customer tries to take advantage of you or your business.

"Bottom line, when starting a new business discuss potential policies with your agent and understand what you are getting," Gaspar says. "Price is important but don't skimp on your coverage, you'll pay much more later."