When you launch a small business start-up, one of your top initial concerns should be purchasing the right business insurance. For many businesses, the solution is a combination of general liability insurance and commercial property insurance. However, it’s important for each company to customize its own insurance plan according to its unique coverage needs. Here are ten things you should do while buying small business insurance.
- Be Aware of Different Types of Business Insurance – There are various types of business insurance policies, but it’s common to establish a foundation with liability and property coverage. These two areas are bundled in a plan called Business Owner’s Policy (BOP), which is usually cheaper as a package than buying each policy separately. If your business doesn’t include owning commercial property, you can start with a general liability policy. You can then add endorsements for special types of coverage such as cyber liability and employer’s liability coverage.
- Learn Your State’s Legal Requirements for Insurance – In most states, you need to carry workers’ compensation if you hire at least one employee. You’ll also need commercial auto insurance if you own and use company vehicles used for business operations. You should also understand industry standards set by trade associations, which work with lawmakers on writing legislation for their professions.
- Gauge Your Industry’s Risks – Every industry has some level of risk. As safe as devoting your life to becoming an independent artist may seem, it can have extreme financial risks. Meanwhile, some of the highest-paying professions such as legal and medical involve litigation risks. The most dangerous professions, such as construction and mining, pose serious health risks. Look at whatever risks impact your industry and how they can affect you financially, which will help you set insurance coverage limits.
- Focus on Coverage More Than Cost – The reason you should prioritize insurance coverage over cost is that if you eventually file a claim, you’ll have sufficient coverage. Remember that you get what you pay for when you buy insurance, including peace of mind knowing a disaster won’t destroy your company. No matter how well it’s run, any business can face litigation, such as when a visitor slips and falls at your establishment.
- Know the Factors That Impact Premiums – Several factors affect small business insurance rates, from location to machinery to how the company is run. The more you can show your insurer you have taken proactive steps to create a safe work environment, the better chances you’ll have at lowering premiums. An example includes making sure only individuals with good driving records are used as drivers.
- Rethink Your Deductibles – Deductibles can be raised to lower monthly premiums. It’s simply a matter of determining risk levels and whether you need to pay more now or later for potential claims. Remember that the more you lower your monthly premium, the more you’ll pay when you file a claim before your policy kicks in.
- Plan for More Coverage Than You Need – It’s always better for businesses to overestimate than underestimate their insurance needs. At some point, your company might face a lawsuit that can drain your capital. However, if you have the right business liability coverage in place, you won’t have to worry about running out of cash quickly. Getting the right liability coverage pays for a wide range of lawsuits, from defamation to injuries to property damage.
- Select a Reputable Insurer – Don’t assume that all insurance agencies conform to the same generic policies and rates. Insurers set their own methodologies for shaping coverage and prices. Some insurers reward business clients for certain behaviors that reduce risks. Make sure your insurer is licensed to operate in your state and has a respectful track record. Learn about each insurance candidate from their websites and online reviews. Try to find an insurer that has plenty of experience serving your industry.
- Review Your Policy Carefully – Since every insurance company is different in how they arrive at their policies, it’s essential to learn everything a policy covers before signing it. Don’t be the unlucky business owner who tries to rush through the insurance process only to learn from a disaster you don’t have all the coverage you need. One of the worst nightmares an entrepreneur can experience is getting hit with a flood, then finding out flood coverage wasn’t included in the plan. You should never assume your basic small business insurance plan covers every possible peril that can wipe out an organization overnight. You need to go over the plan with your insurer and discuss disruption possibilities such as specific natural or human-caused catastrophes. While fire and storm damage are usually part of a standard commercial property plan, earthquakes, floods, and other extreme disasters usually aren’t.
Nonetheless, you can get the coverage you need when a certain type of disaster persists in your region. Paying for extensions to your standard policy will provide appropriate coverage.
- Ask for Expert Advice – Since small business insurance is so complex, it’s helpful to turn to an experienced insurance expert for advice. If you try to figure out everything yourself just to get it done, you might overlook certain areas that can be problematic down the road. It’s better to talk with your insurer and share an inventory list of your company’s possessions. The insurer can then verify what is and isn’t covered.
Every small business needs to review its business insurance policies periodically to make sure they’re up to date and in line with company goals. Following these ten tips will help guide you toward a more cost-efficient insurance strategy. Contact us here at The Reardon Agency to learn more about reaching your small business insurance goals.
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