When starting up a business, you often need to consider what kind of insurance is right for your small business. Many insurance companies offer a basic business owner’s package, but that may not fit all of your needs. Understanding your potential liabilities, what your deductibles could be, and what situations your insurance may not cover can help you be prepared for the worst. These are important factors to consider when you buy small business insurance.
What Are The Biggest Risks In Your Industry?
Different industries have different types of risks. For example, a construction company needs to worry about physical damage to a client’s property, while a marketing firm needs to be more careful about intellectual property rights and potential damage to a client’s reputation.
There are also risks that every company needs to worry about, such as discrimination, worker’s compensation, natural disasters, and harassment lawsuits.
When you know what coverage you may need the most, you can do a more thorough job of getting the right insurance for your business.
What Are You Legally Obligated To Carry For Insurance?
While some insurance is a good idea to carry, some insurance you are legally obligated to carry. Many policies are situational; for example, before doing work on a municipal contract, you may need to show that your company is bonded. A company that has employees may be required to pay for worker’s compensation insurance. Legally required insurance will also vary from state to state.
While your insurance agent should be able to tell you what is necessary in your area, double checking with your local chamber of commerce is always a good idea.
Does Your Insurance Company Have What It Takes To Survive?
Local companies may be able to offer a local company better prices than a bigger firm, but it’s important for you to weight that against the company’s ability to pay claims in a timely fashion. Ask around about any insurance company and find out from other businesses in your industry if they’ve been easy to work with. After all, any company should be able to sell you insurance; it’s whether they can pay out when necessary that really matters to your business.
Your local chamber of commerce or small business association are good places to start but don’t be afraid to ask other businesspeople in the community directly. You can also take to the internet and look for reviews or talk on social media about the company itself.
Can You Handle Your Deductible?
In the first few years of operation, many businesses struggle with liquidity. It can be tempting to cut any extra expenses. In the area of insurance, some companies will opt to carry insurance, but with the highest possible deductible. This can be disastrous.
Just like with a car or home insurance, you need to remember that, in the event of a disaster, you will need to pay your deductible before your insurance pays anything. You should be sure that you have that money set aside to meet your deductible, just in case something happens. Without that preparation, a high deductible can end up meaning that your business is shuttered permanently.
What’s In Your Policy Documents?
Very few people enjoy reading “legalese,” but in terms of your insurance policy documents, it’s necessary. If you don’t know what your policy will cover and what potential restrictions can prevent a claim from being paid, you can’t actually say that you are fully covered.
Your insurance agent should be willing to go over all the details of your policy with you, ensuring that you understand what is and is not covered, and making sure that you understand terms and limitations as they’re laid out. If your insurance agent isn’t willing to do this, find another insurance agent.
Do You Have Enough Coverage?
Another pitfall for many small businesses is undervaluing their assets in order to reduce their premium. While that lower monthly cost might seem beneficial, remember that an insurance company is only going to pay for what you’ve actually claimed. If you say that your building is worth less than it is, and it’s destroyed, the insurance company isn’t going to pay out more coverage than you’ve been paying for.
When purchasing insurance, make sure you’re working off accurate, up to date assessment numbers. Even if it does push up your monthly premiums, if you need the insurance coverage, you’ll be glad that you are sufficiently covered to avoid disaster.
Many small businesses make the mistake of not purchasing insurance because they either think they can’t afford the monthly premium, or they assume they won’t ever need the insurance. Instead of considering whether or not you can afford insurance, consider whether you can afford what happens without it. When you’re uninsured, your company isn’t safe. Any lawsuit, property damages, or other issues, must be paid out of the business funds, or potentially your own pocket. Having insurance protects you, your business, and your workers.
