One of the most important small business tasks is getting business insurance. Here’s how to choose business insurance that’s right for you.
Getting a business started is complicated, with many moving parts and endless associated tasks. One of the most important items a business owner should tend to in that critical phase is getting business insurance.
2021 reportedly proved the second-most costly year recorded for insurers worldwide, largely due to U.S. extreme-weather events. Insured losses from natural catastrophes alone totaled some $120 billion.¹ Typically, businesses and individuals whose risks are covered come through unfortunate events in better shape than if they’d been uninsured.
Many businesses start by securing a general liability policy that they can tailor to meet their specific needs. They may add auto insurance, cyber insurance, and others, depending upon their operations and risks. Here we’ll cover business insurance basics to help you figure out how to choose business insurance that’s right for you.
Assess risks and insurance requirements
Experienced small business owners understand that business insurance is a must. While not all businesses are required to have certain types of coverage, owners recognize that it’s money well spent. The right insurance coverage can protect your company, employees, equipment, and other business assets against a variety of threats.
Insurance is one of those things that you may not think about until you need it. But if you have it when you need it, it’s a great relief. It doesn’t cover personal assets, per se. But it can keep your business from going under or sustaining a crippling hit that could set you back considerably.
Before shopping for insurance, business owners should inventory their needs as well as compliance rules in local, state, and federal laws. Certain businesses are legally required to carry certain types of insurance. Most lenders require it as well. Companies that are working under a commercial lease or other arrangements may have a contractual obligation to carry insurance. And companies with employees are required by law to carry workers compensation, unemployment, and disability insurance in most states.
It’s worth the time to take a risk assessment dependent on industry type, location, number of employees and other factors. Your insurance company can help you find one that’ll return the best, most accurate results.
Deciding what kind of insurance you’ll need
There’s a variety of insurance policies available to business owners. Factors like industry, location, contractual obligations, loan requirements, and number of employees all play into the type of insurance needed. For instance, a catering business with 1 employee won’t have the same insurance needs as a landscaping business with 50. If they are in different states or are paying back a business loan, those needs are even more diverse.
Let’s look at some of the more common types of business insurance.
- General liability protects against claims of bodily injury, personal injury including slander or libel, and property damage to someone’s possessions.
- A business owner’s policy (BOP) generally combines general liability insurance and property insurance for the company. It protects the business owner from lawsuits and liability claims. It also protects company property and covers some financial obligations if the business experiences closure due to a covered loss.
- Commercial property insurance provides protection for rented or owned equipment and buildings used in the operation of the business. It does not cover damage from floods or earthquakes.
- Professional liability insurance is also known as errors and omissions (E&O) insurance. It provides coverage for legal claims of errors or mistakes in services provided by the business.
- Workers compensation insurance provides employee benefits if a worker is injured or becomes ill from the job.
- Commercial auto insurance helps protect the business owner, employees, and business while staff is operating company-owned vehicles for business. This insurance may also help to cover accident-related bodily injury and property damage claims.
- Cyber liability insurance covers the business in the event of a data breach involving the release or exposure of sensitive private information.
- A commercial umbrella insurance policy extends the coverage limits for a business’s liability policy. This means that if a claim exceeds its policy’s limits, the umbrella insurance will kick in and cover the difference.
How to choose business insurance for your company? Start comparison shopping.
Every policy is different, and levels of coverage and limitations vary. But good insurance will be integral to the survival of small businesses in the event they experience claims, losses, or business interruption. So whether you need general liability insurance, product liability insurance, or any other type of insurance policy, get it right. Learn more from different insurance companies about appropriate business insurance coverage for your situation. Gain an understanding of your risks, assets, possible unfortunate scenarios, and potential liabilities. Review several business insurance policies and get quotes from highly reputable insurance providers. Ultimately, the best insurance for your business should ensure peace of mind.
Want to know more about small business insurance? Learn what to know about small business liability insurance.
1 Natural disasters cost insurers $120 billion in 2021, Reuters