Unexpected events like the death of a partner, an injured employee, a lawsuit, or a natural disaster can have a devastating effect on a small business. Because running a small business involves a significant investment, it’s wise to insure it against those (and other) risks. Business insurance protects your investment by minimizing the financial risks associated with it. Unless you are an employer, business insurance is generally not required by law, but it is common practice, and good business sense, to purchase enough insurance to cover your assets. If your business is set up as an LLC or a corporation, your personal assets are protected from business liabilities. But you should be aware that neither of those business structures is a substitute for liability insurance.
Here are five tips from the U.S. Small Business Administration for buying business insurance. Use them to determine what types of insurance are best for your business.
Assess How Much Risk You’re Willing to Take
Insurance companies determine the level of risk they’ll accept when issuing policies, through a process called underwriting. They will review your application and determine whether it will provide all or a portion of the coverage being requested. Each underwritten policy comes with a premium, the price you pay, and a deductible, the amount of money you agree to pay when making a claim. Premiums depend on a number of risk factors, including your business location, building type, local fire protection services, and the amount of insurance you purchase. Generally, the higher deductible you agree to pay, the lower your premium will be. Remember, if you agree to take on a high deductible to save on your premium, you are also taking on more financial risk as well. So, it’s important to assess how much you are willing to risk before deciding.
Shop Around for an Agency You Trust
Some brokers specialize in insuring specific types of business, while others can connect you with policies specific to your business activities. For example, if you operate a landscaping service, you’ll want to find an agent that can help find policies that specifically cover that type of businesses. Often specialist brokers can get you the best coverage and the best rates. The National Federation of Independent Businesses (NFIB) provides information for choosing insurance to help you assess your risks and to make sure you’ve insured all aspects of your business.
Consider a Business Owner’s Policy
Typically, business insurance can be purchased separately or in a package called a business owners’ policy (BOP). Purchasing separate policies from different insurers can often result in higher total premiums. A BOP combines standard coverage options into one package, and is usually offered at a premium that is less than if each type of coverage was purchased separately. BOPs commonly consist of property, general liability, vehicles, business interruption and other types of coverage common to most types of businesses. A Business Owners’ Policy simplifies the insurance buying process and can save you money. Before you buy, make sure you understand the extent of coverage in any BOP you are considering, especially if your business has unique risks.
Find a Reputable, Licensed Agent.
Commercial insurance brokers can help you find policies that match your business needs. It’s important you find a broker that is reputable and understands the needs and specific risks associated with your business.
Review Your Insurance Coverage on an Annual Basis
As your business changes, so do your liabilities. Don’t get caught underinsured should disaster strike. If you have purchased or replaced equipment, expanded operations, added or changed locations, contact your insurance broker to discuss how they may affect your coverage.
The truth is, every business owner needs insurance. You don’t want to underinsure your business, but neither do you want to over-insure it. Discuss your situation with your insurance agent, and you may want to speak with other agents to get their recommendations on the type of insurance your business really needs, too. After reviewing all their suggestions, you’ll want to carefully determine what insurance you must have and what you can afford.
Freedom Insurance is here to help you with your business insurance needs. Call us today for a free consultation!