How to Choose Insurance for Your Small Business

Are you prepared for things like accidents, natural disasters, and lawsuits that could ruin your business? Insurance for your small business can protect you when disaster hits. Here’s how to choose the coverage you need.

How to Choose Insurance for Your Small Business

Choosing a business structure like a limited liability company (LLC) or a corporation typically only protects your personal property from lawsuits, and even that protection is limited. Business insurance can help to make sure both your personal and business assets are protected from unexpected catastrophes. Here are the steps for determining your insurance needs.

• Assess Your Risks - Think about what kind of accidents, natural disasters, or lawsuits could damage your business. Types of risk include:
  • Operational - Operational risk addresses your day-to-day dealings by insuring tangible assets against outside events, such as natural disasters.
  • Strategic - Strategic risk is when your business strategy is threatened. Research your competitors and understand how you can better protect your business.
  • Compliance - Compliance risk is about following the rules and regulations of your industry and the government. You need to be aware of the latest rules in your industry and business. You can’t purchase insurance related to taxes and other forms of compliance risk, but you should be aware of your obligations to stay informed and how you could be held responsible.
  • Reputational - This means protecting your business from security problems, data privacy breaches and other cybersecurity issues, and protecting your brand and logo. 
• Find An Agent - Choose an agent that is reputable and licensed. Commercial insurance agents can help you find policies that match your business needs. They get paid commissions from insurance companies when they sell policies, so make sure to find a licensed agent that’s interested in your needs as well as their own.
• Shop Around - Prices and benefits can vary significantly, so compare rates, terms, and benefits for coverage offers from several different agents.
• Make Annual Re-assessments - Your liabilities grow when your business grows. When you purchase or replace equipment or expand your operations, contact your insurance agent to discuss the changes and how they could affect your coverage.

Types Of Insurance

Depending on the type of business you have, you’ll have different requirements and options in terms of insurance coverage. Here are some types of small business insurance to think about.

• Required Insurance - You might be legally required to purchase certain types of business insurance. 
  • Federal - If you have employees, the federal government requires you to have workers’ compensation, unemployment, and disability insurance.
  • State - Some states require additional insurance. Visit your state’s website to find out the requirements for your business.
• Optional Insurance - After you purchase the legally required insurance, you’ll want to cover the other risks to your business. It’s a good idea to insure against what you wouldn’t be able to pay for on your own. Insurance agents can help you determine what kinds of coverage make sense for your business, compare terms and prices for you, and help you to find the right coverage for the right price. Here are the common kinds of business insurance you should consider.
  • General liability insurance - This coverage applies to any business and protects against financial loss due to bodily injury, property damage, medical expenses, libel, slander, defending lawsuits, and settlement bonds or judgments.
  • Product liability insurance - This coverage protects businesses that manufacture, wholesale, distribute, and retail a product against financial loss as a result of a defective product that causes injury or bodily harm.
  • Professional liability insurance - This coverage protects businesses that provide services to customers against financial loss as a result of malpractice, errors, and negligence.
  • Commercial property insurance - This coverage protects businesses with a significant amount of property and physical assets against loss and damage of company property due to events such as fire, smoke, wind and hail storms, civil disobedience, and vandalism.
  • Home-based business insurance - This coverage is for businesses that are run out of your home. It’s coverage that’s added to a homeowner’s insurance as a rider and can offer protection for a small amount of business equipment and liability coverage for third-party injuries.
  • Business owner’s policy - This coverage is good for most small business owners, but especially home-based businesses. It’s an insurance package that combines all of the typical coverage options into one bundle. It simplifies the insurance buying process and can save you money.

If you want to know more about starting a small business, read our article, “A Guide to Starting a Small Business in Your Local Community”, or contact us.

Tags: insurance, small business