Selecting the right insurance policy is one of the simplest and most effective ways for small business owners to manage risk. This method is crucial for your venture to start and flourish into a successful business.
It is an essential safety net for businesses, but the process can be overwhelming for those unfamiliar with insurance.
Here are some considerations to factor in before purchasing a small business insurance policy.
Assess your risks
When providing policies, insurance companies determine how much risk they are willing to take. This procedure is called underwriting. After reviewing your application, the insurance provider decides whether to offer the required coverage in full or in part. Every underwritten policy has a premium and a deductible. A premium is the amount you pay for insurance. Insurance premiums vary among companies and depend on factors such as business location, building type, local fire protection services, and the amount of insurance purchased. A deductible is the amount you agree to pay when claiming. Generally, your premium will be lower if you agree to pay the higher deductible.
However, when you pay a high deductible, you assume financial risk, so it’s important to evaluate your risks before shopping.
Know the types of business insurance.
Your insurance needs vary and are based on various factors, such as your industry, speciality, and business resources.
Here are some common business insurance policies and their coverage.
- General liability insurance: It is crucial for small businesses as it provides broad coverage for common risks related to bodily injury or property damage arising from their operations, products, or services.
- Business owners’ policy: It is a cost-effective and convenient insurance bundle for small and midsize businesses. It also offers general liability, property, and business interruption coverage at a lower premium than individually purchased policies.
- Workers’ compensation: Workers’ compensation insurance is mandatory for businesses of a certain size. It provides benefits to injured or ill employees and protects businesses from costly lawsuits related to workplace injuries.
- Commercial auto: Commercial auto insurance covers vehicles used for business purposes, including delivery vans, service trucks, and company cars, for small businesses transporting goods.
Shop around
The National Federation of Independent Businesses offers guidance on insurance selection, assisting in risk assessment and ensuring comprehensive coverage for all business aspects. Each company has a different coverage scope and pricing. While some brokers connect you with policies tailored to your business activity, others specialize in insuring particular business types. For example, if your business involves water activities or owns boats, you should look for a boat insurance agent who can help you locate plans that are tailored to the needs of boat repair companies. Expert brokers can provide you with the best coverage and the best rates.
Take measures to minimize risk and prevent loss.
Risk management is an essential tool for protecting yourself. If you own a home, consider doing seasonal maintenance inspections. If you run a home-based business, consider increasing your digital defenses to better guard against cybercrime. Maintaining control over risk in your daily operations can be achieved with careful planning and appropriate business insurance coverage.
Review your insurance needs on a yearly basis
Your insurance plan changes as your needs evolve. Maybe you have started a little business out of your home or got a new car. It’s important to think about whether your policy needs to adjust to new risk exposures after making a change.
Finally, maintain regular communication with your insurance provider or broker to ensure you are staying informed about your insurance requirements.
