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Why and Where to Get Business Insurance

business_insurance

When starting a new business, it’s easy to get wrapped up in all the minute details of getting your business up and running.  The financing, inventory and staff are usually the first worries a business owner will have.  Unfortunately, bad things happen to the most conscientious business owners.  While it’s a nice thought, things like good luck and positive thinking will probably not protect your business from losses.  Luckily there is insurance for small business that can protect you from every direction.

The term “business insurance” is a broad term that really encompasses all the different types of coverage available to protect business owners from losses.  Through business insurance, you can cover your property and business vehicles, insure against legal claims against the business such as liability or workers’ compensation, and also provide health insurance for your employees, among other things.

 

Why Do I Need Business Insurance?

Even if you don’t think your business has enough assets to be sued, or if you believe because your business in incorporated, you’re shielded from personal liability through a so called “corporate veil,” you still may need business insurance. Why? Think about it, we live in a very litigious society, one spilled hot coffee and people are immediately calling a lawyer.  Because in this day and age absolutely anyone can and will be sue, judgments can be collected through wage garnishments and bank account seizures, and even the protections of being incorporated and be broken under some circumstances. And, more seriously, the smaller your business is, the more likely that you can be held personally liable for debts through your personal assets.   Is that something that you are willing to risk?

Your business needs business insurance because of the many risks and potential threats to its successful and continued operation.  Understanding what types of policies are available and choosing the right policies for your business can help protect you and your venture as much as possible.   Don’t your employees, your customers and you deserve to be protected?  Carrying the right insurance for your business can help safeguard your business. Insurance can be a legal obligation too.

You will want to carry insurance that protect your employees.  Any employee who has an accident or a health condition that could be related to their work or work environment may be entitled to financial support for medical bills and lost earnings if you are found to be negligent.  Employers’ liability is a legal requirement if you have employees – even on a part-time or casual basis.

You will also want to carry insurance to protect your customers, and the public.  Yes, your customers – they are the ones most likely to sue if something goes wrong.  If your products or services cause injury to a customer or member of the public, your business could face compensation claims of hundreds of thousands of dollars.  Product liability insurance can ensure payments are made for you.

And, you won’t be able to run your business if something happens to your business assets.  You will want insurance that provides protection for your business assets.  Theft or damage to your premises, equipment or vehicles can happen at any time and could leave you unable to work.  A failure of a key supplier or customer could mean financial problems. Whatever the risks you face, the right insurance for your business can provide protection tailored to protect you from them.

Don’t think that because you own a home business, none of this applies to you.  Think again, one reason small home business owners forgo insurance is confusion over what may be already covered by a homeowner’s or a renter’s policy.  But most business owners have little or no coverage from their homeowner’s policy. What’s more, if you file a homeowner’s (or renter’s) claim for losses sustained by a previously undisclosed home-based business, your insurer may refuse to cover it or cancel your policy.  Whether you are doing business at your home, or out of an office you’re smart to have insurance. The amount of your sales doesn’t matter. The amount of loss you could face should something go wrong is what counts.

What are Types of Business Insurance and Why Would I Need Them?

Insurance coverage is available for every conceivable risk your business might face.

Workers’ Compensation is a form of insurance that covers you employees medical and rehabilitation costs and some portion of lost wages if they’re injured on the job. Typically, carrying Workers’ Compensation insurance that covers these costs means employees give up their right to sue your business for negligence—and in turn, you are providing them peace of mind knowing they can recover for work-related injuries without the complexity of a lawsuit.

Why you should carry it is easy, it is required.  Workers’ compensation insurance is required virtually everywhere.   It varies state by state, so make sure you check; once you have a certain number (usually that threshold is one) of employees, you are required to carry workers’ compensation.  And, in states that don’t require it, be careful your customers might not do business with you unless you carry it.

Business Property Insurance, or sometimes called commercial property insurance – provides protection for your property, as well as inventory or assets, against loss or damage caused by theft, an accident or some other means. Your business property insurance protects you even if the property is away from your place of business when it is damaged or lost. The policy covers your costs to replace or repair the property and, in some instances, compensates you for items that cannot be replaced.   If you don’t own the building where you do business, you’ll only need to cover the contents. The basic commercial property insurance policy will protect your investment in fixtures, furniture, office equipment, inventory and the supplies that you store either at your business location or off-site.

So why carry it?  Unless you are a company that has little invested in premises and little inventory it essential as essential to your business as homeowner’s coverage is for your home.  Could you run your business without your property for even a day?  And, if you are ever going to need financing, carrying property insurance will be requirement for financing.  When you do get it, be advised that most basic policies will exclude losses from natural disasters like earthquakes and may limit claims and losses from water, utility failures and other perils.  Be sure that you get the right insurance and riders for your situation and location.

General Liability insurance is coverage that can protect your small business from a variety of claims including bodily injury, property damage, personal injury and others that can arise from your business operations. This insurance also covers damage your company might cause other people, their reputation, or their property. You have heard already heard the story a hundred times, a restaurant gets called into court for serving hot coffee; or a bakery is sued by someone alleging that their products made him fat.  You just have to turn on the nightly news to see every small business owner’s nightmare of unmerited lawsuits.  Unfortunately, if your business is hit with a lawsuit, no matter how outrageous the claim, you will still spend valuable time and money taking care of it.

Any company that has a store, office, or storage space that customers, vendors, and the general public can enter, or that provides a product whose failure could unintentionally hurt or destroy someone or something, should carry liability insurance.  One means of defending yourself against both warranted and unwarranted claims is by purchasing liability insurance, which protects your business against accusations of injury to people or other properties.

Why should you carry liability insurance?  Well, if protecting your from the cost of frivolous law suits isn’t enough, policies shield you from the expense of out-of-court settlements, litigation and judgments awarded by courts.  Could you pay these costs and still run your business?  If damages are filed against you or you’re sued, general liability insurance covers the insurance company’s investigation and attorney expenses, any judgment or settlement, medical expenses in case of injury and bonds if they must be subsequently posted.  Liability insurance can also cover things you may not have thought about, such as something called an “advertising injury”.  Yes, you can even injure someone with your advertising.  Your company may inadvertently violate someone’s copyright in its marketing, and you can be sued. Liability insurance keeps you covered.

So if you decided that you need both property and liability insurance, a business owner’s policy may be a perfect fit for your business.  A business owner’s policy (also called a BOP) is a special type of business insurance designed especially for small and medium-sized businesses.  General liability insurance and property insurance are bundled together into a single policy, saving you money while offering you the protections that you need.  It is an extremely cost effective option for businesses that require both types of insurance.  However, specific business types like manufacturers and most construction companies are ineligible for these policies.  Business owner’s coverage is usually available to companies with up to $3 million in revenue, though sometimes larger companies can get it.

Where Do I Get Small Business Insurance? 

Where to get insurance is probably the easiest question to answer.  Once you know what insurance you need, and understand why you need it – getting it is easy.  As a savvy business owner you should know that shopping around is your best option.  Getting multiple quotes from multiple vendors will result in the best price for you.  You wouldn’t just go to one dealership to buy a car would you?  And you wouldn’t pay sticker price for sure.

While looking and applying online is a quick and easy answer, you should do your due diligence and find yourself a reputable, licensed insurance agent.  Finding a good insurance agent is as important as finding a good lawyer or accountant. Sure, buying insurance can be intimidating, and it is difficult to ascertain who is trying to take advantage of you and who is giving honest advice.  That is why you should start by asking other business owners you know and others in your industry about what types of insurance they carry and who they bought it from.   Insurance is one of the most important aspects of your business, and one of your more expensive annual costs.  So finding someone that understands you and your business is critical.  Whether it is an agent that works specifically for one insurance company or a broker is up to you.

Commercial insurance brokers can help you find policies that match your business needs. Brokers can usually offer you the greatest choice because they typically represent many insurance carriers.  Brokers receive commissions from insurance companies when they sell policies, so it’s important you find a broker that is reputable and is interested in your needs as much as their own. Make sure your broker understands all the risks associated with your business.  You should always look for one that has a license. State governments regulate the insurance industry and license insurance brokers. Many states provide a directory of licensed agents.

Always remember that basic policies discussed above are just the first building blocks of your insurance coverage. There are literally hundreds of other types of insurance policies that you could add, depending on the kind of business you run. Some, like medical malpractice for doctors and hospitals, are absolutely essential, while others may be more trouble than they are worth. But forgoing insurance for your small business altogether is, excuse the bad analogy, an accident waiting to happen.