A smart business owner does two things: offers a product or service that has good market demand and purchases business insurance.
Well, you probably didn’t see the second thing coming! Most small businesses don’t buy adequate business insurance, and it’s easy to see why. If you’re running on a shoestring budget, buying insurance is out of the question.
But business insurance is super important. It can mean the difference between success and failure. If you’re considering getting your business insured, you’ve made a smart move.
In this article, we’re telling you what to consider when selecting business insurance.
1. Your Business Risks
The risks your business faces are a primary consideration when you’re buying business insurance. You want to purchase an insurance policy that covers all the risks your business faces, right?
Unfortunately, there isn’t a blanket policy that fully covers your business. Wait. We know what you’re thinking. You read somewhere or someone told you that general liability insurance covers your business fully.
That’s not the case.
General liability insurance only covers the liabilities your businesses might face – to a certain limit. For example, if you run a brick-and-mortar store and someone slips on a wet floor in your premises and gets injured, they can sue your business for compensation. The liability coverage you have will kick in.
But what if a flood damages your commercial building and the stock gets damaged in the process? There’s isn’t a liability issue there, but you’ll be facing massive losses.
Businesses face a plethora of risks, from fire to floods, fraud. The good thing is that there are many types of insurance for businesses like commercial flood insurance, hail damage insurance, etc. For every kind of risk, there is an insurance policy out there to underwrite protection.
As such, you need to assess your risks before you start shopping for business insurance. When you know your risks and their threat level, you’ll be in a better position to find the right insurance policies.
2. Know the Different Types of Business Insurance Policies
Having a good handle on the various types of insurance policies designed for businesses is key to selecting the best coverage for your business. After all, how are you going to select insurance if you don’t know what’s on offer?
There are different types of business insurance. General liability insurance is the most common, but there are more. Here’s a brief lowdown on the other common types of business insurance.
Commercial Property Insurance
Property insurance protects you against losses when the insured property gets damaged. The event that causes the damage must be listed in the policy’s terms of coverage. Typically, though, you’ll be compensated if your building suffers flood, fire, storm, or burglary damage.
Business Interruption Insurance
Some events can interrupt your business’s day-to-day operations. For example, if there’s a power outage in your area and you run a manufacturing plant, there could be business interruption if you don’t have a power backup. The COVID-19 pandemic is also a good example of an event that can cause business interruption.
Business interruption insurance compensates you for the loss of income your business will incur when its operations are interrupted.
Workers’ Comp Insurance
If an employee is injured on the job as a result of your business’s negligence, they have a right to claim compensation. Workers’ comp insurance steps in during such cases.
Small businesses like yours are increasingly becoming prime targets for cyberhackers. One attack can cause your business to lose about $200,000. Most small businesses that experience cyberattacks go out of business in 6 months.
With cybersecurity insurance, your business isn’t likely to collapse after a cyberattack. The insurer will compensate you for your losses.
Product Liability Insurance
Ever bought a product that malfunctioned and injured you? Did you know you can sue the manufacturer of the product for compensation?
In the same vein, if your business manufactures products, it could be sued if the products cause injury. In fact, your business could face a class-action lawsuit.
Product liability insurance protects your businesses from settling those claims out-of-pocket.
3. Relevant Regulations
In some cases, you might have no choice but to purchase insurance. In most states, the law requires businesses with employees to purchase workers’ comp insurance, which we have explained above.
So, if you were on the fence about buying this type of insurance and your business has employees, you have no choice but to get coverage.
Therefore, consider the relevant regulations in your state and industry. If there are regulations that require you to get coverage, you have to; otherwise, your business will face regulatory fines.
4. The Type of Business You Run
There are business insurance policies that are designed for businesses in specific industries. For example, if you run a barbershop, there’s barbershop insurance that’s designed to cater to the specific needs of shops likes yours.
If your business is a sawmill, there’s sawmill insurance. There’s even insurance for portable sawmills.
5. The Size of Your Business
The size of your business has a direct influence on not only the type of insurance policies to purchase but also the amount of coverage to get. It goes without saying that a small business won’t need as much insurance coverage as a large business with tens or hundreds of employees.
Case in point:
Both small and large businesses need to purchase workers’ comp insurance. However, a business that has 3 employees will need much smaller coverage compared to a business with 300 employees.
Selecting Business Insurance Made Easier!
Selecting business insurance can be a challenging task if you’re not used to it. It’s not just about contacting an insurance company and getting insured. You need to know the types of business insurance policies your business needs for adequate coverage.
With this guide, you’re in a good position to make the right decisions. Stay tuned to our blog for more small business advice.