According to Insurance Journal, in US, 75% of the businesses are underinsured by about 40% or more. Moreover, more than 40% of the small-business owners don’t have insurance at all, according to an article on the New York Times.
Each year, these thousands of small business owners not only lose their business, but also their livelihood, savings, credit, homes, and reputation due to lawsuits. That being said, it is exceptionally important to protect your business from any risk that can put you in this position.
No, two business insurance plans are the same. They’re customized to fit the unique needs of your accounting, tax preparation, or finance business. So how do you know which is right for your business. Use these guidelines to help you before you reach out to an agent.
1. Do You Know Your Legal Obligations?
Even though not every small business owner will need to buy business insurance, some small businesses may still need to if their industry or state laws and regulations require them to. An example of this is when you have rented a commercial space to operate your business from and the landlord has made it a requirement for you to buy general liability insurance.
For this reason, you will fare better if you perform research on the legal obligations you need to meet for your area and industry. This will ensure that you obtain proper business insurance coverage.
2. Do You Know the Risks Businesses Have to Face in Your Industry?
Every business owner experiences different risks depending on their industry. An example of this is an accountant tasked with filing tax returns of customers whereas an owner of a restaurant will be more concerned with their food not making a customer sick.
Given this, the type of business insurance coverage they would require differs due to their industry. The accountant will apply for professional liability insurance coverage to protect them from lawsuits a customer might lodge against them for making an error in their tax return filing.
The restaurant owner will take out product liability insurance, which will protect them from a potential lawsuit lodged by a customer because they either fell ill or experienced an allergic reaction after their dined in at the restaurant.
3. Have You Read Your Business Insurance Coverage Thoroughly?
There is a good reason for people advising you to go to more than one insurance company when shopping for insurance. The reason — business insurance differs from insurance company to company. The differences include in the limits, deductible, premiums, and exclusions.
Therefore, business owners need to ensure they understand what the business insurance includes and does not exclude and then make the decision to buy from a certain insurance company. They need to read the entire business insurance policy before they buy it. In doing so, business owners can ensure they are no gapes in the business insurance coverage. Another benefit they receive from reading the business insurance policy from top to bottom is that they can avoid unexpected surprises in the event they need to file a claim.
4. Have You Considered the Deductible?
Most business insurance coverages offer you a deductible, which is an amount the business owner will need to pay in the event they need to file a claim to cover a loss they experienced. The insurance company will pay for the remaining claim amount, up to the decided policy limit.
When deciding on a deductible, business owners will need to choose between a higher or lower premium amount. If a business owner decides to go with a high deductible amount, they might not be able to pay the entire amount if they file a claim.
5. Do You Tend to Overestimate the Amount of Business Insurance You Need?
In the event a customer, client, or an employee files a lawsuit against the business owner, the litigation process will deplete them financially. Even if the court decides to dismiss the lawsuit, it can still cost business owners a lot of money in legal fees.
For this reason, business owners should consider obtaining minimum insurance coverage, if possible, as they never know when they might need that additional protection. For instance, a customer injures themselves at their store or an employee making a delivery or running an errand for them gets into an auto accident, the bill can add up quickly.
If the court reaches a settlement where the business owner has to pay this much to the customer, the insurance company will pay until a certain amount and if the amount exceeds your business insurance policy limit, it will become the business owner’s responsibility to pay for the rest.
You need to consider these things before you buy business insurance. However, another thing that may concern you is the cost of business insurance. You should always prioritize business insurance coverage over business insurance costs.
Why Do You Need to Prioritize Business Insurance Coverage over Business Insurance Cost?
Once you know which policies you need to add to your business insurance coverage, the next question that will plague you is its cost. Even though business insurance coverage is an additional expense, buying it is important. It protects your business from serious financial damage that may occur down the line. Even if you budget is tight, not buying business insurance coverage will be mistake.
If disaster strikes and you do not have business insurance coverage or have not added the essential policies that would provide your business with additional financial protection, you will find yourself paying out of your own pocket. For this reason, you need to prioritize business insurance coverage over business insurance cost.
Consider These Business Insurance Coverage Options
When you are buying business insurance coverage options, you need to consider the following options:
- Business-interruption Coverage – It protects you in the event your business experiences loss and needs to close down.
- Commercial Auto Coverage – It protects any cars you use to operate your business.
- Employee Health Insurance – It protects you and your employees in the event you or they fall sick.
- Liability Coverage – It protects you against lawsuits in the event a person sustains an injury at your business or property damage occurs.
- Property Coverage – It protects the buildings, equipment, and inventory where you operate you run your business. It also protects your equipment and inventory if you lease the building space, as it is the landlord’s responsibility to obtain overage to protect the building.
- Umbrella Liability Policy – It protects you in the event your business experiences a large loss and extends your liability coverage, which gives you additional protection
For a full list of policies to consider for you business, check out our: 9 Types of Insurance a Small Business Owner Should Have in Connecticut
Buying business insurance is a must, but you can do it wisely by considering these things before you do.
Digital Marketing Director