For many people starting a small business – especially for those who are on their first rodeo – insurance is often the last issue in their mind. Some opt to go without insurance, either consciously or unconsciously; with enormous risks to pay in case the uninsured happens.
The insurance space is wide and varied and can be confusing for many new business owners. Below are 13 questions to ask before you buy insurance for your small business.
1. Should I get insurance before starting a business?
The answer is three huge fat yeses. Let’s dispense with the erroneous notion that a small business doesn’t need insurance. Hey, even a small fish needs water. And in business, a sound insurance policy is the element that will make you stay afloat when it’s one of those days.
Getting insurance before starting a business means you are starting on the right foot. Plus, it gives you peace of mind. Starting and running a business is already stressful, what with all the challenges.
You know about Murphy’s Law, right? That anything can go wrong, will go wrong? Well, having an insurance policy will keep sleepless nights at bay, as you will not have to worry yourself sick about what might happen to you and your business in case something untoward, which is uninsured, happens.
2. How much insurance do you need for a business?
You may be in the same industry as the Joneses next door, but what works for them may not work for you. That’s why you shouldn’t just go with the flow, but you should also not navigate this space alone. Ask for help from an independent insurance agent, who will help you find out what works for you.
Besides, an independent insurance agent is well-versed in this industry, and will identify some of the risks that you may miss; and will guide you accordingly.
3. Should I know my risks?
Different small businesses have different risks. Knowing your risks will help you have a laser focus on the type of insurance policy that your business requires, and prevent you from throwing away money at policies that your business does not need.
Don’t try to go without insurance because of the costs; or because, for instance, you imagine that a natural disaster will never happen. To paraphrase that famous saying; better safe than be sorry while counting your enormous uninsured losses.
4. Should I do my due diligence, or leave it all to the agent?
Before you call your insurance underwriter, do your homework. What are the laws that require insurance in your state? These vary state by state. The best place to look is your state’s website, to gives you detailed guidelines.
Cover your federal flanks. Then, after you purchase insurance that’s required by law, you can find insurance to cover any other business risk. The types of business insurance coverage that you need for your small business depends on what your company does and the state you’re in.
Also, know that it may be mandatory for your business, depending on the industry you are in, to have certain types of insurance policies. For instance, if you are a construction company, your client may require that you have a builder’s risk policy to cover damage or theft to their property under construction. These are some of the factors to consider while doing your due diligence.
5. What insurance policies should a business have?
The most common insurance policies that a small business will want to consider are:
A business owner’s insurance policy (BOP) is a combination of two important forms of insurance – commercial property and general liability – into one convenient package. Business owners’ policies usually cost less than buying the two coverages separately.
Business interruption insurance is coverage that replaces business income lost in a disaster. The event could be, for example, a fire or a natural disaster. Business interruption insurance is not sold as a separate policy but is either added to a property/casualty policy or included in a comprehensive package policy as an add-on or rider.
General liability insurance helps protect your small business from claims that it caused bodily injuries and property damage. These risks can come up during normal business operations. They can get expensive for small businesses and many don’t have the resources to cover a liability claim.
Worker’s compensation insurance serves two purposes: It assures that injured workers get medical care and compensation for a portion of the income they lose while they are unable to return to work and it usually protects employers from lawsuits by workers injured while working.
Professional liability insurance (PLI) protects professionals such as accountants, lawyers, and physicians against negligence and other claims initiated by their clients.
Hired and non-owned auto insurance (HNOA) covers commercial auto liability damages, including settlements or judgments, attorney fees, and other court costs that arise as a result of an auto accident for which you or an employee is responsible.
Commercial auto insurance is a policy of physical damage and liability coverages for amounts, situations, and usage not covered by a personal auto insurance policy.
Commercial property insurance is used to cover any commercial property and protects the covered assets from such perils as fire, theft, and natural disaster.
Cyber liability insurance is a type of insurance policy that protects businesses from the expenses incurred after the result of a data breach, including stolen or damaged intellectual property.
6. How important is a reputable, licensed agent?
Independent agents work with a variety of insurance companies to get you the best coverage package at the lowest prices.
A reputable, licensed agent will make the process smoother and less stressful for you. A good agent is tactful and – because he has been around the block countless times – will know how to help you see financial realities clearly, even when you can not see the real value of a certain insurance policy. A good agent will give you such facts as the claim settlement history of the insurance company; information that the average small business owner may not be privy to.
7. What’s the importance of reading and understanding my policy?
Read your policy with a magnifying glass. Once you sign your policy, it’s a done deal. That’s why you must take your time and pore over the policy. Ask for help and clarification if you don’t understand some of the things. If you are not well versed with insurance language, ask for it to be broken down to you in layman’s terms.
Don’t assume some things, as this can be costly. That does not cut it in the insurance sector. Assuming may make you have an ugly surprise if and when you need to file a claim.
8. Should I make a plan or not?
Don’t approach insurance underwriters with anything on the table, except, perhaps, the name of your business and what you do. That’s vague. Have a solid and detailed business plan, which outlines different aspects of the business.
A plan will tell insurance underwriters that you know what you are doing – not just in the business aspect – but also in the insurance part of things. A business plan will also make it easier for your insurance agent to know the types of risks that your business may face.
9. What’s the importance of considering my deductibles?
As a small business, you need to know how your deductible affects your premiums. A deductible is the amount of money that you are responsible for paying toward an insured loss. When a disaster strikes your home or you have a car accident, the deductible is subtracted, or “deducted,” from what your insurance pays toward a claim. Deductibles are how risk is shared between you, the policyholder, and your insurer.
Generally speaking, the larger the deductible, the less you pay in premiums for an insurance policy. A deductible can be either a specific dollar amount or a percentage of the total amount of insurance on a policy. The amount is established by the terms of your coverage and can be found on the declarations (or front) page of standard homeowners, condo owners, renters, and auto insurance policies.
10. Can I shop for discount opportunities?
If it’s your first time starting a business and you are shopping for insurance, it may seem like all the insurance providers are offering the same items at the same price. But if you know how to go about the entire process, you will realize that insurance providers are different, and they offer different packages at different rates.
The trick is in knowing how, for instance, to combine certain policies, which will save you that extra buck. Once again, don’t be in a hurry to sign on the dotted line. Ask your agent – or another trusted business owner who is in the same industry – to guide you on how you can shop for a discount.
If your business requires several different types of coverage – such as vehicle coverage, protection from business interruptions, property coverage, or loss of equipment and liability coverage – consider purchasing a Business Owner’s Policy (BOP), as it bundles different types of coverage. Instead of buying separate policies for your different insurance needs, BOP can save you money.
11. What are the common mistakes small business owners often make?
Owners of home-based and small businesses frequently make two common insurance mistakes. First, home-based business owners often assume their homeowner’s policy covers business assets. But in most cases, you need a separate commercial policy to safeguard business property and protect your business from liability.
Second, owners who have incorporated or formed an LLC may think their business structure protects them. While a formal business structure may protect your assets, it won’t cover business losses.
12. Should I review and update your coverage annually?
You may think it is too much work, but reviewing and updating your coverage annually will help you center on the insurance policy that your business needs in the coming year, and do away with what it will not require. This is because a business is constantly changing; which means that the insurance needs are also changing.
If your business plan has changed, even in the least bit, chances are that your insurance plans also need to change. From where you are seated, you may not perceive it, and may go on with business as usual; only for your complacency to come and bite you in the back.
While reviewing and updating your coverage, consider emerging trends that may affect your policy and business. For instance, many small businesses were caught flat-foot by the pandemic, and they had to pay dearly.
13. Can I do this process online?
The good news is that, unlike in the old days, you don’t have to leave your office to shop around for insurance coverage. What’s more, the pandemic has seen a sharp rise in consumers going digital in purchasing all forms of products and services. The removal of this hassle and bustle gives you ample time and space to run your small business.
With the introduction of the internet in the 1990s, insurers began offering policies online. As consumers began to be increasingly comfortable purchasing products of all kinds over the internet, online aggregators began to appear.
Aggregators collect information on prices, generally for auto insurance and term life insurance, which are the most standardized, so that consumers can compare the cost of coverage from one company to another. Eventually, many agency companies as well as direct writers began to offer internet platforms, making it possible for consumers to purchase an insurance policy directly online without the aid of an intermediary
Where to get a free insurance quote for small business
Request Nuriya Insurance Agency to get a free quote for your small business today. Follow Nuyira Insurance Agency’s owner on LinkedIn.