A lot of people dream of having their own business and for good reason. It’s a way to be your own boss and skip the typical nine-to-five grind. And it can help you realize a lifelong dream or pursue a passion. Seeing your vision become a reality is hard to beat.
As with anything else, having a small business is not always rainbows and sunshine. It takes a lot of hard work and sacrifice. Unfortunately, some people don’t realize just how difficult it is to keep a small business running. There are many risks, and if you fail to do your research and set up a comprehensive business plan, your business dream could lead to a financial nightmare.
No one likes to think about the possibility of their business failing. But the reality is if you don’t plan for the bumps in the road, you won’t make it very far. One of the only ways to be certain that all your hard work is protected is with small business insurance.
Why do you need insurance?
Some small business owners don’t bother buying insurance beyond the basic policies required by law to get a business license. In fact, many see insurance as just another expense. But inadequate coverage could spell disaster for your business and exposes you to huge financial losses. A single slip-and-fall claim could set you back over $46,000, according to the National Council on Compensation Insurance. Now ask yourself: Could your business afford to pay out this claim and keep operations going?
Insurance is a necessary investment. It protects businesses against personal injury or property damage claims. It also gives you some peace of mind. In the event of an unfortunate incident, you can count on your insurance coverage to keep operations going.
Knowing which policies your business needs
The world of insurance can be daunting for small business owners. Keeping these four things in mind can make buying commercial insurance a bit easier.
1. Assess your business’s risks
All businesses come with risks, but certain industries carry more risks than others. For example, a retail store owner faces very different challenges than a roofing contractor. Do you have a physical store that is at risk of theft? Do you offer professional advice that could lead to a lawsuit? Does your company store personal data that could be hacked? These are all important questions to ask yourself, as you think about buying insurance.
Assessing your risks can also help set an expectation of how high your premium. One of the factors that insurance carriers consider when setting your rates is your risk profile and your industry.
2. Do your research
As a small business owner, you’ve got a full plate. However, it’s essential to do some quick research about the different types of policies and coverage levels available. There are numerous insurance providers out there, offering an array of policies. It can be a tedious task, but keep in mind that the goal is to protect the future of your business.
At the least, conduct an insurance assessment using your industry, ZIP code, number of employees, and revenue to see what businesses like yours typically purchase and the average policy cost.
Here are some common policies to consider:
- Business Owner’s Policy. Nearly all businesses carry General Liability and Commercial Property policies. But you can save money by bundling them under one Business Owner’s Policy (or BOP). It’s a cost-effective and convenient option for small business owners.
- Product Liability insurance. If you are manufacturing, distributing, or selling products, this policy is for you. This policy protects your business against product recall claims.
- Errors and Omissions insurance. If your business provides professional services or advice to clients, like consulting, consider purchasing this policy. It protects your business against claims related to mistakes that lead to a financial loss for your client.
While doing your research, don’t forget to compare quotes from multiple carriers. It’s a common misconception that insurance needs to be expensive, but there are several ways to get cheap insurance. That said, price should not be the determining factor when buying a policy. There should be a balance between affordability and coverage.
3. Read your policies
Insurance documents are hardly page-turners, and no one likes paperwork. It’s all too easy to sign your name on the dotted line and forget about it. But if you really want to make sure your business assets are protected, you need to go through the fine print. Reading through your policy will help you understand what is and isn’t covered. You’ll be in for a rude awakening if you go to file a claim only to discover it’s not covered under your policy. Dedicate some time to go through all the documents, and if you have any questions, be sure to contact your agent.
4. Keep your insurance records updated
The needs of your small business will change as your operations grow. You may need to replace pieces of equipment, buy a new company vehicle, or set up operations in another office. These changes all need to be reflected in your insurance coverage. To make sure the growing needs of the business are taken care of, check your policy records regularly. If there are changes in your operations, get in touch with your insurance agent, so they can update your coverage.
The bottom line
These are just some of the things small business owners need to know about insurance. The key is to assess the risks involved, so you can make more informed decisions on which policies to get. In the end, it’s all about making sure your small business is protected against uncertainties. With the right insurance, you can get back to what matters most: running your business.
Emily Lazration is the Content Marketing Specialist at CoverWallet, a tech company that makes it easy for businesses to understand, buy, and manage commercial insurance online. She has written for several outlets including Inc., Ooma, and Fundera, covering small business news and advice.