Everything You’ve Ever Wanted to Know About Business Insurance
Whether you’re thinking about starting a brand new business venture, or you already own a business and are looking to expand, one of the most important investments you can make for your business is purchasing a business insurance policy. There are numerous types of policies, some of which are actually a legal requirement under federal law (e.g. workers’ compensation, disability, and unemployment insurance).
In addition to the required policy types, there are countless other ones (most of which are industry-specific and/or for specific types of businesses). So then, how do you determine which type of business insurance is right for your company? How can you determine how much coverage your business requires?
These are very common questions (especially among newbie business owners and small business operators). Don’t worry – business insurance isn’t that complicated, and below we go into detail regarding everything you need to know to get yourself up to speed (and ready to purchase a policy).
Four Most Common Types of Business Insurance
General liability, property, commercial vehicle, and workers’ compensation insurance are four of the most common business insurance types in the United States. Commercial General Liability Insurance is designed to protect businesses from lawsuits. If you’re unaware, the US has over 40 million lawsuits filed on an annual basis and maintains a roster of over one million registered lawyers (which might be why there are so many lawsuits each year).
Commercial property insurance offers coverage for the building that your business operates out of, along with all of the property found within that building (that belongs to your business). Examples of property insurance in action would be a fire breaking out at your office and having all of your computers damaged. Property insurance would cover the repair/replacement costs.
Commercial vehicle insurance offers protection for your business’s vehicles. Keep in mind that having a normal auto policy isn’t enough when it comes to business. Most states have specific requirements around commercial vehicle insurance (essentially making it illegal for you to operate without having a vehicle insurance policy).
Workers’ compensation is a form of insurance that nearly everybody should be familiar with (especially business owners). This type of insurance protects your business from having to pay injured/sick employees. Having workers’ compensation is federally required of all businesses (no matter what industry they’re in, where they’re located, or how many employees they have).
Understanding Business Insurance Quotes
Before you should even start looking for quotes, you need to have an in-depth understanding of which type of policies your business needs, as well as what level of coverage those policies will need to have. Underinsuring your business is about as worse as not insuring it at all.
Can you imagine if you had to go to court to battle a lawsuit, and because you purchased the wrong policy/coverage level, your insurance denies your claim? This type of situation could spell financial ruin for even the most robust business (and it happens all the time, every single year).
There are several factors that go into determining a business insurance policy quote. The industry that you operate in, where you’re located, how much revenue you earn, how many employees you have, and the history of your business are all taken into consideration during the quote process.
One important thing to keep in mind is that numerous factors can affect a quote, and you should always get more than one quote before purchasing a policy. If you have any questions about the quote, you need to discuss those with the insurance broker. Specifically, you should be asking the following types of questions:
- What are the coverage limits?
- What are the payment options?
- Are there term limits?
- What would happen if I purchase a BOP (business owner’s policy)?
- What if I need to increase the policy’s coverage limits?
- What will happen if the policy doesn’t cover my business?
The more questions you ask during this stage, the less head-scratching you’ll be doing down the line when you’re facing a lawsuit (and your head is hunched over your desk in despair, trying to decipher your policy’s coverage limits). Knowledge is power, especially concerning business insurance.
When it comes to business insurance, knowing is half the battle (like most things in life). The more prepared you are, and the more you understand your business’s weaknesses, you’ll be able to walk away with an excellent policy that adequately covers the needs of your business (without breaking the bank).