Choosing Small Business Insurance

Nobody likes to talk about insurance. Too often it feels like money down the drain, money that could be used so much more effectively elsewhere – particularly to help grow your business. But, as a small business owner, you’ve got a lot at stake. It’s worth taking the time to understand your insurance requirements and explore your options. It may, ultimately, be easier – and cheaper – than you think.

Requirements vs. Reality

Most businesses are not required to have business insurance (unless you are an employer – see below). If your business is an LLC or a corporation your personal assets are protected from business liabilities. Without insurance, however, your business assets are unprotected.  Business is inherently unpredictable; nobody expects the unexpected. Business insurance protects your business by minimizing financial risks associated with unexpected events – a lawsuit, a natural disaster, death, etc. Protection is good.

Insurance Choices

There are five different types of business insurance you can invest in, depending on your unique business risks:

• General liability insurance
• Product liability insurance
• Professional Liability insurance
• Commercial Property insurance
• Home-based Business insurance

The Small Business Administration’s Business.gov provides details on each of these on its ‘Types of Business Insurance‘ page.

Insurance Tips

Business.gov also dedicates a page on its website to discussing the following Five Tips for Buying Business Insurance:

1.      Asses your risks – be sure you fully understand underwriting, premiums, and deductibles and how these all apply to your business

2.      Shop around – there may be ‘specialist brokers’ that cater to your particular type of business

3.      Consider a business owner’s policy – a BOP can save you money; and, make sure you understand how much it does, and does not, cover

4.      Find a reputable, licensed agent – make sure your agent is state-approved

5.      Assess your insurance coverage on an annual basis – as your business grows and changes, make sure your insurance coverage reflects that

On this Five Tips for Buying Business Insurance page Busines.gov provides advice in each of these areas, as well as additional insurance resources – such as a state-by-state listing of insurance offices. I highly recommend spending some quality time going through these pages and getting educated.

Insurance requirements: Employees = Insurance

As I touched on at the start of this entry, businesses with employees are required to pay for insurance: workers’ compensation insurance, unemployment insurance, and disability insurance (depending on where your business is located).

• For more information on workers’ compensation insurance, go to this state-by-state listing of agencies and information.
• For more information on unemployment insurance, go to this state-by-state listing of unemployment tax and insurance information.

You are only required to purchase disability insurance if you do business in one of the following locations: California, Hawaii, New Jersey, New York, Puerto Rico, Long Island. Visit Business.gov’s Insurance Requirement for Employers page for links directly to each of these and their unique requirements.

In the end …

… insurance may well be your business’ necessary evil. But, ‘necessary’ is the key word here. Take the time to get smart before you buy. As I said at the start of this post, it may be easier – and cheaper – than you think.