What to Consider Before Getting Insurance for Your Small Business
May 7, 2018
Getting insurance is one of the most difficult choices a small business owner has to make. Nobody knows the future, after all, a fact which can turn any insurance policy into the smartest investment or the biggest waste of money your business ever made.
It’s quite logical: if you have insurance against an event that will never occur, it’s a clear waste of money. On the other hand, if you don’t have insurance and something does happen, you could lose everything you’ve ever worked for in a heartbeat.
Luckily, there are a few considerations that can help you decide what kind of insurance to get for your small business.
Do You Need Insurance At All?
The federal government made this decision easy for you. If you have employees, you’re legally required to get workers’ compensation, unemployment, and disability insurance.
Several states have additional insurance requirements. Check out your state’s official website and find out if these requirements apply to your business.
What Types of Business Insurance Are Available?
There are six main types of business insurance you can choose from.
- General liability insurance provides cover against various occurrences, like property damage, bodily injury, slander, libel, and defending lawsuits.
- Product liability insurance covers financial loss caused by a defective product that inflicted bodily harm.
- Professional liability insurance gives the same cover for service providers: it protects against malpractice, negligence, or errors.
- Commercial property insurance extends cover for businesses with valuable equipment and property. It protects in the event of fire, vandalism, wind storms, etc.
- Home-based business insurance can be added to your home insurance if your business operates out of your home.
- Business owner’s policy is a package that bundles several of the above mentioned insurance types according to your specific requests.
What Kind of Insurance Should Your Business Get?
This depends entirely on the nature of your business. It’s best to run a risk assessment to see what kind of mishaps are more likely to happen than others. For example, if you’re selling products that could possible malfunction and harm people, you should consider getting a product liability insurance.
If you don’t provide any after-sales services, then professional liability insurance may not be necessary. Similarly, you won’t need commercial property insurance if you don’t possess valuable equipment.
If you need help assessing your risks, you can ask the National Federation of Independent Business (NFIB) for assistance. There’s also plenty of resources online that can help you find what you need.
After the initial risk assessment, research the market and compare various insurance companies’ offers. Don’t hesitate to ask for a personal quote.
However, beware of insurance companies that just want to make a quick buck. Before you commit yourself, ask around and make sure you choose a reputable company that won’t leave you hanging if the worst happens.
Getting insurance is not a one-time thing. Your business evolves constantly, as should your insurance policy. Reassess your risks every year and modify your coverage accordingly.
And be as safe as possible.
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