Buying Business Insurance
Operating a business involves a sizable investment. The purpose of Business insurance is to protect your investment by reducing financial risks related to unexpected events such as lawsuits, possibly a natural disaster, partner passing away, or an injured employee.
If you're an employer, business insurance is usually not required by law, however, it's common practice to purchase business insurance to cover your business and possibly your personal assets. If your business is an L.L.C. or a corporation, your personal assets are protected from business liabilities; however, neither business structure is a substitute for liability insurance, which covers your business from losses.
Your state government determines insurance requirements for businesses. Most U.S. states require businesses with employees to pay for workers' compensation insurance, unemployment insurance, and state disability insurance. Your state may require insurance of specific business activities. For example, if you own a car or truck and use it for business purposes, you may be required to purchase commercial auto insurance. Finally, your financial lender or investors may require you to maintain life, business interruption, fire, flood or other types of insurance to protect their investments.
Available Business Insurance Types
Insurance coverage is available for every potential risk your business might encounter. Business insurance quotes, specific policy cost and amount of insurance coverage of policies are variable depending on the insurer. You should discuss your specific business risks and the types of insurance available with your insurance agent or broker at the time you get insurance quotes. Your business insurance agency can advise on the exact types of business insurance you should consider when receiving business-insurance-quotes.
General Liability Insurance
Business owners purchase general liability insurance to cover legal disputes due to accident, injuries and claims of negligence. These policies protect against payments as the result of property damage, medical expenses, bodily injury, libel, slander and the cost of defending lawsuits, and settlement bonds or judgments required during an appeal procedure.
Product Liability Insurance
Companies that manufacture, wholesale, distribute, and retail a product may be liable for its safety. Product liability insurance protects against financial loss as result of defective product that cause injury or bodily harm. The amount of insurance you purchase depends on the products you sell or manufacture. For example, a clothing store would have far less risk than a small appliance store.
Professional Liability Insurance
Business owners providing services should consider having professional liability insurance (also known as errors and omissions insurance). This type of liability coverage protects your business against errors, malpractice, negligence in provision of services to your customers. Subject to your profession, your state government may require you to carry such a policy.Physicians for example are required to purchase malpractice insurance as condition of practicing in certain states.
Commercial Property Insurance
Commercial Property insurance covers everything related to the loss and damage of company property due to a wide-variety of events such as fire, smoke, wind and hail storms, civil disobedience, and vandalism. The definition of "property" is broad, and includes lost income, business interruption, buildings, computers, company papers and money.
Property insurance policies come in two main forms: (1) all-risk policies covering a wide-range of incidents and perils except those noted in the policy; (2) peril-specific policies that cover losses from only those perils listed in the policy. Examples of peril-specific policies include fire, flood, crime, and business interruption insurance. All-risk policies generally covers risk faced by the average small business, while peril-specific policies are usually purchased when there's high risk of peril in a certain area. Discuss with your insurance agent or broker on the type of business property insurance best suited for your small business.
Home-Based Business Insurance
Contrary to popular belief, homeowners' insurance policies don't generally cover home-based business losses. Depending on risks to your business, you may add riders to your homeowners' policy to cover normal business risks such as property damage. However, homeowners policies only go so far in covering home-based businesses and you may need to purchase additional policies to cover other risks, such as general and professional liability.
Tips for Buying Business Insurance
Assess Your Risks
Insurance companies determine the level of risk they'll accept when issuing policies. This process is called underwriting. The insurance company reviews your application and determines whether it will provide all or only a portion of coverage being requested. Each underwritten policy carries a premium and deductible. The premium is the price you pay for insurance.
Premiums vary widely among insurance companies, and depend on a number of risk factors, including business location, building type, local fire protection services, and amount of insurance purchased. A deductible is the amount of money you agree to pay when making a claim. Generally, the higher deductible you agree to pay, the lower your premium will be. However, when you agree to take on a high deductible you are taking on some financial risk. So, it's important to assess your own risks before shopping for business insurance.
The National Federation of Independent Businesses provides information for choosing insurance to help you assess your risks and to make sure you've insured every aspect of your business.
Shop Around for the Best Coverage & Price
The extent and costs of business insurance quotes you get for business insurance coverage varies from company to company. Some brokers specialize in insuring specific types of business, while others can connect your insurance quotes for policies specific to your business activities. For example, if you operate a tow truck service, you'll want an agent that provides policies specifically coveing automotive service businesses. Often specialist brokers can get you the best coverage and best rates.
Find a Reputable, Licensed Agent
Commercial insurance brokers will help you find policies that match your business needs. Brokers receive commissions from insurance companies when they sell policies, so it's important you find a broker that is reputable and is interested in your needs as much as his own. Make sure your broker understands all the risks associated with your business.
Consider a Business Owners' Policy
Insurance can be purchased separately or in a package called a business owners' policy (BOP). Purchasing separate policies from different insurers can result in higher total premiums. A BOP combines typical coverages into a standard package, and offered at a premium that is less than if each type of coverage was purchases separately.
Generally, BOPs consist of cover property, general liability, vehicles, business interruption and other types of coverage common to most types of businesses. BOPs simplify the insurance buying process and can save you money. However, make sure you understand the extent of coverage in any BOP you are considering. Not every type of insurance is included in a BOP. If your business has unique risks, you may require additional coverage.
Finding a good insurance agent is as important as finding a good lawyer or accountant. You should always look for one that has a license. State governments regulate the insurance industry and license insurance brokers. Many states provide a directory of licensed insurance agents. If you're looking for a new agent start with your state's department of insurance.
Assess Your Insurance Coverage on Annual Basis
As your business grows, so do your liabilities. You don't want to be caught underinsured should disaster strike. If you have purchased or replaced equipment or expanded operations, you should contact your insurance broker to discuss changes in your business and how they affect your business insurance quotes and full business insurance coverage.