Picture this: You are a small business owner with a storefront in your local business district. One morning, you were mopping the floor when a customer came in. Things were going well until I slipped and fell and broke my arm. Customers don't have health insurance, and before you know it, you're suing them for medical expenses.
Strange twists of fate can happen to small businesses of all kinds, including e-commerce businesses, and can shut down a business in no time. Small business insurance helps protect you from all sorts of random events that are out of your control. Below are the key steps to evaluating your insurance needs and finding the right coverage to help protect your bottom line.
How to get business insurance
- Understand how insurance can help you
- Check out the different types of business insurance
- Assess business risk
- Get a quote from a commercial insurance company
- Review, customize, and purchase insurance policies
- Reevaluate your policy annually
Business insurance is a way to protect your business from unexpected financial losses. Here are six easy steps to get the right small business insurance to best protect your personal and business assets.
1. Understand how insurance can help you
It's a common misconception that if your business is small, you don't need insurance. However, small business insurance can help both you and your venture in a variety of ways, including:
- Protect your assets. This includes equipment and buildings in the event of theft or a natural disaster.
- Financial Redemption. Insurance can reimburse you for the funds you would have earned if your business is unable to function properly due to unforeseen circumstances such as a cyber attack or robbery.
- Protection from Lawsuits. Insurance provides protection from claims for personal injuries such as slips and falls.
- Closing loopholes in reporting. If you run a business from your home, your homeowners insurance may not cover your products or business assets in an emergency. Small business insurance can fill in these coverage gaps.
2. Check out the different types of business insurance
Ask yourself, “Do I need business insurance?” is just the beginning. There are many types of business insurance, and understanding them can help you decide which type is best for your business. Some of the most common types of insurance chosen by small businesses include:
- General responsibilities. General liability insurance provides coverage to protect your business from personal injury, property damage, or lawsuits resulting from personal injury. If you are a contractor, your industry may require you to work in a specific space.
- commercial vehicle. Commercial auto insurance protects your business if you or your employees are involved in a car accident while driving a company vehicle on the job.
- Worker's compensation. If you have employees, workers' compensation insurance is almost always required by law, but details and regulations vary by state. Workers' compensation provides benefits to employees who are injured on the job and are unable to work. If an employee is injured, you could be fined if you were not injured.
- Cyber liability insurance. Cyber liability insurance (data breach insurance) protects you in the event of a data breach and the information that keeps your business running, such as strategic plans, customer lists, and banking records, is held to ransom. It also covers legal costs if a customer files a lawsuit for a data breach.
- Professional Responsibility. Professional liability insurance protects you if you provide professional services to a client and are sued by the client for, for example, negligence, fraud, or negligence. This coverage is also known as errors and omissions (E&O) insurance.
- Business interruption. This insurance is used when business operations stop due to events beyond your control. Business interruption insurance covers loss of income, plus rent payments, mortgage payments, and even quarterly tax payments, depending on the scenario.
- commercial real estate. Physical workspaces are protected from damage caused by events such as natural disasters, theft, and vandalism.
- Business Owner Policy (BOP). BOPs typically bundle commercial real estate, general liability, and business interruption insurance.
- Key person insurance. This includes key executives of the company, such as the president and founder. If a key person dies, the payments can be used to fund the search for a replacement or the costs of maintaining business operations.
3. Business risk assessment
Not all businesses require every type of insurance. If you are an independent contractor and work from home as an accountant, it may be wise to carry professional liability insurance, but you are not required to carry workers' compensation insurance. Alternatively, some types of businesses have greater risks built into them. Factors to consider when evaluating which insurance is right for you include:
- digital footprint. Do you do all your work from a computer? What is your contingency plan if your computer gets hacked and you can't work? In this case, it may be worth considering cyber insurance.
- physical workspace. Does your business have a physical location that the public can access? If so, you will need general liability insurance.
- Local weather. Is your business located in an area prone to natural disasters such as floods, hurricanes, and tornadoes? If so, commercial real estate insurance can protect assets destroyed in a disaster.
Lynne McChristian, senior lecturer in finance and director of the Office of Risk Management and Insurance Research at the University of Illinois at Urbana-Champaign, recommends three key points for business owners to begin assessing their company's unique business risks: We suggest that you ask yourself these questions:
- What are my personal responsibilities?
- What are the business loss trends in my industry?
- How can you best protect your family, business, and employees with the right protection?
Additional questions you may ask include: What is the value of the assets you need to protect? What are your expected annual business income and expenses? How many employees do you have?
When you begin the insurance process, collect business records regarding payroll, accounting, assets, and number of employees. These may be requested by your affiliated insurance professional. These documents may detail business locations, annual sales, tools and equipment, lease agreements, and more.
4. Get a quote from your business insurance company
Gathering insurance quotes is up to you, whether you work with a broker, compare through third-party websites like Insureon or Simply Insurance, or contact insurance companies directly.
If you choose to work with an insurance broker, look for one that has experience working with businesses similar to yours. If you have a track record of selecting plans that fit your industry, you're more likely to end up with a policy that fits your needs. If you don't know where to start, here are some things to keep in mind:
Use the network
If you know someone in your industry, consider contacting them directly to find out what insurance company they use. For example, if you're a yoga instructor and know you need general liability insurance, other instructors can be a great source for recommendations of trusted providers.
please do your homework
There are insurance companies around the world that specialize in small and medium-sized businesses. Research company ratings, accessibility, and customer satisfaction. Or, work with a broker experienced in the field to help you find the right insurance.
Consider special insurance or gap insurance
Specific insurance plans exist to accommodate special workers and workplaces. Policies are available to suit rideshare driver and boat insurance plans. Even if you're a small business that doesn't fit the traditional mold, the right products, providers and brokers can help.
McChristian offers the following additional tips for businesses looking for the best insurance for their needs.
- Perform an online search and visit your state's Department of Insurance website for information such as consumer and business resources and rankings of insurance companies based on complaints.
- Consider an independent insurance agent, or insurance broker, who represents multiple insurance companies.
5. Review, customize and purchase your insurance policy
Please read and review the policy in its entirety to ensure you fully understand the terms, exclusions, and other sections of the agreement. If you have any questions or concerns, please consult your insurance company or broker. This may be an opportunity to customize the insurance that best suits your needs. You are then ready to sign and purchase your new insurance.
6. Reevaluate your policy annually
After you sign your first policy, set a reminder on your calendar to revisit your policy one year before the end date.
“Think of your annual review like a health check for your business,” says McChristian.
She explains that it's important to conduct a business health check once a year because risks can change as your business evolves, and any policies need to adapt to those changes. To do.
“What you need one year may not be the same the next year,” McChristian said.
For example, you may have more customers than you did a year ago, so you may need to update your insurance to reflect that increased risk. You can increase or decrease your insurance policy each year depending on your needs.
“The best insurance is comprehensive, recognizing and covering all business risks and protecting your personal finances from potential events,” says McChristian.
Frequently asked questions about how to get business insurance
What kind of insurance should I get if I am just starting a business?
Although it varies depending on the type of business, it is basic to take out general liability insurance. This typically protects you and your small business against personal injury, property damage, and even libel and slander claims if your business is sued by a customer or the public.
