Running a business comes with inherent risks: A employee could get injured on the job; a natural disaster could destroy property; or a client could file suit, alleging a contractual breach.
For those and other reasons, it is important to protect your assets, both business and personal. One of the best ways to do that is to make sure you and your business are adequately insured.
Here are the reasons why a business needs Insurance
It’s the Law
According to the SBA, the law states that you have to give your employees certain types of cover. You have to make sure that you cover them against compensation, disability, unemployment and more. This will, of course, depend on the country or state where your company is located.
Failure to carry legally required coverage could result in fines, civil or criminal penalties, exclusion from public contracts and “cease and desist” orders – all of which could cost you far more than the price of an insurance policy.
You could potentially be Sued
We live in a somewhat litigious society. In the event of a lawsuit or even liability calm, if you do not have insurance then your business could easily fold. One accident, one broken contract, one disgruntled employee, and it’s over. Even if you win the suit, you could go out of business due to the cost of legal defense.
Even if you happen to win the legal suit, you still need to pay out for a lawyer who can represent you.
Why business Insurance? Specific needs for your business
There is a wide variety of business insurance coverage’s available to business owners, so they can tailor their insurance protection to address the specific risks facing their business. When choosing coverage’s for your business, think about the important aspects of your operation that need protection. These could include:
The type of work you do
Your physical premises
Property and equipment
Intellectual property
Employees and customers
Keep in mind that as your business grows, your coverage needs may change.
Types of Coverage you may need
There are two main types of losses that business may sustain: damage or destruction of physical assets and monetary damages resulting from lawsuits. Business can protect themselves against damage to physical assets by purchasing commercial property insurance. They can safeguard their company against the cost of third-party lawsuits by buying commercial liability insurance.
Property insurance may be purchased by itself or in combination with liability insurance. Many business buy property insurance separately in the form of a commercial property policy. The latter covers buildings, machinery, Office furnishings and other types of property commonly used by business. Small businesses often obtain property insurance by purchasing a business owners policy (BOP). A BOP is a Package policy that includes both property and liability insurance.
TIP: Generally liability insurance may be purchased separately or as part of a BOP. Your business needs this coverage to protect itself against third-party claims for bodily injury, property damage, or personal and advertising injury.
Property, liability and BOP policies are flexible so coverage’s can be added or deleted via endorsements as needed.
Two other coverage’s many businesses need are commercial auto and workers compensation coverage’s. A business auto policy covers trucks, cars, and other vehicles used by business. It includes commercial auto liability and physical damage coverage’s. Note that personal auto policies should not be used to insure vehicles owned by businesses.
Most business must purchase workers compensation insurance to comply with state worker protection laws. A workers compensation policy provides benefits like medical coverage and disability that injured workers are entitled to receive under state laws. The policy includes employer’s liability coverage, which protects your business from lawsuits filed by injured workers.
Steps to Buying Insurance
Buying Insurance for a business is a process that involves five key steps.
Educate yourself
Before buying Insurance, you should have a basic understanding of the coverage’s described above:
General liability, commercial auto, commercial property, and workers compensation. You may also need other type of coverage, such as errors and omissions liability or a commercial umbrella. It may be helpful to ask other business owners in your industry what insurance coverage’s they have.
Analyze Your Business
The next step is to access your business so you can describe your operations to others. Prepare a written description of your business, explaining what it does and how it operates. Create a flowchart that describes each step of your operations. Make a list of the property your business owns.
Choose an Agent or Broker
Insurance is a people business. You’ll need an agent or broker with whom you can develop a long-term relationship. This person should be a licensed professional with a good knowledge of insurance cover ages. He or she should also understand the insurance marketplace. Give your agent your written description of your business. Provide any additional information him or her requests. The more your agent knows about business, the better he or she will be able to meet your insurance needs.
Buy Insurance
Your agent or broker should recommend coverage’s appropriate your business. He or she should complete applications and submit them to one or more insurance companies. When the insurer provides quotes, your agent should help you review and compare them so you can choose the best options. Once you have made your selections, your agent may collect the premiums from you or instruct you to pay them directly to the insurer.
Review Your Insurance Coverage’s regularly
Your business isn’t cast in stone. It will grow and change over time. Your insurance policies need to reflect those changes. You may need to buy additional coverage’s, or increase or reduce your limits.Meet with your agent or broker once a year, before your policies renew, to access your coverage’s.
