Choosing small business insurance may not be as exciting as picking a company name or making that first sale, but it is equally as important.
Even if you choose a legal structure like an LLC or a corporation, not all of your personal property and assets will be covered. Small business insurance helps ensure that both your business assets and your personal assets are more fully protected from unexpected issues like lawsuits. As a rule, you should always have coverage for assets that you wouldn’t be able to pay for on your own.
Additionally, you may even be legally required to carry certain kinds of business insurance. More often than not, the U.S. government requires businesses with employees to have workers’ compensation, unemployment, and disability insurance. Depending on your state, you may also be required to purchase additional policies.
Tips for buying small business insurance
Here are some tips to help you buy insurance for your small business:
Consider which potential accidents, natural disasters, or lawsuits could damage your business.
Find a reputable licensed agent who can help you find policies that match your needs.
See if your trade association or other industry group recommends certain insurance companies.
Read customer reviews from real clients to learn how quickly the insurance company settles claims and if it provides good customer service.
Check the financial standing of insurers with rating companies like A.M. Best and Standard & Poor’s.
Determine if the insurance company you are interested in is licensed by your state to provide business insurance.
Ask how the company calculates prices. The company should be truthful about what issues it considers, including the size of your business and which industry you do business in.
Compare rates, terms, and benefits for insurance policies from several agents.
Ask what’s included in your policy and more importantly, what’s not.
Consider whether you want a higher deductible and lower premium or vice-versa.
Consider buying a package policy, such as a business owners policy (BOP), which may cost less than individual policies.
Ask about what you can do to reduce your premium. Following your insurer’s recommendations on things like workplace safety, disaster preparation, and loss mitigation may reduce the cost.
Reassess your coverage each year, especially if you have purchased or replaced equipment or expanded operations recently.
Consider buying an umbrella policy, which may provide additional coverage on things that aren’t typically covered in the basic policy, such as false arrest, libel, and slander.
Consider purchasing disaster or catastrophic insurance, which can help protect your business catastrophes like earthquakes, hurricanes, or terrorist attacks.
Consider specialty insurance, like errors and omissions insurance or cyber insurance.
The key is to take your time and do your homework.