Planning a business can be stressful. You need to develop a solid idea, raise start-up money, hire staff, find a suitable location, and identify local competitors. However, one thing you can’t forget to have is business insurance.
It’s essential for helping you mitigate risks and grow your venture into a successful business. However, with the varying insurance policies, it can be challenging to pinpoint what you need and how they can help your company. To help out, here are a few concepts to consider before buying coverage.
1. Understand the Different Insurance Coverages
The business insurance you’ll need will depend on factors, such as:
- Your industry
- Business needs
So here’s a quick overview of a few types of insurance policies and what their coverage entails:
|Type of Insurance||Policy Coverage|
|General Liability Insurance||Liability from third-party injuries, defamation, or copyright infringement|
|Commercial Property Insurance||Pays for repairs or replacement of stolen, damaged, or lost business property|
|Professional Liability Insurance||Covers lawsuits for negligence made by businesses working in professional services|
|Cyber Liability Insurance||Helps mitigate costs for business data breaches, and potential lawsuits from clients|
|Workers’ Compensation Insurance||Pays lost wages and medical expenses for an employee suffering from a work-related illness or injury|
|Product Liability Insurance||Covers legal expenses if a party claims a product you sold caused injury, illness, or property damage|
2. Your Industry’s Risks
Each industry will have different risks, meaning the type of coverage they need will also differ. For example, let’s say you own a restaurant (hopefully, the food is tasty). You would be worried about someone getting sick after eating a meal there. So you’ll need product liability insurance to protect you if that happens.
On the other hand, someone like a lawyer would need professional liability insurance in the event of negligence during a client’s case. If you identify your industry risks, it’ll be easier to determine the best coverage needed to protect your business.
3. The Importance of Coverage vs. Price
After reviewing policies, the next step is figuring out how much it will cost. There’s no doubt that business insurance can get expensive, and you’ll need to allocate a budget for it. It’s beneficial because it protects your business from unnecessary risks.
As you look at prices, there will be a lot of head shaking and eye-rolling because of the high costs. You may get tempted to buy a cheaper policy because you’ll save a few bucks. But remember, the grass isn’t always greener.
Cheaper policies are like this for a reason—some may leave you vulnerable to standard business risks while others can have slow processing times, casting you into a perpetual state of limbo.
There might even be random price hikes, which could add to the premium costs you initially tried to avoid. Your best bet is to diligently search for a reputable business insurance provider and ensure they fit within your budget.
4. Know What Will Affect Your Rates
Although business insurance has high costs, your quote is usually affected by factors like:
- Your company’s size
- The company location
- Chosen deductibles
- Policy limits
- Assets that you want to insure
Some factors are non-negotiable, but there are some tricks to help you lower associated premium costs, such as:
- Creating a safe work environment
- Installing security systems
- Not having a lapse in your insurance coverage
Your business insurance policy will come with a deductible—the amount you’ll need to pay before your policy helps out. After you pay the designated amount, your insurance provider will cover the rest of the loss, up to the policy limit.
When choosing a policy, you’ll have to make a complex decision. Do you want a higher deductible and lower premium or a lower deductible and higher premium? Whatever you decide, ensure your business has the financial capital to cover the deductible.
6. Settling for Minimum Coverage
No business owner wants their company to go through a lawsuit. When it happens, you’ll end up spending thousands on legal fees, even if the case gets dismissed.
Don’t settle for minimum coverage. In fact, it’s better to overestimate the amount of coverage you’ll need if a lawsuit does happen. If someone at your company suffers an injury and gets a settlement, anything your policy can’t cover will come out of your pocket.
Business Insurance Is Crucial for Survival
Business insurance is necessary to have a thriving company. It can protect your venture from lawsuits and keep business-related costs to a minimum.
However, review our points listed above before purchasing it. You don’t make costly mistakes that could have long-term effects on your business.