Insurance 101 for New Businesses

Protecting your business can be one of the most overlooked errors for new and longtime business owners. While your corporate structure may provide some protections, having the correct liability insurance can keep both you as an owner and your business protected when the unforeseen happens.

General liability insurance will help to cover you in the instance of accidents, injuries and claims of negligence. Policies of this type protect when there is property damage, medical expenses, and the cost of defending your business in the case of a lawsuit.

Product liability insurance protects companies that produce, sell or distribute products when an item is found to be defective. The amount of insurance you may need will vary depending on what you sell. If you are selling clothing, you would likely need much less of this type of insurance than a business selling heavy equipment.

Professional liability insurance is something businesses providing services should consider and may be required in some states. This insurance protects the business in the event of errors, negligence or malpractice in the service the business provides. An example of this is malpractice insurance that physicians often must carry.

Commercial property insurance comes in two forms. All risk policies cover most incidents that would damage the location of the business with certain listed exceptions listed in the policy. Peril-specific policies cover certain listed hazards. Flood insurance would be an example. If you are running your business from your home, you may need to purchase additional insurance for your business as your homeowner’s policy may not cover any business loses contrary to popular opinion.

Most states also require that you have certain types of insurance if you have employees. These vary by state but often include, workers’ compensation insurance, unemployment insurance, and disability insurance.

When purchasing insurance, there are a few steps you should take. You should assess your risk. When purchasing insurance, you may be given a few options with different costs associated with each option. Having a lower cost policy with a high deductible may seem attractive but if you cannot meet that deductible or it causes your business financial difficulties it may be better to pay more up front for a lower deductible policy.

You should always look for insurance from multiple sources. By shopping around, you may be able to find a nearly identical policy for a much lower price. You should also consider a business owner policy, by purchasing this type of policy you may be able to save money by bundling all your policies into one larger group of policies. However, be aware that not all business owner’s policies include all the insurances you may need. If your business has unique risks associated with it, you may need additional coverage.

Make sure you only purchase your needed insurance from a reputable, licensed agent. Having an agent that you know is going to be there can be a huge weight off your shoulders when the unforeseen occurs.

You should also assess your insurance coverage and needs at least once a year. When your business grows, you may need to purchase additional coverage. If you purchase or replace equipment you may find that your insurance coverage costs change. Not looking at your insurance needs can cost your business if you don’t stay up to date with your business needs and desires.