How to Choose the Best Insurance for Your Small Business

May 19, 2022

Every company needs business insurance. Even if you adhere to safe work practices and are in a low-risk industry, an incident can occur at any time.

Slip-and-fall injuries, professional mistakes, and auto accidents are just some of the many types of incidents that take place every day around the U.S. If you think, “That’ll probably never happen to us,” you should think again.

Sadly, many companies go out of business every year because a liability lawsuit judgment created a financial burden they couldn’t bear. So, there are tremendous benefits to having adequate business insurance coverage. The key is finding the best insurance for your small business.

Understanding Business Insurance

To find the right business insurance, you first need to know a little about the coverages available. There are several types of insurance for small businesses.

Insurance companies offer them as separate policies so that you can purchase only the ones that are pertinent to your business. For example, you don’t need commercial auto insurance if you don’t own or lease company vehicles.

Common business insurance policies include:

  • General liability insurance. Also called commercial liability insurance, this type of insurance covers a few types of liability. For example, it can pay damages and legal costs associated with injury claims from non-employees, and can also cover damage to the property of others caused by your company.
  • Business owners policy. Also known as property & liability insurance, a business owners policy (BOP) combines general liability insurance with protection for your company’s property. It’s convenient for addressing some of the most common risks a business faces with one policy.
  • Workers’ compensation insurance. So-called “workers’ comp” is typically required by law if you have employees. It protects your employees financially if they are injured, become ill, or die due to an on-the-job incident.
  • Professional liability insurance. Errors and omissions (E&O) insurance is another name for this coverage. It protects your business if an employee makes a mistake that causes financial harm to a client. For instance, if an architect’s error on a blueprint causes a structure to fail, and the client sues, professional liability insurance can cover the damages, legal fees, etc.
  • Commercial auto insurance. A commercial auto policy protects your company from liability stemming from the use of company-owned or leased vehicles. So, if your employee is driving a company car and hits and injures a pedestrian who then sues the company, you may be covered.
  • Umbrella insurance. This type of policy serves as an extra layer of protection on top of another liability policy. If the cost of a claim exceeds that policy’s limit, the umbrella coverage can pay the difference up to its limit.
  • Cyber insurance. Cyber insurance pays the costs associated with a system hack or security breach in which someone steals sensitive information, and fraud has occurred or there is a reasonable expectation it might happen.

6 Tips for Buying Small Business Insurance Policies

Knowing what types of insurance are available, use these six tips to get the right coverage:

  1. Understand your business risks. If your company provides expert advice or services to clients, you have professional liability risk. If you own or lease vehicles, you need commercial auto coverage. Consider every aspect of your business operations to develop your insurance “shopping list.”
  2. Research your legal requirements for insurance coverage. Some types of insurance are mandatory, such as workers’ comp for companies with employees. You must put obtaining those policies at the top of your priority list.
  3. Keep in mind the relationship between deductibles and premiums. Your deductible is the amount you have to pay toward a claim before your insurance covers the remainder. The higher your deductible is, the lower your premium will be. However, you must be able to pay your deductible if an incident occurs.
  4. Think about coverage before cost. If you select the least expensive coverage available, you may run into trouble when a loss occurs. If your insurance won’t fully cover the loss and you incur a considerable out-of-pocket expense, your premium savings can vanish instantly.
  5. Buy from a trustworthy provider with ample financial assets. Imagine a significant incident that affects many of an insurance company’s customers and results in the company being unable to pay all of its claims. You don’t want your insurer to tell you that your company is among those that they can’t compensate.
  6. Read your insurance quotes carefully before you make purchases. Insurance policies have limits, exclusions, and other features that you must be aware of to ensure the coverage adequately protects your business.

A Final Word on Buying Small Business Insurance

Be sure to ask any questions that come to mind when you are shopping for business insurance. The age-old advice that “there are no stupid questions” definitely applies to insurance!

Any reputable insurer will be happy to answer questions about your insurance needs and their policies and services. Don’t hesitate to contact them.


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