The multifaceted business insurance industry can be difficult for any small business owner to understand. A small business can be harmed by not knowing what is involved in ensuring adequate insurance coverage exists for any number of situations. Proper assessment of risk is tantamount to avoid insufficient coverage - or too much for aspects of your business that don’t need high levels of coverage.
If you are just incorporating your business now, you may find this is a good time to examine the types of insurance that are necessary for your particular business.
Three different types of insurance exist, which include property, liability, and people. Basic property insurance covers against most unforeseen events such as vandalism, fire, lighting, etc. If location warrants such an investment, optional insurance policies are also available for earthquakes and floods.
Property insurance can be divided into two groups. They are distinguishable in that one policy identifies exactly what is covered (“name-peril policy”) while the other identifies what is not covered (“all-risk policy”), thus it is very important to pay attention to these details. After deciding on the type of protection needed, you will need to think of the items that need coverage, such as buildings, inventory, office equipment, machinery, records, and trademarks to name a few.
Any business must have some sort of liability insurance. This is to protect against lawsuits for something your business did or didn’t do that resulted in personal injury or property damage. Liability insurance covers the cost of any jury awards and your legal defense. It is best to compare yourself to other similar businesses to determine the proper level of coverage. Some insurance providers combine personal and liability coverage but sometimes that may not be adequate. A restaurant for instance may need higher liability coverage since customer traffic is much higher than say a consulting firm.
The final leg of the business insurance triad is people. This includes health/dental coverage, which is optional, and workers’ compensation insurance, which is state-mandated. Workers compensation insurance pays for job-related illness and injury, including medical, disability income, rehabilitation, and even death benefits. Each state has different rules regarding who is considered an “employee” so it is vital to verify what your state requires before purchasing a policy.
Consult a Business Insurance Professional
Inevitably, it will be necessary to consult with an insurance agent or broker. The difference between the two is that an agent represents a specific company such as Allstate while a broker represents many insurance companies and has more freedom to suggest the right policy. When choosing an agent or broker, do not simply refer to your local phone book. Obtain referrals from other business owners, especially those with similar insurance needs.
The Insurance Information Institute is a helpful resource to learn more. Of course, you should always consult with a professional to ensure you are properly covered. Not understanding insurance properly can be harmful to your business so be prepared and informed when choosing policies and coverages.
If you have not yet formed a corporation or LLC to take advantage of the limited liability benefits, you can now incorporate online with MaxFilings easily.