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 having too much coverage or not enough for various aspects of your 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 didnt 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.
If you haven’t incorporated your business yet, you may want to consider the limited liability benefits of forming a corporation or LLC. MaxFilings lets business owners incorporate or form an LLC easily online.
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 employeeso it is vital to verify what your state requires before purchasing a policy.
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 freedomto 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.
