8 Steps to Choose the Right Small Business Insurance

We all know how important it is to make sure you’re properly insured. Having vehicle, homeowners, life, and health insurance will help protect you from the financial devastation that can arise from unexpected situations.

However, when it comes to selecting the right small business insurance, things can get a bit more confusing.

Whether you’re just starting a small business, or you want to make sure your established business is fully protected, understanding the basics of buying commercial insurance will help you choose the right coverage.

The following ten tips will help you get started.

1. Review the Types of Small Business Insurance

The first step to picking business insurance is understanding your options. Some of the most important types of insurance business owners need include:

  • Business interruption – helps you pay operating expenses and recover lost income if you’re shut down because of a disaster like a building collapse, flood, fire, or theft
  • Management liability – this covers various types of liability including fiduciary, directors and officers (D&O), and employment practices liability
  • Errors and omissions (E&O) – also called “professional liability insurance,” this covers claims that your services caused a customer “financial distress”
  • Worker’s compensation – this covers expenses associated with an employee’s work-related injury
  • Product liability – covers injuries or damage caused by your products
  • Auto insurance – this is necessary if your employees use vehicles for business purposes
  • Cyber insurance – this coverage will protect your from damages that could result if you’re hacked, have a data leak, or another business-related cyber-security issue

A Business Owner’s Policy is comprehensive coverage that usually combined general liability and property insurance.

This means it would cover property damage, personal injuries, bodily injuries, and advertising injuries as well as product-related injuries and damages. Sometimes, you can also add an employment practices liability policy (ELPI) to your policy.

2. Consider Your Assets and Responsibilities

Once you’re familiar with the types of insurance available to you, it’s time to evaluate your legal responsibilities and your business assets. First, which types of insurance are you required to have?

If you have employees, there’s a good chance that you’ll have to carry worker’s compensation insurance. The same goes for auto insurance if you have a company fleet.

Other types of insurance are optional and may or may not be appropriate for your business. When deciding what you need, it’s also a good idea to consider your business assets and operations.

For example, if you own a jewelry store, you’ll want to make sure you’re insured against theft.

If you own a manufacturing plant, you’ll want to make sure your employees are protected against injuries. Professional advisors, like accountants and financial consultants, are prime candidates for carrying E&O insurance.

3. Evaluate Your Risks

When choosing your insurance coverage, you’ll also want to analyze your risk.

For example, a company that stores customer data on their server or in the cloud faces the risk of it getting into the wrong hands. For this reason, cyber liability insurance is a great idea.

On the other hand, a single-person law practice probably has no need for worker’s compensation.

Choosing the correct business insurance coverage means finding the balance between covering likely risks and avoiding wasting money on insurance for incidents that are extremely unlikely to occur.

4. Estimate Your Costs

While it would make you feel good to have millions of dollars in coverage for every possible scenario, this is usually cost-prohibitive.

Once you’ve evaluated your responsibilities and risks, you need to weigh this against the cost of purchasing comprehensive insurance coverage.

The ultimate goal is to ensure you have enough coverage to protect yourself without overpaying for coverage you don’t need.

5. Work with a Professional

If all of this is making you feel anxious, you’re not alone. That’s why many people choose to work with a professional who will help you analyze all of these factors and choose the perfect coverage.

You can choose to work with a professional insurance broker, financial advisor, or another professional business advisor with financial experience.

Having a second opinion will help you feel more comfortable and ensure you haven’t missed any important considerations.

6. Choose a Great Provider

Not all insurance providers are the same. Before you commit to a policy, take some time to research the company. Check the company’s reviews and whether they have a history of paying claims without the hassle.

Obviously, you’ll want to make sure the company is licensed to serve customers in your state.

Also take the time to research the company’s ratings by third-party agencies like A.M. Best, Moody’s, and Fitch. This will help you evaluate the financial stability of the company.

A company can only pay out your claim if they’re still in business and financially viable, so this is critical.

7. Read Your Policy

After you receive your insurance policies, make sure you take the time to read through them.

This will help ensure that it actually covers everything you think it does and that you’re aware of any “fine print.”

While it’s not the most exciting thing you’ll ever do, reading your policy will help you avoid unexpected (and unpleasant!) surprises.

8. Plan an Annual Review

Lastly, you’ll want to review your insurance coverage once a year.

This way, if there have been any significant changes in your business needs, you can proactively make adjustments.

Doing an annual review will also help you make sure you’re not overpaying for your policies.

Get Help with Your Small Business Insurance Today

It’s not always easy to choose the right combination of small business insurance coverage. That’s why you want to turn to the pros!

The experts at Harrah & Associates will evaluate your business needs and make sure you’re covered! Contact us today to schedule a consultation.