Did you know that 40% of small businesses are uninsured? Additionally, most insured small businesses are inadequately protected because 75% of them are underinsured.
Despite this low uptake, business insurance is proving to be necessary. One in three small businesses faces an insurable event in a year. They face contract disputes, employee injury, customer injury, and property damage risks. To protect yourself, you need to apply for business insurance.
What Is Business Insurance and How Does It Work?
Business insurance offers financial protection if your small business faces risks that affect operations. It is a risk management tool used to help cater for events including employee injury, injury caused by your products or services, fire events, extreme weather events, and burglary.
You need to contact a licensed insurance broker who’ll assess your business’s risks. This professional will then advise on the insurance company’s policies and the premiums to pay annually.
Whenever an insurable event such as an employee injury happens, the insurance company will help cover the costs. Depending on your agreement, you’ll pay an amount of money to help cover the expenses before the insurance company settles the bill. This is known as a deductible.
An insurance company won’t pay for an event that you aren’t covered for. For example, a commercial property insurance policy will cover the loss of business property but won’t help settle bills when a worker is injured at work. You, therefore, should ensure that you’re sufficiently protected.
To do this, you need to understand the different types of business insurance.
Types Of Business Insurance
Workers’ compensation insurance is necessary when you have employees. This will protect them when they fall ill or get injured on the job.
Professional liability insurance is important if you offer services. Consultants, including doctors, need this to protect themselves against negligence suits and other work-related errors. In medicine, for example, 41% of Americans believe to have experienced medical malpractice at some point. Despite this, only a few people file for medical malpractice suits. Although medical malpractice suits aren’t prevalent, they are costly, sometimes costing as much as $100,000. So, you better get covered, to be safe.
Product liability insurance is very different from professional liability insurance. While the latter covers services, the former covers products. Product liability insurance is, therefore, vital for product-oriented businesses. This covers damages caused by the product. In 2020, 11 million Americans were treated for injuries caused by consumer products. Product liability lawsuits are not limited to particular products. Everything is fair game.
Commercial property insurance protects businesses with a brick-and-mortar location. Inventory, equipment, office space, furniture, and signage, among other items, are protected in case of a burglary. Fire is covered too with this policy, but you should talk to your insurance agent to know the extent to which you’re covered. Usually, there’s the basic, broad, and special form cover for fires. Read the fine print.
Key person insurance covers important individuals who are critical to the business, such as the owner, or top executive. The insurance company helps find a replacement and covers losses if the worst-case scenario happens and that individual can no longer run the company.
General liability insurance covers third-party bodily injuries, personal and advertising injuries, and third-party property damage. If you can’t afford all necessary policies, ensure that you at least get this one.
So, once you get an idea of policies to pay for, it’s time to find a good business insurance policy. But are you eligible?
How to Be Eligible For Business Insurance
In general, every business is legally required in the United States to have business insurance. Businesses with employees must have unemployment, workers’ compensation, and disability insurance. There’s additional coverage that’s legally required depending on your state. It’s a requirement in Michigan, for instance, for all business owned-vehicles to get commercial auto insurance. Bodily injury coverage and personal injury protection are a must.
Eligibility for business insurance also depends on the policy you want to take. Business Owner’s Policy (BOP) is an excellent choice because it covers both property and liability coverage with a discount. This deal, however, has criteria you must meet.
Your business should have fewer than 100 employees, earn less than a million dollars annually, and have a physical location. It should also operate in a low-risk industry and need less than a year of business interruption insurance. Business interruption insurance covers lost income when your business operations are interrupted.
Now that you’re eligible, how do you apply for business insurance?
How to Apply For Business Insurance as a Small Business Owner
You need to identify a reputable licensed agent. There are almost 6,000 insurance companies in the United States. The easiest way to shop around is by asking for recommendations from friends and family. You can also use your social media platforms and online forums to get ideas. Prepare a list of all mentioned companies and do thorough research on them. Read about them online by visiting their website and reading online reviews. Also, visit their offices to assess issues such as customer service.
You can then understand the insurance company’s financial strength. Be keen on the claims settlements honored and how easy the process is. Once impressed, you can then look at the cost of cover by your company of choice.
There’s always room for cheaper insurance through discounts. Business insurance discounts generally include loyalty, safety, group, and bundling discounts. Talk to your insurance sales rep to understand what more you can do to qualify for further discounts.
Get the paperwork done once satisfied by everything your company of choice offers. Ensure that you understand your insurance contract. Exclusions should be well stated.
Getting Business Insurance Is Easy
Business insurance protects your business against several risks, such as losing executive members. You’re legally required to take business insurance but should ensure that you’re eligible for specific policies such as the Business Owners’ Policy. Remember to read the insurance contract to understand the exclusions. Shop around by asking friends and family for recommendations, assess your companies of choice, then settle on necessary policies for your business.