Operating a business is a risky venture, as even some of the most seasoned entrepreneurs aren’t guaranteed success. There’s so much to account for when running a business of any size, such as winning over customers, keeping margins high and competing in a crowded field. Those are all things the business owner has some degree of control over.
It’s what out of one’s control that can be most damaging, as a lawsuit or an accident or any other type of threat can cause irreparable harm if you’re uninsured. That’s why it’s essential to purchase adequate business insurance. While this safety net comes at a price, the peace of mind that proper coverage provides is well worth the cost.
As important as this step is for any business, it’s not always easy. There are so many different plans and options out there that all seems to have confusing terms. With that in mind, here’s what you need to consider when buying insurance for your business.
Gauge Your Risk
An insurance company’s job is to gauge how “at risk” you are, and then charge you accordingly. A high degree of risk means high premiums, while low risk means a cheaper price for your insurance. When you go through the process of purchasing insurance, you can bet that the underwriter will be thorough in gauging your risk levels. There are lots of different factors that affect what you pay, ranging from your experience to the type of industry you’re in.
The underwriters are professionals that have done this many times before. Most of us, however, have far less experience judging the risks we face. While we’re not as experienced as one of the insurance companies, it’s important to do some risk assessment of our own.
Think negatively for a moment about all the things that could potentially go wrong. Some threats will be far more likely to happen to others, so focus on those and plan to buy the appropriate insurance to cover that problem.
Finding the right type of insurance when there are so many options brings us to our next point:
Find the Best Fit
While renter’s insurance and auto insurance are pretty straightforward when it comes to the types of policies, business insurance can be far more complex. There are a number of different types for all kinds of businesses.
Here are just a few examples of the types of insurance out there:
- General liability covers lawsuits and other legal fees.
- Property insurance covers the building (or buildings) where the business is located.
- Product liability insurance covers legal problems that arise from the products you sell
- Professional liability insurance protects service-based businesses
- Business interruption insurance covers a business’s losses in the event of damage or disruption from a natural disaster, during which they have to suspend ordinary business hours.
Those are just some of the best-known types of business insurance out there. Bear in mind that states require minimum levels of coverage, so ensure that you obtain at least the basic level required by law.
There are some especially obscure coverage options. There’s insurance to protect winter-based businesses from low revenues caused by warm weather. There’s also insurance to protect you if your customers’ financial information is breached by hackers.
Obviously, such specialized types of insurance aren’t useful for most businesses. However, it’s important to do the research to see what’s out there.
Shop Around
When you’ve narrowed down the type of insurance you want, the next thing to do is shop around for the best prices and find the best fit. Some insurance providers offer customized coverage, while others offer more general coverage at a better cost. Weigh the pros and cons — in addition to the costs — in order to find what works best for you.
To be honest, there are some types of insurance that will sound appealing but don’t make much sense to purchase. Price is an important consideration, as it’s not easy for small businesses to be covered for every single possible threat.
Stay Up-to-Date
Purchasing different types of business insurance is simply the beginning. It’s also important to regularly review the policies, as there could be annual changes that leave you uncovered for something you thought you were protected for.
While poring over dry insurance details is nobody’s idea of a good time, it pays to stay on top of these things. You might not know until it’s too late that you’re missing a crucial detail.
On top of that, insurance rates can fluctuate with little notice. Staying on top of any updates to policy and price can help save you money or heartache down the road.
An Absolute Must
Business insurance is probably the last thing on most minds when they’re feverishly planning to startup a business. While it’s not a particularly fun topic compared to the rest of a business, it definitely shouldn’t be neglected.
Spend the time it takes to find the best business insurance for your type of work. You’ll be able to focus on growing your business instead of putting out fires (both figuratively and possibly literally).
