Everything You Need to Know About Insuring Your Small Business in 2023
Every company needs one or more types of business insurance. Corporations, small businesses, and one-person startups all face business risks like lawsuits, property damage, etc. Small business insurance policies can address these risks and cover the costs.
Business insurance is particularly important for smaller companies. That’s because one incident not covered by insurance can result in a significant financial burden—easily five figures or more. That type of expense can threaten the financial stability of a small company. Sadly, many go out of business each year because the debt is more than they can bear.
The good news is that the right policies can provide financial protection.
7 Types of Insurance You Should Consider
Every business has unique insurance requirements. You can address yours by purchasing some or all of these common policies:
- General liability insurance. This type of insurance covers injury lawsuits from non-employees (visiting customers or clients, delivery people, etc.), customer property damage, and other specified risks.
- Business owners policy (BOP). Also called property & liability insurance, this type of coverage addresses both lawsuits and company property damage (to your building, equipment needed to run your business, etc.) in one convenient policy.
- Workers’ compensation insurance. States require virtually all companies with employees to have a workers’ comp policy. It protects team members and their families financially if the employee is injured, gets sick, or dies on the job.
- Commercial auto insurance. Most states require businesses with vehicles owned or leased for work purposes to have this type of policy. It can pay costs related to liability (being sued over an accident) and damage to the company’s vehicles from specified risks.
- Errors & omissions insurance. Also called professional liability insurance, this policy protects your business if a client says you made a mistake in the professional advice or services you provided and it caused them a financial loss.
- Cyber insurance. Every business possesses sensitive information of some kind—credit card numbers, customer information, etc. This type of coverage, often purchased as an add-on to another policy, can protect you if someone gains unauthorized access to your data and uses it to commit fraud, or if there is a reason to believe they will.
- Umbrella insurance. Liability insurance policies (like most policies) have a limit on how much they will pay for a covered incident. If someone sues your business and you’re found liable for an amount exceeding the limit of the underlying coverage, an umbrella policy can cover the difference up to its limit.
Your business may need some or all of these policies to protect itself financially. Obtaining coverage is crucial, but so is getting policies from an insurer you can trust.
Crucial Questions for Choosing an Insurance Company
To find a reputable small business insurance company, you should ask these six questions:
- Does the company have extensive insurance industry experience? New insurance businesses are founded all the time, but trusting your company’s financial protection to a “newbie” can be very risky. It is much safer to buy insurance from a company with a proven background.
- Do they earn high marks from rating organizations like AM Best? A high rating from an independent organization says a lot about how reliable an insurance company is. If a company doesn’t have these types of reviews, that’s a red flag.
- Do they offer the various coverages you need? Getting all your policies from one provider makes it easier to manage them. It’s also beneficial working with one company that really understands your business and can advise you on how to maintain adequate protection as it grows and changes.
- Is the company familiar with your industry? If a provider can’t say that they’ve ever insured a company in your industry, you probably should keep looking.
- Do they have deep financial resources to cover claims? Needless to say, this is vitally important. An insurance startup will say it can pay claims, but you should choose an insurer that can back up that statement with figures on prior year claims paid.
- Does the provider make it easy for you to purchase and manage policies? Buying and using insurance used to mean multiple trips to the company’s office (or them visiting yours). Today, you should be able to get quotes, purchase policies, and make changes to your information online whenever it’s convenient for you.
Getting and Staying Insured Is Critical for Your Company
Being protected financially from unexpected events lets you focus on running your business. And the great news is that small business insurance is affordable and easy to obtain.
Don’t let another day go by without being insured!