How to Choose Small Business Insurance
Choosing the best small business insurance coverage protects your livelihood against the unexpected. It must meet federal, state, and local requirements while addressing industry risks. Many factors impact coverage and costs, making insuring a business a complex task.
But how do you determine the coverage, limits, and kind of insurance needed for small business owners? This guide explores these topics and discusses the average costs and limits for optional and required business insurance. It also covers advisory options for entrepreneurs needing assistance understanding regulations and choosing insurance products.
How to choose business insurance in 5 steps
Whether you work from home, rent an office building, or meet clients off-site, certain regulations may apply to your company, necessitating small business insurance coverage. Before discussing the types and costs in detail, let's review the basics that small- and midsized businesses should consider.
To choose the right business insurance, owners should:
- Review laws to determine your small business insurance requirements. Federal regulations require employers to have unemployment, workers' compensation, and disability insurance. States may impose additional rules.
- Assess your risks, liabilities, and assets. Insurance covers losses you can't pay out of pocket, which vary by company. Evaluate value and costs related to property, inventory, accidents, and professional errors.
- Consider fund availability to put toward deductibles. Insurance costs add up quickly, but cash on hand to cover higher deductibles can reduce monthly or annual fees. Choose a reasonable amount that doesn’t overextend your account.
- Decide which small business insurance types are most important. To stick to a budget, prioritize coverage based on your risk analysis. You can add or remove policies as your needs change.
- Determine how to find the best small business insurance. Comparing coverage limitations, insurance terms, and policy comparisons can be challenging. Insurance agents, brokers, and professional employer organizations (PEOs) can help.
What are the different types of small business insurance?
Small business insurance providers offer commercial coverage for most risks that companies face. Many carriers provide several insurance options, allowing companies to bundle policies for additional savings.
Home-based businesses may prefer a BOP, whereas high-risk and medium-sized companies might select a commercial package policy. Both solutions bundle multiple policies for cost savings.
While choosing the right amount of coverage is vital, there's no point in buying insurance you don't need. When in doubt, an impartial, third-party adviser can help your company sort through your choices.
Here are the most common types of insurance for small businesses:
- Commercial liability insurance: This general business coverage pays for bodily harm, property damage, or advertising injury claims.
Errors and omissions insurance: E&O coverage or professional liability insurance covers claims that your services or advice caused financial harm because of actual or alleged errors or a failure to complete a service. - Commercial property insurance: Like home insurance, this plan protects financial losses to physical assets from natural disasters, fires, vandalism, and theft.
- Cyber liability insurance: Business cyber policies cover liabilities from claims due to a data breach involving sensitive customer data.
Business owner's policy: A BOP is a bundled solution that combines commercial and property liability insurance into one plan. Some also include business interruption and continuation coverage. Options and eligibility vary by provider. - Commercial auto insurance: Small businesses that use trucks, vans, and cars can get coverage to meet state requirements and endorsements for extra services.
To narrow your list of insurers, ask for recommendations from your professional network, check out customer reviews, and read guides on the best small business insurance providers.
The Columbia Montour Chamber's business insurance program with Penn National has paid members over $300,000, based on the group’s collective loss experience. Contact a member insurance agent to see if the program is the right fit for your business.
Excerpts taken from CO by the U.S. Chamber of Commerce written by Jessica Elliott , Contributor. To get the full article click here.