Small businesses rely on small business insurance to provide legal and financial protection against liabilities. Without the right combination of business insurance policies, business owners could be responsible for extravagant out-of-pocket costs and suffer reputational harm.
While there is no one-size-fits-all insurance policy, it is important to carry certain types of insurance, such as business owners, commercial property, commercial casualty insurance, and commercial umbrella insurance. To choose the best insurance for an organization, business owners should analyze their business assets, risks, and liabilities.
Choosing insurance for a small business can be overwhelming. Before investing in small business insurance, consider the following:
1. Understanding the Different Types of Small Business Insurance
The insurance requirements for a small business owner will vary based on a range of factors, such as their business assets, industry, and level of risk. Before buying small business insurance, understand the different policies available and what they cover.
- Commercial Auto Insurance – Covers vehicles used for business purposes, such as trucks, vans, and cars.
- Business Owners Policy – Provides enhanced general liability and property coverage.
- Commercial Casualty Insurance – Delivers broad protection to address losses from injuries to people and damage to others’ property.
- Commercial Property Insurance – Pays to repair or replace lost, stolen, or damaged business property.
- Commercial Umbrella Insurance – Provides excess liability above the limits of liability on other commercial insurance policies.
2. Determine What Policies May Be Legally Required
Depending on the location of a small business and any contracts the business has entered into, it may be required to carry certain types of insurance. For example, a landlord may require a small business owner to carry liability insurance before allowing them to rent an office space.
Although a landlord may already have property insurance, liability insurance can help cover accidents if someone is injured or property is damaged within the business.
Client contracts may also require certain types of small business insurance, such as commercial umbrella insurance. Clients want peace of mind that the business can meet the requirements of a contract.
3. Know What Factors Affect Small Business Insurance Rates
The risks that a small business faces have a major impact on its insurance rates. From the physical location of the business to the assets it owns, these factors help insurance companies determine an appropriate premium cost.
While it is not always possible to control certain risks, there are things small businesses can do to keep their premiums affordable, including the following:
- Do not allow insurance policies to lapse, as this can result in a premium increase.
- Make changes in the workplace to create a safe environment, resulting in fewer on-site injuries and illnesses.
- Reevaluate safety systems throughout the business, including security alarms and fire suppression systems.
- Perform background checks before allowing employees to drive company vehicles or only permit employees with a good driving history behind the wheel.
4. Consider How Deductibles Impact Premiums
One of the biggest decisions a small business owner will face when purchasing small business insurance relates to deductibles. The deductible is the amount that a business owner must pay before the insurance company kicks in to cover any remaining losses up to the policy’s specified limit.
The higher the deductible for an insurance policy, the lower the premiums. It is common for business owners to choose a high deductible to pay lower premiums each month; however, this is not always the right choice.
It is important to consider whether the business can realistically afford the deductible in the event of a covered incident.
5. Buy Additional Coverage for Extra Protection
Small business owners generally operate on tight budgets and seek ways to cut costs. One way that business owners achieve this is by purchasing the minimum amount of coverage needed to meet contract requirements. Unfortunately, this approach can backfire.
A single lawsuit could mean devastation for a small business. Buying more coverage than needed can provide small businesses with extra protection in the case of a catastrophic event.
Consider buying commercial umbrella insurance to supplement any existing insurance policies that the small business currently carries.
Commercial umbrella insurance provides small business owners with extra coverage across multiple liability insurance policies if there is a claim against the business that exceeds its limits.
Work with the Experienced Insurance Agents at Atlas Insurance Agency
Buying small business insurance can be a complex process regardless of industry experience. To ensure that the appropriate type of insurance and coverage is chosen, it is important to speak with an experienced insurance agent.
At Atlas Insurance Agency, small business owners are connected with a team of knowledgeable insurance agents that understand the unique risks and liabilities that modern businesses face. To learn more or to get started, contact Atlas at (808) 400-6634 or request an insurance quote online.