When you are starting or running your own business, you need optimism and promise to keep you motivated and going strong. Even if your business faces harsh market challenges, your optimism and enthusiasm may just be enough to help you pull through. That’s the power of having a positive mindset as a business owner.
However, your optimism must have its limits. It shouldn’t blindfold you against reality. It’s necessary that you turn off your spigot of unbridled hope and optimism at times, just to figure out those things that might go wrong with your business. Don’t mistake that for pessimism; it’s a necessary step to help you identify the risks that your business is exposed to and to take necessary action to mitigate those risks.
Buying business insurance policies is one of the smartest ways to mitigate risks that your business is exposed to. And for you as a business owner, it’s a measure that is more than necessary.
While some business owners understand the importance of business insurance, they feel completely at sea when it comes to identifying and choosing the right business insurance policies for them. This explains why most of them dither over buying business insurance. If you are looking to buy business insurance for your company, here are the various types of business insurance that you can choose from; based on the type and needs of your business.
9 Facts You Must Know About Small Business Insurance
Just like the auto insurance for car owners and drivers, there is an insurance cover for business owners; this type of insurance is called business liability insurance. The purpose of taking this insurance is to protect business owners from any liability, losses or legal matters that may arise as a result of a negligent action or mistake on their side as they go on their day to day activity of running the business. From this definition, you can see that it is very mandatory for every business owner to take up a business insurance cover to avoid unforeseeable damages they may incur as they run their businesses.
- Saves Your Business from Bankruptcy-: You may feel that the business insurance thing is another meaningless duty you are imposed to pay for. The only time you may realise the importance of this insurance is when one of your clients brings a multi million dollar lawsuit to your doorstep. Many businesses have been run down or had to file for bankruptcy after a single court matter with a past client who suffered damages from the company’s negligent act all because the business didn’t take a business insurance policy in the first place.
a. It is Very Risky to Run Your Business Without Business Insurance-: Mistakes are bound to occur either sooner or later as you run your business. It may come from you, it may come from your employees or workers; in which case you will be held vicariously liable for their act. Whichever way it is, running a business without a business insurance cover puts your business on a risk of incurring legal matters or customers suing for damages. The only cover to that is by getting business insurance.
b. Some States Make It Mandatory for Business Owners to Get a Business Insurance-: Another fact you should know about business insurance is that some states or countries make it mandatory for every business owner to get a business insurance cover before they commence business.
c. Monthly Premium Fees-: Just like in any other types of insurance covers, you are required to pay monthly premium fees to your insurance company to keep your business insurance policy active. In fact, you can use an automatic payment billing system to pay for your business insurance every month.
d. Liability Cover-: Another fact you need to know about business insurance is that the insurance company takes care of any liability that may occur as a result of damages or negligent acts of the business owners or its employees. For instance, if you sell a pack of bubble gum to a customer, and he or she develops a problem in his mouth or sour throat as a result to taking you bubble gum, the customer will likely bring a law suit against your company or business; the insurance company will assume responsibility for such damages.
e. Some Insurance Companies Assume Full Liability-: I explained what a liability cover is, in the number prior to this one; but another fact you may wish to know is that some insurance companies assume full liability or responsibility for damages while others don’t. It all depends on the provision made in the insurance clause or terms.
f. Most Business Insurance Cover Employees-: Most business insurance clauses make provision to cover for employees. Since the employees are vital to the success and grow of the business, provisions are made in the business insurance to cover their affairs. For instance to compensate them if they get out of job, pending the time they get a new job of to cover for their retirement. In order to protect the rights of employees, some states make it a rule that a business owner must take a business insurance that covers the employees too.
g. You Can Take More than One Business Insurance Cover-: Depending on the nature of your business, you can combine and take more than one insurance policy. Let’s take for instance, your company is into construction and development of properties. You can take a professional liability insurance to insure your company against any liability it may incur when executing a construction contract and also take a property and asset cover to insure the machinery or equipments you use for undertaking your construction projects.
h. Your Premium Is Likely to Go High after Liability is Paid-: The amount you pay on premium may skyrocket to some percentage increase after the insurance company undertakes a liability. For instance, as a software designer, you pay about $100 monthly as your Error and Omission (E&O) insurance fee. After some time, a patent software that was in your care leaked to the general public before the software was launched; the owners of the software may bring a multi million suite against your company and after much intervention the company decided to settle out of court for one million dollars. After the insurance company undertakes the liability of paying off the one million dollars, the amount you paid for premium can skyrocket to almost $500 from the normal $100 you paid prior to the incident.
8 Types of Small Business Insurance Policies and Their Benefits
This type of business insurance is a must-have for every business, even if it’s home-based. It provides both defense and damages if a third party alleges—rightfully or wrongfully—that you, your employees, products or services caused damage to their body or property.
This policy comprises every necessary coverage that you will need as a business owner. Usually, it includes liability insurance, vehicle coverage, business interruption insurance, property insurance, and crime insurance. You can alter the risks covered in a BOP based on your company’s specific needs. Usually, a BOP will help you save money because the bundle of coverage it comprises often costs less than the total costs of all the individual coverage.
This type of business insurance provides coverage for employees who are injured on the job. So, if you hire employees to work for you, you need to buy a worker’s compensation policy. The policy will provide wage replacements and medical benefits to your injured employees. And due to these benefits, they will certainly give up their rights to sue you for the incident.
4. Professional liability insurance
Also known as errors and omissions insurance, this policy provides defense and damages for failure to or improperly rendering professional services. So, the policy applies more to your business if you render professional services, such as legal services, real estate consulting, accounting services, technology services, and so on. However, you must bear in mind that general liability insurance does not provide this protection. So, you must buy the policy separately.
5. Property insurance
If you own your office building or have valuable business property such as office equipment, computers, inventory, or tools, you should consider purchasing a property insurance policy. This policy will provide coverage if you are hit by fire, vandalism, theft, smoke, damage, etc. Property insurance is typically included in the business owner’s policy (BOP). So, if you already have purchased a BOP, you need not purchase a separate property insurance policy.
This applies to businesses that have vehicles. Commercial auto insurance protects all the vehicles you use for your business, including those that carry your employees, products, or equipment. This insurance policy will provide coverage for your work cars, SUVs, vans, and trucks during damages and collisions.
Even if you don’t have company vehicles, but your employees drive their own cars while handling company tasks, you should have non-owned auto liability insurance to provide coverage for your company in case the employee does not have insurance. If you have a BOP, you can add non-owned auto liability insurance to it.
7. Data breach
If your business handles sensitive, confidential information about customers and employees on computers, servers, or in paper files; you are responsible for protecting that information. And if a breach occurs either electronically or from a paper file, your data breach insurance policy will provide coverage for your company against the loss.
8. Renter’s insurance
If you have rented your office space or other facility you use for business, you need a renter’s insurance policy. This will offer protection against damage to the rented property and its contents.
9 Factors to Consider Before Applying for Small Business Insurance
I. Consider the Type of Business Insurance Your Business Needs-: You have to consider the type of business you are running and then make a choice of business insurance that best covers it. For instance, if you are offering services instead of production of physical productions, you will need professional liability business insurance or an Error and Omission (E&O) insurance to cover for any damage that may occur as a result of a mistake you made or negligent action when offering your services.
II. Choose the Business Insurance That Cover Employees-: For your business goals to be achieved, you need employees to help work towards achieving the goal, your business insurance must cover for the welfare of your employees and any liability they may insure on the your business organization. The insurance should cover for your employee’s health, unemployment, and emergency and retirement funds. Some states even make it compulsory that your business insurance cover your employee’s welfare in case of unemployment, or emergency.
III. The Insurance Should Cover Property and Physical Assets-: This is to cover your company property or building and assets from losses that may occur as a result of collapse, earthquake, accident. It is important that the insurance policy cover this aspect of your business; so that in the event of such occurrence, the insurance company will bear full responsibility.
IV. The Business Insurance Policy Must Make Provision for Additional Services-: In the nearest future, the business would have made enough success to allow it expand and incorporate other products and services. You should take a business insurance clause that will be flexible enough to accommodate other products and services that you will incorporate into your business in the future. If this clause is not made available, it is best to choose another insurance policy unless you don’t intend expanding your business in the future.
V. The Monthly Premium Cost-: This is another important factor you should consider before choosing a business insurance package. As a small business, you need all your capital to be channeled into various aspects of the business in order to achieve your business goals, so money may be something you don’t have much of. That is why you should consider the premium fee of getting an insurance policy to see if your business can afford to spare such amount monthly. If your business can’t afford it then the better choice is to look for a cheaper option with another insurance company.
VI. The Insurance Coy Should Assume Full Liability-: Some business insurance only take half responsibility when damages or a legal matter against the company arises; you should avoid such cover and opt for business insurance that cover or take full responsibility of damage including legal fees.
VII. Compare Insurance Offer from Other Insurance Companies-: Before you finally make a choice of the insurance company to pitch with, you have to make a list of ten potential insurance companies that provide business insurance policy, and go through all their clauses, before making a final choice.
VIII. Consult the Services of an Insurance Broker-: After making a list of all the insurance companies around that offer business insurance services, you can consult an insurance broker to help you make a choice of the insurance company with the best business insurance cover.
IX. Cross Check the Insurance Clause-: Before taking a business insurance cover with a company, ensure that you take your time to go through all the wordings of the clause provision; if possible do so with a lawyer. This is to make sure that there is no hidden clause that may work against your business on the future. For instance, some insurance clauses skyrockets your premium payment once they have undertaken a liability caused by the negligent act of your company. If you are not cool with any of the clauses, you may as well get a new insurance company to handle you business insurance.