40% of small businesses in the US don’t have enough insurance to protect them if things go wrong. Insurance can make the difference between a setback and a disaster for the small business owner, but it’s also a regular expense. Having sufficient insurance coverage to protect your business when the unexpected happens is important, but unnecessary insurance costs impact on your business profitability.
How can you go about finding the right balance for your particular business? You want adequate protection, but you don’t want excess insurance costs. Here are some tips that can help you to keep insurance costs at a minimum.
Does Your Business Need Liability Coverage?
Liability cover protects you if one of your clients suffers some form of loss, injury or damage as a result of doing business with you. How much liability coverage you need depends on the type of business you run.
If you have a store, and a member of the public slips and falls, resulting in an injury, or if you’re a builder and an accident happens on the site that causes damage to property, your liability insurance covers you. However, a lot of people don’t ever have contact with the public in their type of business. If you’re an IT expert who works from home, you may not need liability insurance at all.
Professionals like lawyers and accountants may need to have additional professional liability cover and product producers should consider product liability cover. These forms of liability are not usually covered by general liability insurance.
While we’re on the subject of liability, remember that as a sole proprietor or member of a standard business partnership, your business liabilities may have to be covered by your personal assets. Forming a limited liability business entity ensures that your personal assets aren’t endangered by business liabilities.
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Employee Insurance (Workman’s Compensation)
Workplace compensation insurance is a must when you hire employees. Remember to factor this into your projections when deciding on whether or not to employ additional staff members. It doesn’t matter if you’re not in a dangerous industry.
Accidents around the office account for a large proportion of workplace injuries and compensation claims. An ordinary fall could result in serious injuries, so this is definitely not an area where you can afford to cut corners. The requirements for workman’s compensation insurance differ from state to state. Find out what the legal requirements are in your area.
If you own your business premises, you should certainly insure them. You may think that homeowners’ insurance will cover you if you do business from your home, but chances are, your home insurance has a specific exclusion clause regarding property that is used for business purposes. You stand to lose out if there is a fire, flood or some other disaster unless you have the right insurance.
This insurance covers your online presence. How important is it to your business? If your online presence is a vital part of your business operations, you should get coverage to protect you from cyber-attacks that could otherwise spell the end for your business. However, if your online presence isn’t vital to your continued business operations, there is absolutely no need for this type of insurance.
Business Owner’s Policy
When investigating your business insurance options, you may find that getting a single policy that covers liability, your vehicles, interruption of business activities and property insurance in one is often more cost-effective than taking out several policies to cover every aspect of your insurance needs.
Vehicle and Equipment Insurance
The value of your fleet determines how important vehicle insurance is to your business. Although the replacement cost for a vehicle may be high, older model vehicles may not be worth insuring owing to their low book value. If your employees use their own vehicles in day to day business, you should consider adding non-owned vehicle insurance to your package. Some Business owners’ policies include this option.
Some business owners go the whole hog and ensure every piece of equipment at the cost of higher premiums. Decide whether it’s really necessary to insure everything and consider reducing your premiums by only insuring equipment that would be very costly to replace.
Claiming a few hundred dollars could be more trouble for you than it is worth, plus having lower deductibles means higher premiums. If you want to cut down on business insurance premiums, being willing to pay for smaller hiccups out of your own pocket will decrease your premiums while giving you peace of mind.
Shop Around and Review Your Insurance Every Year
It’s worth taking a little time to get advice from a number of different brokers. Compare prices, coverage and benefits carefully before reaching a final decision. Remember that the cheapest insurance isn’t necessarily the best option for your business. The whole point of insurance should be that it will protect you if something goes wrong.
Think about what would happen to your business in various scenarios and ensure that you have sufficient coverage to get you through these disasters. While you’re thinking about potential risks, think about ways in which you can avoid the situation arising in the first place. You’ll still need insurance, but if you’re able to avoid a disaster in the first place, all the better.
Review your insurance on a yearly basis checking that you are not paying insurance for assets you no longer have and ensuring that your coverage is sufficient. If your business is going through changes, it’s time to review your insurance since your need will change as your business changes.
A good insurance advisor will be willing to help you in this process. Remember, you do have the right to decide what kind of insurance coverage you’re going to choose, so ask why specific insurance packages are being recommended and ask about alternatives. Ultimately, the decision is up to you.
If your company is seeking startup business loans to get the amount of insurance that you need to make the plan in this article work for your company, contact Seek Capital today.
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