Business insurance

What is business insurance and why do I need it?

Accidents can happen, and any business runs the risk of losing its reputation, cash flow and ability to survive if disaster strikes.

If an employee makes a mistake or a customer slips on your property, you could be liable for costs or get sued. Let’s say you’re a plumber and you incorrectly fix a pipe for a restaurant, which forces it to stop operating for a month. You could be forced to pay out what the restaurant would have earned in that time.

This is why business insurance exists. It offers protection for a range of things like getting sued and much more. If you don’t have insurance, you might have to pay for damages out of your own personal finances.

Risks businesses could face

Compare business insurance products

Types of business insurance

• Basic business coverage
• Additional coverage

How much will business insurance actually cost?

Like most insurance quotes, it depends on the circumstance. The amount you pay for coverage depends on what type of business you’re running, how many people you employ and what risks you run. If you’re running a light team of four or five librarians, your insurance will cost less than if you have 50 architects planning homes across the country.

How do I get cheap business insurance?

• Increase your deductible. Like most insurance policies, raising what you pay in case of a claim can drive down your ongoing premium costs.
• Bundle up. Taking out all your policies with a single company can net you a hefty discount.
• Skip useless extras. If you don’t need it, don’t pay for it! An insurance broker can help you figure out what’s likely to matter for your business so you can skip the rest.
• Mitigate risks. An insurer is likely to charge you more if it thinks you run a high-risk operation. You can mitigate risks by installing security and fire alarms and creating a safe workplace.

Is business insurance worth it?

Consider the following scenarios when you might need business insurance.

You’ve worked hard to get where you are. Maybe you built your business from the ground up, or you’ve taken it and turned it into something to be proud of. So why risk it? No matter how careful you are, accidents happen, mistakes get made and people file complaints out of anger or spite. Without insurance, one bad situation can put you out of business for good.

What would you do if someone got really sick or a worker was injured on your site? How would you cope if a flood ruined your building or a thief made off with thousands of dollars of stock or private data? These are important questions you’ll need to answer.

Here are a few situations where business insurance just might save you:

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How do I find the best business insurance?

1. Figure out your business risks

Determine the most likely issues to come up and which would be most damaging without insurance. If you have employees, what would happen if they were dishonest or got injured? Do you have a product or service people might be unhappy with? How vulnerable are you to theft or disasters?

2. Compare policies that cover your risk

Once you’ve figured out the risks, you can pick a policy. You may need only one type of coverage, or you may need to pick and choose coverage areas to build your perfect policy.

3. Picked a policy? Now look at what you are covered for exactly

Read the fine print on the policy you’re taking out. Are you covered for the worst situations? Is your insurance limit high enough to cover your most valuable assets if they get damaged or stolen?

4. Check what’s not covered

Every insurer places caveats on claims. These are situations and circumstances where they won’t acknowledge a claim. Investigate these carefully before taking out a policy.

5. Consider an insurance broker

Using an insurance broker to choose the best policy for you can save you money overall. Finding the perfect policy can take a long time and can cause a ton of stress. Even after all this, you might end up with an inadequate or an over-the-top policy. Insurance brokers can walk you through the process, assess the biggest risks your business is likely to face and choose the best policy for you.

Why small businesses still need insurance

If you run a small business, you likely don’t have to worry about many of the same problems that a much larger business would face. But this doesn’t mean that you’re home free. Small businesses have a number of unique risks that a larger company doesn’t.

Smaller companies rely on these factors to stay in business, and insurance could help minimize risks if any of these factors are compromised.

• Maintaining your customer pool. If one of your regular customers stopped using your services for any length of time, it could lead to a catastrophic drop in revenue.
• Reliable suppliers. If one of your suppliers stopped supplying you, it could severely slow down business or bring it to a grinding halt.
• Loyal, valuable employees. Having a small pool of employees means that even one or two employees leaving, not doing a good job or abusing your trust could put your business at risk.
• Minimal office space. Small businesses are frequently tied to one location that is vital for their operation. What would happen if a storm or fire heavily damaged the premises or your business outgrew its location? This could cause dangerous and expensive disruptions.
• Local reputation. Many small businesses live and die by their reputation in a community or industry. How would you cope if your company was accused of fraud or dishonesty?
• Technology. Disruptions to power, Internet access or machine function can completely shut down a business’ trading capability. A virus ruining your computers or a power outage can have very expensive consequences, especially if you don’t have backup data, power or devices.
• Low financial overhead. As a small business, even a minor financial setback, such as a new competitor or a denied loan for expansion, could be disastrous.

How does home business coverage work?

Home business coverage is a type of insurance that covers your business contents and liability exposures related to your business. You can add this as an endorsement to your existing home insurance policy, or you can buy a separate business owner’s policy (BOP).

BOPs are more expensive than adding a home business endorsement to your home insurance policy. However, it also comes with much broader coverage.

• Business contents. Also called business personal property, this could include anything that you use for your home-based business. You can have protection for items like your laptop, printer, phones, childcare equipment or even desks and furniture you use for your business.
• Business liability. This provides coverage if your business is sued for multiple business-related reasons. It could be as simple as a delivery person getting hurt on your property while delivering a package for your business or faulty work that you performed for a client.

What additional coverage can I get?

While shopping around with different companies to see which one is the cheapest, it’s also important to compare included or add-on coverage. Some home-based business add-ons could include extra coverage for:

• Business income and extra expense. Provides a limit, usually starting at $5,000, that replaces lost income if you have a claim, such as a fire that destroys your business property. And, if your expenses increase as a result of the claim, you’ll be covered.
• Accounts receivable records. Provides coverage to damaged paperwork related to accounting and accounts receivable.
• Childcare services. Liability coverage for childcare services that care for three children or less.
• Hired and non-owned auto. Provides liability coverage if you use a hired car or you borrow someone else’s vehicle for your business use.
• Cosmetology liability. Provides liability coverage for salons, barbers and massage therapists for various health and beauty services.

Do I need home business coverage?

Your standard home insurance policy doesn’t cover business activities, both in its property coverage and in its liability coverage, so there’s a chance a claim could be denied without the home business add-on. And if you opt for the pricier business owners’ policy, you won’t have as many coverage limitations.

Making false statements about the nature or size of your business could potentially negate both your business and home insurance coverage in a claim, so it’s important to be up front with your insurance company.

Your questions about business insurance answered

Is business insurance required?

Yes, most states require small businesses to take out worker’s compensation insurance, though specific laws vary by state. Other types of insurance, while not legally mandated, are highly recommended.

Will I be covered for lost revenue?

It depends on what’s causing your drop in business. Risks such as an economic recession where demand for your product or services may fall or a close competitor infiltrating your market are not covered by business insurance. But business interruption insurance can cover revenue lost after an unpredictable disaster like a fire or flood.

Business interruption insurance covers a business for the loss of revenue that it suffers following an unforeseen event. This means that while the business is being repaired, cash will be provided to account for the loss of revenue but not for personal income.

Check to make sure that the limit in your policy is high enough to cover your business if it shuts down for an extended period of time. Building fires and floods can shut a business down for months or even years.

How do I make a claim?

Most insurers will let you make a claim online or over the phone, though the process can vary between providers. In most cases, you will need to supply proof of ownership or legal responsibility and as many details as you can about your claim.

How do I know if I have the right kind of business insurance?

• Assess how your business has changed in the last 12 months. Has your number of staff grown or decreased? Have you obtained new assets?
• Cut coverage you don’t need. If you have coverage that’s no longer relevant to the risks your business faces, cut it from your policy.
• Add coverage you do need. If your business is facing any new risks, get coverage to protect yourself.

Is it worth using a broker to help me find coverage?

Possibly, but it depends on your situation.

Commercial insurance brokers have a wealth of experience and an in-depth understanding of the business insurance market. They know which policies are available and which ones will be right for you. But you could save money by purchasing a business policy yourself.

If your business faces unusually high risks or has complicated insurance needs, use a broker to make sure you’re fully covered. If you know exactly what you’re looking for, save yourself some money by purchasing a policy yourself.

When won’t I be covered?

Like any insurance policy, it’s equally important to know when you won’t be covered. You can avoid losing out by checking the exact details of your policy, but there are a few that most policies won’t cover. You’ll probably lose out if your claim involves the following:

• Government-approved confiscation, requisition or destruction of your property
• Damage to or at a company you acquired after taking out business insurance or any assets related to that company
• Damage to buildings by natural disasters not included on your policy
• Aggravated or punitive damages or fines

Where can I get business insurance?

You can purchase coverage directly from the insurance brand or with the help of an insurance advisor or broker. A business insurance advisor will help you compare the different options available and assess your business risks to find an option that’s suitable for you.

What insurance do I need?

This depends on how your business is set up. If you employ people, you may be legally required to take out workers’ compensation insurance to protect your employees. If you own a vehicle, you’ll also likely need commercial auto insurance.
Depending on the risks your business faces, you may want to take out other forms of insurance to protect yourself from liability and financial setbacks.

How do I know if I need business insurance?

Nearly every business can benefit from having some form of insurance coverage in place. It offers financial protection against a large number of common risks, giving you peace of mind that your business will be able to survive if something goes wrong.

What is the difference between general liability insurance and professional liability insurance?

General liability insurance provides cover for breaches of your general responsibility to the public, such as when a customer slips and injures themselves in your store. Professional liability insurance covers breaches of your professional duty and acts of negligence, such as an architect’s error when designing a house.

How do I know if I need general liability insurance?

If you regularly deal with the general public or have customers and clients visit your business premises, you may need liability protection.

What factors will affect my business insurance premium?

Factors such as the type of coverage you apply for, the size of your business, where it is located, the type of business you run and your claims history can all have an influence on your insurance premiums.

How can I find the right policy for my business?

Enlist the services of a qualified insurance broker. A broker has experience and knowledge of the insurance market and can match your business with a policy that meets all your insurance needs.

Can I claim my business insurance on my taxes?

Yes, according to the IRS, you can deduct your insurance premiums as a business expense.

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