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Small Business Insurance

by ade
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As you start your small business, you may be thinking about the insurance coverage you need to protect yourself and your business. Insurance can cover your business against all sorts of events, from equipment theft to legal expenses if you’re sued by a customer or employee. 

Before you start shopping around for small business insurance, though, make sure you know which policies are most important and which questions to ask an insurance provider about them.

When Do I Need It?

Depending on your type of business, it’s a good idea to look into business insurance when you begin hiring employees. Liability coverage may be a good place to start. 

The Occupational Safety and Health Administration (OSHA) offers guidelines for general liability and other types of coverage for employers. 

These are just suggestions; make sure to talk with an agent who can help you determine what coverage is best for your company. If you need help getting started, Insureon provides free quotes from top U.S. carriers so that you can compare rates and coverages quickly and easily. 

Just complete one application online or via mobile app, and Insureon will match you with multiple carriers in minutes—and connect you with agents who can answer all of your questions about how to get started with commercial insurance.

How Much Coverage Do I Need?

Like life insurance, a general rule of thumb is to ensure assets equal to three times annual revenue. 

For example, if your company generates $1 million in annual revenue, it’s wise to protect that amount with some form of coverage. However, factors such as industry and number of employees should also be considered. 

By taking inventory of what your company owns and has a financial stake in, you can make an informed decision about how much coverage is enough. 

After all, protecting yourself from risk—whether that’s physical damage or theft—isn’t just good for your bottom line; it’s also good for your peace of mind. And with Insureon, you can apply for multiple policies in one place so you get all your business-related insurance quotes at once. 

If a policy isn’t right for you now, don’t worry: You can keep applications on file until they’re needed later on down the road.

Which Kind of Policy is Right For Me?

There are three basic types of business insurance policies to consider: property and casualty, liability, and workers’ compensation. 

Property and casualty policies protect your company from losses such as property damage or employee injury; liability policies help protect against legal action from customers, clients, or other third parties who could sue your company; and workers’ compensation is state-mandated protection that covers employees who suffer workplace injuries. 

When choosing an insurance policy, it’s important to understand what each policy offers and how much coverage you need. For example, if your company doesn’t have many assets (such as inventory), then a general liability policy might be sufficient for protecting your firm in case of lawsuits. 

If you operate in multiple states with different laws regarding workers’ compensation, then it may be worth considering an umbrella policy that provides broader coverage for all 50 states (and beyond).

Does My Location Matter?

It’s a good idea to carry coverage in each state where your business has an established presence. 

If you work from home, have employees, or operate a storefront location, it’s best to look for small business insurance quotes online in each of these states and select carriers with multiple offices within those states. 

That way, if there is an issue that requires legal representation, your representative can come from one of those nearby locations. In addition, some insurers will offer lower rates for multi-state policies than they will for single-state policies.

What Are Key Limits?

Every type of commercial insurance has limits. Knowing what they are will help guide your choice of coverage and ensure that you have enough coverage to protect your company. So what are key limits to look for? 

Let’s start with liability coverage. It’s helpful to know that there are two parts of a policy: Occurrence-based policies and claims-made policies, each with different payout options. An occurrence-based policy pays out if an incident occurs during a specified time period, regardless of when you file a claim. 

A claims-made policy only pays out if you file a claim within 60 days after an incident occurs. Both kinds of policies require reporting within 30 days after an incident happens, but claims made only require reporting within 60 days after filing a claim—so it can be more beneficial from a timing standpoint.

How Much Coverage Am I Required by Law?

All businesses are required to carry a certain amount of commercial liability insurance, which protects your company against claims of negligence in cases that result in bodily injury or property damage. Small businesses can choose their coverage and limits, as long as they meet state minimums, which typically range from $100,000 to $300,000. Be sure to check your state’s laws for specific requirements.

If I don’t carry insurance, what happens?

Business owners are responsible for their companies’ actions. If a person is injured or property is damaged because of an accident or incident that happened on your property, you may have to cover legal expenses and pay out-of-pocket costs. 

Business liability insurance covers these situations. Liability policies help protect your personal assets from the risk of lawsuits stemming from events related to your business, such as injuries at your facility, faulty products, or copyright infringement.

Do Health Issues Affect the Premium Amount?

Health issues do not affect premium amounts in most cases. Some carriers, such as ACE and State Farm, underwrite based on pre-existing conditions and will adjust premiums accordingly. 

Before you apply for coverage with a particular carrier, check their underwriting guidelines to ensure your application is eligible. Regardless of who you are insured with, keep up with routine medical screenings to reduce risk factors and costs down the road. How much does it cost?: 

The average annual cost of small business health insurance was $2,721 per employee in 2016 according to research from Kaiser Family Foundation. This number varies depending on age group, location, and industry—for example, restaurants tend to have higher average premiums than retailers or manufacturers. In some states like Florida and Oklahoma, businesses pay an average of $3,000 or more per employee each year for health care costs alone.

Is cyber liability part of standard policy coverage?

Cyber liability is part of standard coverage on commercial policies, but it’s often an optional policy. You’ll want to make sure your policy includes it—just in case. 

Cyber liability covers damage caused by a cyberattack on a third party and can run into tens of thousands of dollars for large companies (think Target) or much smaller companies (think mom-and-pop shops). Additionally, commercial crime policies are good choices for many businesses.

Will an umbrella policy cover lawsuits or other legal claims against me and my company?

An umbrella policy covers claims outside of your business operations, such as if someone slips and falls in a grocery store or if a customer files a suit against your company for an advertisement that’s misleading. You can use an umbrella policy to provide extra protection against these types of claims. 

Do I Need Workers’ Compensation Insurance?

Workers’ compensation is required by law in every state except California. The policies are designed to cover medical expenses and lost wages for employees who are injured on the job, but they also protect employers from lawsuits. If you have one employee, it may not be worth buying workers’ comp coverage—but if you have more than one employee (or plan on hiring them), it could be a good idea to get coverage.

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