How to choose commercial policies based on your business’s needs
- Consider what types of commercial policies you need
- Understand what insurance is required by law or industry standards
- Know the risks of your industry
- Determine your budget, but don’t simply go with the lowest price
- Consider a higher deductible to lower premiums
- Read policy quotes carefully to understand what’s covered (and what’s not)
Commercial insurance is essential for doing business. Of course, you need to protect your assets, inventory, and property. In addition, certain policies are required by state or federal law. Your biggest challenge is finding the right coverage. There are plenty of choices, which can make the process confusing.
Insurance for your business is an essential safety net. Finding the right coverage and policies can get complicated. Small businesses need to spend their money efficiently while getting the most protection for their company and employees. Here are six things to consider when choosing commercial insurance for small businesses.
1. What policies do you need?
There are several types of commercial policies. You need to decide which coverage is essential for your business. Your choices should be guided by industry or state regulations as well as what will protect your assets, employees, and your property. Here’s a quick rundown of the basic policies you’ll need to consider.
General liability – Covers lawsuits and legal fees related to third-party injuries and property damage, and advertising injuries such as defamation or copyright infringement.
Commercial property – If you rent or own space, you’ll need commercial property insurance to cover damage to the office, equipment, inventory, and things like the parking lot and signage outside.
Business Owner’s Policy (BOP) – This policy combines general liability and commercial property.
Professional liability (Errors & Omissions insurance) – If you provide professional services, you’ll need this to cover lawsuits related to mistakes or missed deadlines.
Cyber liability – If you store, transfer, or use the private data of customers or clients, you should consider this policy. It’s meant to cover the costs related to a data breach or other types of cyber invasion.
Workers’ Compensation – If you have one or more employees, you will probably be required to carry Workers’ Comp, like in Florida. This policy covers medical costs and lost wages for employees who are injured on the job.
Commercial auto – If you operate vehicles for business purposes, you’ll need a commercial auto policy to cover property damage, injuries, and legal fees in the event of an accident.
Business interruption – If you’re forced to shut down because of a natural disaster, fire, or flooding (not related to a storm), you need business interruption to cover your operating costs and lost income.
Product liability – If you create, sell, or distribute products, you’ll need protection if a product causes injuries or property damage. It can even cover things computer software that might become infected with a virus that impacts an entire network.
2. What policies are required by law?
Aside from protecting your business, buying certain commercial policies is often guided by state or industry requirements. In some cases, your clients or lender may also require you to carry specific policies.
For example, a landlord or lender might require you to carry property insurance and general liability. Most states have strict requirements regarding how much workers’ compensation insurance you need.
If you provide professional services, such as an architect, doctor, IT professional, or lawyer, you may need to carry professional liability.
3. What are the risks of your industry?
Certain industries come with higher risks. For example, accountants might be sued by a client for errors in tax filings, while a factory might need more workers’ compensation due to a greater risk of injuries. If you own a restaurant and a customer gets sick from eating tainted food, you’ll be glad to have product liability.
4. What is your budget?
Determining which business policies to buy is only the first question. You must also consider how much you can pay. Unfortunately, this isn’t the place to cut costs. You may not need the most expensive coverage but buying too little or going with a rock-bottom price may result in you losing everything. The cheapest policy may be inexpensive for a reason, offering either limited coverage or exclusions that leave out crucial elements of your business.
5. Can you pay a higher deductible?
If you’re looking to lower premiums, consider having higher deductibles. This means you’ll pay more out-of-pocket but the monthly savings could make this option the right choice for you, particularly if you’re in a low-risk industry.
6. Pay attention to the details
Policies vary widely depending on the carrier. Each will have specific limitations, exclusions, and coverage options. Take time to read each insurance quote carefully so you understand what’s covered and what’s not. Make sure you won’t end up with any gaps in coverage or surprises when comes time to make a claim.
Ensure you find the right small business coverage
It’s essential to protect your small business with the right commercial insurance policies. They will secure your assets, property, and reputation from damage or possible lawsuits. The six considerations above will help you choose the right coverage.
If you have questions about business insurance, contact us and request a quote. We will ensure you have the right coverage to protect your freelance enterprise.
This blog and website are made available by the publisher for educational and informational purposes only. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.