Small businesses typically start with small budgets that take time to develop. Therefore, it’s important to decide on the right business insurance early on to avoid legal catastrophes that drain companies of their capital. Every business needs to establish its own customized plan. Here are essential insurance tips for an SMB startup to minimize risks and maximize protection.
Distinguish Different Types of Coverage
There are various types of business insurance based on specific industry risks related to dangerous equipment and activities. Some of the most common types of plans include:
- General liability insurance – Covers liability for injuries, property damage, defamation, and intellectual property infringement
- Business owner’s policy (BOP) – Bundles general liability and commercial property insurance into one plan at a lower cost
- Commercial property insurance – Covers stolen, lost or damaged company property such as office equipment or furniture
- Business interruption insurance – Pays for costs when a business must temporarily shut down
- Error & Omissions (E&O) Insurance – Pays legal costs for lawsuits due to professional mistakes, oversights, or negligence
Business Insurance Requirements
Each state has its own business insurance requirements, but most have only a few, which are workers’ compensation and commercial auto insurance. If your company employs one or more individuals, you’ll need to invest in workers’ comp. You will also need commercial auto insurance if your company uses vehicles to conduct business.
Most other insurance is optional, but they provide adequate protection against disaster. Every business that uses a computer network should consider purchasing cyber insurance due to the escalation in cybercrime. The federal government already mandates that certain industries like healthcare must use high-level cybersecurity, which can still get breached by hackers leading to an explosion of lawsuits. Having sufficient cyber insurance in place can mitigate the disaster.
Be Aware of Industry Risks
Some industries involve higher risks than others. Construction and mining, for example, are very dangerous industries that can involve fatal accidents. Big oil companies don’t plan to have massive leaks or spills, but sometimes they happen. Even a consultant who meets managers in safe offices can face lawsuits by giving poor advice that leads to a financial decline.
Different types of insurance add-ons exist for different types of risks. For example, professional liability insurance covers consultants, while product liability insurance covers a restaurant when its food causes illness.
Understand Factors that Affect Insurance Costs
Knowing the factors that affect your monthly premium can help you make adjustments in business activity to lower costs. It’s important to keep your policy up to date so you’re not caught in a lapse, which can raise the rate. Cutting risks will contribute enormously to lowering commercial property insurance rates. Examples of cutting risks include when a business installs fire protection devices and security alarms. Moving to a location with a low crime rate is another way to reduce rates.
Remember that the key to lower premiums is demonstrating risk management strategies, such as creating a safer work environment. Contact the experts at Scautub Agency to learn more about your small business insurance coverage options.