Starting a new business is both exhilarating and terrifying. As a business owner, I understand the challenges and importance of being prepared for the unexpected. In this article, I will share my top 10 insurance tips for new business owners to help you protect your investment and achieve success.
Bad things will happen.
Think it can’t happen to you? You can do everything right in your business, and disaster can still strike. Approximately 40% of small businesses will file an insurance claim within the next ten years (Source: The Hartford). Still, you can’t operate gripped by fear of uncertainty. Don’t make the rookie mistake of ignoring these realities (potential lawsuits, people getting hurt, property being damaged, etc.). You need to prepare for these business-sinking events to avoid losing it all.
Insurance is a powerful tool.
It can feel like insurance is just another empty expense. This is terrible thinking. Proper coverage frees you up to worry less and work more on building your business. You are paying to transfer certain risks onto the company — it’s a powerful thing, and it serves you well to have the coverage you need. In 2019, U.S. businesses paid over $400 billion in insurance premiums (Source: National Association of Insurance Commissioners).
You’re buying a legal contract.
Insurance is not a carton of eggs. Policies are legal contracts that differ significantly, even from the same insurance company. This is especially true for commercial policies. Many are highly customizable. The key is to make sure you are getting the coverage you want.
Understand coverage limits and exclusions.
No insurance policy covers everything. This is to help control what you pay. If there were a policy that covered ‘everything,’ it would be very expensive! Know how much of what is covered. Most often, you have options. You don’t want to let a sales agent select everything for you since they might gut the policy to make it look cheap. Be careful of this! Understand your options. About 75% of businesses are underinsured by at least 40% (Source: Marshall & Swift/Boeckh).
Thousands of products.
Depending on the type of insurance, there are likely dozens and maybe hundreds of insurance companies with tons of products for you to choose from. When you look at all the products across all the companies, it can be mindboggling. A big part of what we do for clients is we help navigate through all of these options to find the best match (in terms of company and coverage) for you and your business. Nearly 60% of small businesses experienced a significant event, such as a cyberattack or property damage, that negatively impacted their operations within the past year (Source: Nationwide).
Not all agents are the same.
Some companies sell directly through websites or their ‘captive’ salespeople (agents employed to push their products exclusively). Most commercial insurance is sold differently. The vast majority is purchased through the ‘independent agency’ channel. A good indie agency for you will have the products/policies you need.
When you talk with a good Indie agency (like us!), ask them if they have special programs for businesses in your industry. Sometimes, insurance companies or agencies will design products and services that cater specifically to the industry you are in. This doesn’t mean it’s the best deal – but it’s worth looking at. Take inventory of the coverage offered, compare it to your needs, and see how the price comes in. Also, find out the insurance company’s reputation for paying claims and providing good service.
Cover the big stuff first.
You can’t protect yourself from every potential financial loss. Or at least, you won’t want to. It’s appropriate to self-insure on risks that you feel comfortable taking. Some of the best risks to take are the smaller ones that won’t hurt you that badly. This frees up your budget to spend on the big things that really would hurt your business. For example, raise deductibles to free up money to allocate to higher liability limits. A study found that 60% of small businesses that experienced cyberattacks went out of business within six months (Source: National Cyber Security Alliance).
Get a comprehensive plan.
Business owners are often forced to deal with several different insurance sources to get all the necessary insurance; perhaps their auto insurance is one place, homeowners insurance another, life at yet another, and then finally, their business insurance at yet another place. This leaves more opportunities for severe gaps in coverage. For example, business owners often have excellent coverage in one or two of their commercial policies but are dangerously exposed on their personal auto. Look at everything holistically.
Don’t go it alone!
Get help. Insurance isn’t easy or fun. It’s important to find resources you can trust that care about you, are truly competent, and have the time/resources to do right by you. Get help identifying the risks in your life and the type and amount of coverage you need. From there, get help shopping to find the best place to get all of this (not only for the policy but for the ongoing service they might provide). All of us at Page work hard to be this trusted source.
Bonus! What you likely need.
Please consult with our licensed insurance experts to discuss your needs and preferences. These are just a few basic types of insurance that many business owners need:
- Package Policy or Business Owners Policy. This policy might include many of the coverages typically needed by a business in your industry. It can consist of many different things but typically excludes stuff that can be better covered in the policies I list below.
- Commercial Auto: Depending on the nature of your business, you might need to have an auto policy different from the typical personal auto policy.
- Workers Compensation: This could be required by your state or even those you get work from – even if you don’t have employees. Know what’s required of you. Work-comp helps your employees with medical bills and lost wages if injured on the job. It also serves the business owner by keeping you out of court for every workplace injury.
- Professional Liability: For many businesses, more than general liability is needed. Professional liability is often necessary to protect you from liability claims regarding your work. There are too many other types of insurance to list here (cyber, EPL, etc.), but understand you’ll likely need a few policies for comprehensive coverage that makes sense.
Running a business comes with various risks and challenges. Insurance is a powerful tool to help mitigate these risks, allowing you to focus on your business growth. Ensure you understand your coverage options and work with a reliable, independent agency to tailor a plan that best suits your needs.
Page Insurance prides itself on being a trusted source for business owners. Our team of experts can help you navigate the complex world of insurance and find the right coverage for your business. Remember, according to the U.S. Small Business Administration, approximately 30% of businesses fail within the first two years. Having the right insurance coverage can play a significant role in ensuring your business stays afloat.
So, don’t wait. Reach out to our team at Page Insurance today to discuss your business insurance needs and let us help protect your investment, allowing you to focus on what you do best – growing your business.