Many small and medium-sized businesses overlook essential insurance policies. Here’s what you need to know to ensure that your business stays protected.
From extreme weather to cybercrime, business of all kinds and sizes have plenty to worry about above and beyond the day-to-day operations that are often top of mind.
However, in a survey of entrepreneurs by Manta and Insureon, fewer than three in 10 small business owners have even a business owner’s policy, the basic business insurance that covers general liability insurance and commercial property insurance. When it comes to more specialized insurance needs, it gets worse from there.
Here's how can you identify and prioritize potentially company-saving coverage for your unique needs and risks.
General Liability Insurance
This is the basic building block of business insurance, covering a wide range of possible damages and legal expenses related to claims for bodily injury, property damage or other liability that your business may incur during normal operation.
What to know: One thing to keep in mind with general liability and other business policies is that your coverage will be based on the type of company you have and the size of your operation. For example, the insurance policy for a services business will likely be based on payroll, while a product-focused company’s policy may be based on gross revenue.
When you establish a policy, you’ll want to provide your best estimate for where you’ll be over the course of the year. At the end of the policy period the insurer will “true up” the policy based on the actual amount—which will determine whether the company owes money, receives a refund, or comes in exactly where expected.
Virtually all companies should have some property insurance in place—if only to cover office equipment for theft, fire or other damage. How much depends on the nature of your business: A services company that leases all of its space, for example, may not need much in the way of property insurance. For a major manufacturer that owns its space and equipment or a company that owns vehicles, such coverage is essential.
What to know: Resist the temptation to undervalue your property to save on your premium: These policies have co-insurance clauses whereby the business is still responsible for a percentage of the replacement costs. If you lowball on valuation, the difference between your insurance need and coverage paid could prove significant.
Business Owner’s Policy (BOP)
This policy not only combines general liability and property insurance, but also often includes additional coverages—such as business interruption and cybercrime. For many companies—particularly smaller operations with relatively limited exposure to risk—this policy may be the way to go.
What to know: Many BOPs offer a suite of products and a lower premium than if coverage were bought à la carte. Even so, it’s important to weigh the convenience and savings of a bundled program with the specific needs of your company. If your business has significant exposure to specific areas not covered by these policies you could very well be better off purchasing policies individually.
Required in most states, workers compensation provides medical coverage and wage replacement for employees who become injured or sick because of job-related activities—regardless of who is ultimately found to be at fault. If you employ anyone, you’ll want this coverage in place. It protects your business as well as your workforce; employees who receive workers comp benefits have limited rights to sue.
What to know: Because these polices are regulated by individual states, you’ll need to abide by state statutes for determining coverage, benefits, and evaluation. Similar to general liability, your policy amount will be based on estimated payroll—and your insurer may adjust that if it changes over the course of your coverage period.
With virtually every business operating in the digital space—even if it is simply employee emails or a basic website—cyber security now falls squarely under the category of necessary insurance. The degree to which your business is exposed to cyber crime will depend on the nature of your enterprise. At a minimum, however, every company needs to protect itself from data breaches, system hijackings, and email scams.
What to know: Cyber insurance is increasingly bundled into Business Owner’s Policies, but be sure your policies cover the many different facets of cybercrime—including remediation following a breach.
Work with Partners Who Know Your Business
Business insurance spans a wide range of coverage and policy options, so it is essential to work with professionals who understand the risks your business faces, the policies that best protect against those risks, and the impact the fine print can have on your needs and resources. Once you’ve gotten a plan in place, it’s important to use your insurance as intended—to cover losses your company could not easily absorb. Doing so will help ensure your business qualifies for the lowest premiums down the road and keep your insurance costs in check for the long haul.