Entrepreneurs tend to be relentless in pursuit of their dreams. Many bring a unique approach to getting your business up and running. They spend every waking moment (and even part of their sleep time) thinking of new ways to innovate, improve and outsmart. This type of person is often so preoccupied that they accidentally skip meals.
It’s no wonder, then, that many entrepreneurs and small business owners don’t pause long enough in their frantic development efforts to consider the various ways they should purchase insurance policies on their physical facilities, intellectual property, and sometimes, even their very lives. Developing new life-saving medical technology or turning a family restaurant into a franchise is fun and exciting. Taking out insurance policies is decidedly less attractive.
Regardless, the responsible move of every business owner and visionary is to pause long enough to do the right thing for themselves and the people they work with. In many cases, the law requires business insurance, but common sense requires most forms. The last few years, at least, have amply demonstrated the inescapable fact that “business as usual” can be wiped out by health problems, the introduction of new regulations, and civil unrest. Business insurance doesn’t cost … it pays.
Your first step is to recognize the need and set aside time and a portion of your budget for this to happen. But how much insurance does your business really need? What most business owners say is best commercial insurance? To help answer those questions, it can be helpful to outline the most common types of policies.
General liability insurance
We’ve all heard stories about how a business was sued after, for example, a bystander slipped on the sidewalk and was seriously injured. In our increasingly litigious society, there are people looking for reasons to sue successful companies as a kind of easy payday. You owe it to yourself to protect yourself and your employees.
A general liability policy will cover your business against claims involving physical injury and property damage that may be attributed in any way to your products or services. Whether a legal claim against your company is frivolous or not is beside the point. You just can’t count on your good intentions alone.
Commercial property insurance
Loss of property in a fire or as a result of theft and vandalism is a category of business insurance you should be thinking about. If your business is located in a northern temperate zone, you probably know someone who suffered serious property damage when a water pipe froze or burst.
Business property insurance policies can protect your assets in all of these circumstances and more. When disaster strikes, it is generally not announced weeks in advance. Ensuring you’re covered in this category can help you stay in business, moving if necessary, in case of unforeseen events.
Business insurance from home
When offices began closing in March 2020, many workers moved into their home offices. Surprised, many had to repurpose various parts of their homes to accommodate office work. Over time, support equipment (printers, computers, screens, etc.) came to the house piece by piece. As restrictions related to the pandemic began to lift, many workers decided to stay and continue working outside of their homes. Some started businesses from home.
What many home-based workers failed to do, given all the hectic activity, was take the time to call their insurance agent. If company-owned equipment was brought home during the pandemic, will insurance come to the rescue if someone breaks in and steals it? Will your employer support you in the event of data theft or loss at home? Questions like these should have clear and unambiguous answers. If you are unsure, talk to your agent about commercial home insurance as soon as possible.
Product liability insurance
If your business sells a product to a customer that is later determined to be toxic or cause serious injury, are you liable? The best legal minds are likely to say “Maybe.” By now, we are all familiar with the history of the lawsuit (and the multi-million dollar award) that led McDonald’s to begin politely informing its customers that the coffee they were about to enjoy was “hot.”
People can sue your company for any reason. Once a claim is filed, anyone within 100 miles of the incident can find your name on a subpoena. Their products may be the safest, most reliable, and best value on planet Earth, but someone will find a way to get hurt by them. Make sure your business is fully covered against such claims, whether they have merit or not.
Professional liability insurance
Similarly, lawsuits can be brought against companies that provide professional services. The offer of services is quite wide. The company that collects and washes uniforms looks very different from a financial advisor’s wood-paneled conference room, but both companies provide a service that can produce unexpected or unpleasant results. Uniforms are lost in transit. Tanks from the bag. Disgruntled clients call their attorneys.
Again, your good intentions coupled with a willingness to fix things are not enough. As good and admirable as those values are, your business still needs to get enough coverage in case a customer proves to be especially stubborn and unwilling to forgive or compromise. Ask your agent to help you assess areas of exposure that you may not be seeing.
Business income insurance
Business income insurance has a structure similar to a business property policy. The main difference is that a BIC policy considers your monthly income as a tangible asset that can be lost by any means. As a recent example, many companies suffered a severe slowdown or total work stoppage once the 2020 pandemic took hold. Companies that had BIC coverage may not have fully weathered the storm, but they did much better than those. They never thought they would need this type of insurance.
When inquiring about this type of coverage, be sure to get details in writing about the duration of the coverage. Keep up the rallying cry of “Two weeks to flatten the curve!” Most importantly as you work with your agent to determine how much coverage you will need and (perhaps most importantly) what period of time the policy will cover.
6 practical steps to purchase commercial insurance
Now let’s talk about how you can decide what is right for you.
1. Seek the advice of a qualified professional.
You may very well be that rare combination of entrepreneurial entrepreneur and master actuarial, but most people are not. An experienced entrepreneur knows when to trust the experience of others. Given the downside of encountering circumstances for which you are not covered, it only makes sense to seek the opinion of insurance experts. You can Google information to start learning about risks, exposure, and appropriate levels of coverage, but commercial insurance is too important not to schedule at least one face-to-face meeting with your agent.
2. Get at least two opinions on your level of risk.
Let’s say your agent is a top-tier actor who really knows what he’s doing. That’s great, but you should still seek at least one other opinion when it comes to the subject of risk assessment. Think of commercial insurance as gathering information and choosing a doctor before open heart surgery. Lawsuits, natural disasters, pandemics and the like are capable of performing unwanted “surgeries” on your business at any time. Be sure to select coverage based on empirical data that will be maintained during a claim.
3. Be clear on your geographic service area.
If someone calls your business from a neighboring state and acts on advice they receive from one of your employees, are you responsible if that advice produces harmful results? Both you and your staff need to be 100% clear on the geographic area you serve, be it at the “friendly neighborhood” level or around the world. If your business isn’t insured to do business in an adjacent county, don’t give in to the temptations of a quick sale either.
4. Know your local employment insurance laws.
The downside of not knowing what you don’t know can be enormous. Demands from current or former employees can be time and money burdensome even when you win! We all know that ignorance of the law is not a viable defense, so make sure you and / or your agent are well versed in the requirements before making your first hire. Regulations change, of course, so make sure someone stays up to date here.
5. Budget for premium costs.
Plus business owners they like to spend money on improvements to their facilities, hand out bonuses or any number of other things that they can see with their eyes. Paying insurance premiums, for many, feels like money down the drain simply because they don’t see tangible benefit. For those who envy this line item on their budgets, it might actually be helpful to post photos of destroyed businesses next to the desk or computer screen where you pay bills. you guys are buying something, and that something is peace of mind in the face of disaster.
6. Review, review and review.
Many (perhaps most) business owners and entrepreneurs sign their policies, pay premiums, and store paperwork in a dark corner of their premises. However, adopting a “one-and-done” attitude toward commercial insurance is a serious mistake. We all know that circumstances change rapidly, the value of the company rises and falls and the only constant is change. Set aside time to periodically review your coverage and make any necessary adjustments.
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