The Right Insurance Coverage... A Make Or Break Business Decision

Your business insurance, whether you’re in business, or in the planning stages, may not cross your mind too often. In actuality, purchasing insurance may represent one of the biggest gambles you take. Will you sustain a catastrophic event? Who knows? But can you afford not to insure yourself against it? The answer’s easy, right? Of course... we must insure ourselves against the unforeseen events that threaten our survival. But what if your insurance costs are through the roof and over the course of time, you never file a claim? Are those “peace-of-mind” premiums you paid out worth it? Or did they, in fact, drain a fair a mount of profit from your already thin margins? These are questions all small business owners need to consider.

Business owners have many stories of policies that either didn’t cover enough damage or covered the wrong risk. And the fault here usually lies with owners themselves who didn’t put enough thought into their insurance purchase. Many owners know far too little regarding the coverage they need... and many don’t even know much about the coverage they already have.

Before you choose a policy, you must choose an agent. Choose wisely and shop around. Some agents get paid based on their ratio of policies sold to damages paid. Meaning that it’s in their interest to sell you as much insurance as possible and minimize your claims as much as possible. There are many good agents out there but you may also want to investigate using a risk consultant can help. Or you may even consider creating an emergency fund for accidents.

When choosing a policy, first consider whether your business grosses more or less than $3 million. If less than that, you’ll likely end up with a business owners policy, or BOP, which bundles business policies and lets you add additional pieces as necessary. Grossing more than $3 million? Then you’ll probably buy your policies separately. And there are a few policies a small business like this should have. The first three you’re likely familiar with: workers’ compensation, property insurance and general liability.  But the other, business interruption insurance, may be unfamiliar to you. When an event forces you to cease business for a time, or even to just slow down, this insurance pays not just the lost sales, rent and payroll costs while you rebuild your business after an accident; it also pays for you to rent a temporary office or equipment so you can get back on your feet faster. It’s also relatively inexpensive. Understand, though, that some policies don’t go into effect until a certain amount of time has passed after an accident, so make sure to read the fine print.

There are many other policies you may need to consider depending upon your business, so do you homework here.