All small businesses must carry insurance. The types of policies and coverage amount will vary depending on industry, location, and size.
For example, all companies must purchase worker’s compensation, disability, and unemployment policies, according to federal government regulations. Then, some companies will need to buy commercial auto coverage, and others will need to obtain commercial property policies.
On average, small businesses pay between $150 to $500 monthly for insurance. Seeing the cost as an investment is tough when no immediate payout occurs.
Nonetheless, the policies double as a safety net when the worst does occur. No one saw the events of 2020-1 coming. The economic shutdown impacted companies and solopreneurs in ways no one predicted.
Organizations that previously purchased business interruption plans hedged against financial losses – an essential insurance function.
The following are seven things to keep in mind about small business insurance.
- Stay Abreast of the Legal Requirements
The administrative costs of operating small businesses can reach high levels. In addition to registering the company, obtaining permits and licenses, and developing a business plan, owners must also purchase insurance.
By law, business owners, including solopreneurs, must purchase:
- Worker’s compensation
The money lands in pots that fund successful claims filed by employees.
After that, insurance mandates vary, so business owners must stay abreast of the legal requirements.
- Insurance Also Covers Freelancers
The Internal Revenue Service sees freelancers as small business owners. Therefore, freelancers benefit from acting like them.
Business insurance also covers independent contractors. For example, you’ll find self-employed insurance for bartenders who freelance. The market also offers policies for freelance landscapers, mechanics, and accountants.
Solopreneurs benefit from protecting themselves. If they experience business interruptions or a lawsuit, the policies cover independent contractors against financial losses.
- Purchase the Right Policies
It’s possible to purchase too much insurance. Thus, company owners must research their small business insurance options and use the information to buy the right policies.
Most businesses should cary:
- General liability
- Professional liability
- Business interruption
- Commercial property
The most common business policies also include the following:
- Product liability
- Home-based business
In addition, business owners should pick up policies that protect their assets and health, such as:
Insurance agents can provide further guidance on purchasing the right policies.
- Acquire Enough Coverage
Business owners must balance purchasing enough insurance and managing their budgets.
Since insurance is an investment that doesn’t have a payout unless something goes wrong, it’s essential to purchase the adequate amount.
The policies do their job when owners purchase enough coverage. Otherwise, entrepreneurs pay into the policy that covers less than necessary if something goes wrong and the need to file claims arises.
- Insurance Doubles as a Safety Net
Legal bills quickly add up, even when the courts throw out cases. The cost to defend oneself still has costs, and it puts a dent in the budgets of small businesses.
Insurance doubles as a safety that protects companies against financial losses. Therefore, it’s an investment.
Lawsuit judgments that go against business owners can wipe them out financially. Each policy covers certain circumstances and pays out specific amounts to help the holder cover claims, decisions, and awards.
- Bundling Policies Can Save Money
Another top policy that business owners can purchase is the business owner’s policy.
Agents will bundle standard policies, which creates a win-win situation. Business owners can purchase enough coverage at a discount, and agents gain new clients.
Entering 2023, business professionals offer increasingly customized services and products. Since the insurance market has more products, some agents can create bundles that benefit their business clients.
- Reassess Insurance Needs Annually
Entrepreneurs know it costs more money to acquire new customers than retain existing ones. Once business owners become insurance clients, agents will work to keep them on their rosters.
However, business owners can reassess their insurance needs annually and make adjustments as necessary.
For example, entrepreneurs can scale their policies’ coverage with their company’s growth. Solopreneurs can purchase the minimum coverage to help them satisfy legal requirements.
Sometimes companies shrink. Thus, they can shrink their coverage accordingly.
Small businesses must purchase specific insurance policies. Then, they must invest in other policies. Although policies do not provide a payout unless something grows wrong, they act as a safety net against financial losses. Businesses can consult with agents who will provide additional guidance.