Entrepreneurs create their start-ups with the hope that they will grow and thrive, despite the competition and other business challenges. Business insurance is there to make sure that your investment in a business is protected as well as your investors and co-founders. Having insurance makes it easy to offer compensation to your employees and any other involved parties in case an accident happens. Some types of insurance policies like workman’s compensation are mandatory for all start-ups. Despite the length of time that insurance products have been in the market, business owners still do not fully understand the products they need and their importance. Here is a detailed breakdown of business insurance basics and why you need it.
Main Types of Business Insurance
General Liability Insurance
This insurance policy covers your business when someone makes certain types of claims against it. General liability will cover you for physical injuries, damages, and even non-tangible acts such as libel and slander. The insurance policy also covers the cost of legal defense if the case is in court.
Workman’s Compensation Insurance
As mentioned, this policy is a legal requirement for every startup. It is the insurance products which replace the salary and pays for all medical expenses of an employee injured in the line of duty. The law dictates that anyone receiving workman’s compensation cannot sue you for liability, which makes the insurance product a safety net against expensive liability suits. Learn more about Workman’s compensation insurance here.
Commercial Property Insurance
A growing business will get some assets along the process. These assets include industrial buildings, office, and office equipment, computers, and other property. This insurance cover protects your business assets against damage caused by fire, flood, and other natural and artificial disasters.
Professional Liability Insurance
If you are operating a business such as a dental clinic, a plastic surgery clinic, and other investment and advisory practices, you need professional liability insurance. The insurance product covers and protects you from legal damages and other costs that result when you make an omission or mistake as you carry out your duties.
Business Interruption Insurance
The insurance product is there to cover your business in case unexpected circumstances lead to the suspension of your operations. If for instance, your restaurant is closed down and you lose your source of income, the insurance should support you until the situation is resolved and you resume earning an income.
Commercial Umbrella Insurance
The society has become extremely litigious, and it seems like someone is always waiting for a little trigger to have them file a lawsuit against people’s businesses. Umbrella insurance protects your business from malicious and potentially ruinous lawsuits and accidents. It is like a backup for all other business insurance products. Other business insurance policies that would be great to have, depending on your industry include commercial vehicle insurance, product liability insurance, and insurance coverage for home-based businesses.
The Benefits of Spending Money on Business Insurance
All successful businesses come with their own set of inherent risks. Insurance is one of the ways that you can cushion yourself against massive losses in case the unexpected happens. Here, are the benefits you draw from having business insurance products:
- You minimise your losses: One thing that happens when businesses go through unexpected events such as theft, fire, liability suits, and others, is financial losses. Some losses can drive your business into bankruptcy. When you have insurance cover, the company covers the damages and gives your business the chance to recover and thrive.
- Reduced employee turnover: Forbes notes that companies which offer great insurance and other benefits to their employees can retain them for many years. When you retain employees in your business, you can boost productivity by creating a positive workplace culture.
- You avoid problems with the law: As mentioned, it is a legal requirement to have certain business insurance policies. Operating a business against the law could lead to serious legal issues and even loss of the license to operate the business.
- Employee protection: Insurance products such as Workman’s compensation insurance are specifically meant to shield your employees from loss of income in case they get injured at work. Having them also gives your business credibility and helps you attract the best talent in your field.
- Certain contracts will need it: Certain business contracts will require you to have various business insurance products. If for instance, you are renting business premises, need to borrow loans, or you are getting into contracts with clients, you will need insurance.
The Cost of Business Insurance
There is no direct answer as to how much you can expect to spend on business insurance. However, some indicators can help you estimate how much you are likely to spend insuring your business:
- The size of the business determines how much has to be insured and at what cost.
- The nature of the business and number of employees also play a role in determining insurance costs.
- Your insurer’s policy terms will also come into play.
- The risks related to your industry also play a role in determining the cost of insurance. High-risk industries have to deal with high premiums, while low-risk industries enjoy lower premiums.
- Coverage limits also have a role to play in determining the cost of insurance
The only way to find out how much insuring your business will cost you is by getting a business insurance cost analysis from experts such as insurance agents.
Managing Business Insurance Costs
You can take certain steps to lower your business insurance costs. For instance, paying premiums upfront lowers the amount that you have to pay. Training employees on safety helps you manage business risks while bundling insurance policies lowers their cost. Business insurance is an interesting balancing act that all start-up owners have to engage. The rewards you get from a comprehensively insured business are more than the money you spend on coverage. Your task is to find the insurance products which offer you the best coverage at the most affordable cost.