Any time you launch a business, you’re inevitably courting risk. One of the most effective ways to mitigate and manage your business risk is by investing in the right kinds of insurance. Before you start purchasing coverage, however, it’s important to do your due diligence. After all, business insurance comes in many different types, and the specific kinds of coverage required can vary from one business to the next. You’ll also face important decisions about the amount of coverage you purchase, the carrier or broker you choose, and more.
As you consider your insurance options and prepare to meet with your independent insurance agent, there are a number of questions that can provide clarity and direction. Use these questions to take inventory of your insurance needs and goals.
Key Questions to Ask Before Buying Business Insurance
1) What types of coverage are legally required?
First and foremost, recognize that not all types of business insurance are optional. Some situations may require you to have particular policies in place. For example, most (but not all) states require companies that have employees on their payroll to have worker’s comp coverage. And if you’re renting space for your company, the landlord may require you to invest in general liability coverage. These are just a couple of examples of scenarios in which business insurance isn’t optional, though of course, you can still make some decisions about the insurance agent or carrier you use.
2) What types of coverage are needed to help mitigate my business risk?
You will also discover plenty of examples of insurance coverage that isn’t required but does offer a lot of potential benefit to you and your business. Some examples include:
- If you have your own office space, you’ll want to insure it against fire, flood, theft, and vandalism.
- For businesses that operate vehicles, whether a commercial fleet or “company cars,” auto coverage may be useful.
- If you’re offering a professional service (like financial advice), you may wish to have errors and omissions (E&O) coverage.
- Companies that sell physical products may benefit from product liability coverage.
Note that basically all businesses benefit from general liability coverage, which can provide some protection against consumers who claim accident, injury, or property loss due to an act of negligence or oversight on your part.
3) What kind of policy limits do I need?
The limits to your insurance coverage denote the maximum amount that your insurer will pay. For example, say you have a general liability plan with a limit of $1,000,000. Someone sues your company for $2,000,000. What this means is that your insurance will only pay, at most, half of your legal expense.
So, what kinds of limits do you need? It all depends on the industry you’re in, the nature of your business, and other factors. An independent insurance agent can help you determine the limits that are best aligned with your legal exposure and your budgetary restrictions.
4) What’s not covered by the insurance policy?
Even when a policy seems very broad and comprehensive, there are always some exclusions. For example, even a really robust property insurance policy will likely have some exclusions for acts of war. Meanwhile, insurance for your equipment or heavy machinery usually does not cover normal wear and tear. It’s important to know about the limitations inherent to your coverage, allowing you to identify the areas where you’re still open to some risk.
5) Can I qualify for any discounts?
There’s no way around it: Insurance is a significant business expense, and it’s going to be an important line item on your annual budget. Even so, you may be able to reduce your expenses by seeking insurance discounts. For example, some plans will offer a discount if you go a year or two without filing any claims. It’s good to know about any discount opportunities in advance, before you settle on a specific carrier or plan.
6) How does insurance fit into my broader business strategy?
Ultimately, insurance can be an important way to maintain the continuity of your services, even in the event of something really disastrous happening. As such, it’s helpful to think of insurance not just as an obligatory expense, but as an important piece of your overall strategy. In particular, you might want to think about business interruption coverage, which will help cover your losses if there is ever a major disaster that shutters your business for a period of time.
7) How can I keep my business insurance costs down?
There are plenty of things you can do to keep expenses under control. A good rule of thumb: Insurers prefer working with clients who are responsible. So, you may be able to lower your premiums by making sure you have fire alarms, fire extinguishers, and so forth. And you can curb your cyber insurance expenses by shoring up your IT security, and by providing cybersecurity training for all of your employees. Your independent insurance agent will be able to tell you more about ways to keep costs in check.
8) How do I file a claim?
Sooner or later, you’ll probably run into a situation where you need to file a claim. It’s good to have a clear idea of how you’ll do that, who you need to contact, and what documentation you must provide. It’s always wise to know how the claims process works before you invest in coverage.
More Questions? Talk to an Independent Insurance Agent Today
As you take stock of your business insurance needs, it’s always wise to talk with a professional. An independent insurance agent can help you assess your needs and determine the coverage best suited to your business.
At Sentinel Business Advisors, we’re pleased to provide a range of insurance products to accommodate diverse business needs. We’d love to talk with you further about choosing the insurance that’s right for you. Whenever you’re ready to chat, reach out to Sentinel Insurance Advisors directly.
