As you contemplate the prospect of your fledgling business taking off and becoming successful, keep in mind one of the downsides to operating a business: Risk. This is where insurance comes in. Similar to the way you protect your car and home with insurance, you also must protect your business’s assets in the event of a natural disaster, legal liability or any other any other risk you can’t afford to cover.
Review Your Coverage Needs
The specific coverage and amount that you need will vary, depending on the type of business you’re running. If you are renting office space, check with the landlord or leasing company about what insurance coverage is included with your rental agreement. You may need to purchase business property insurance. This type of policy usually covers the structure of your building and the contents of your office.
In the early stages of your business, you may find there is a lot of crossover between your personal belongings and business property. For example, you may be using your family car to go on sales calls, meet with investors, etc. In that case you should make sure your personal auto coverage is sufficient. After all, if you get in an accident, you’ll need a replacement car to continue running the business. If you have company cars, then they’ll need to be insured, too.
Consider Liability Insurance
This type of coverage may not be familiar to you. About.com’s small business expert Darrell Zahorsky, in his article Protecting Your Assets With Business Liability Insurance, explains that most small businesses are partnerships or sole proprietorships. Even if you are incorporated, there are still instances where you can be held personally liable for the actions of your business.
There are a few types of business liability insurance. General liability insurance covers claims related to a customer or other persons who injures themselves while at your office. No matter how safe you keep your office, there is always a risk of being sued, and general liability insurance is crucial to all businesses. Depending on the nature of your business, you may need more coverage.
Zahorsky suggests you look into errors and omissions coverage, also known as professional liability coverage, as well as product liability coverage, which, in addition to general liability insurance, round out the three kinds of liability coverage most critical for businesses. Errors and omissions coverage is designed to protect professionals from financial loss associated with negligence such as if a client alleges you gave him bad professional advice or botched a job.
There are various forms of professional liability coverage, depending on your field of work, as well as policies that cover unique circumstances. Doctors and lawyers usually carry a type of professional liability coverage called malpractice insurance. Product liability offers coverage to companies that make or sell a product whose use results in a consumer being injured. The amount of coverage you seek here should be proportionate to the potential risk of your product.
If you’re hiring employees, then you are likely to have to cover workers’ compensation coverage and possibly even a health insurance plan. Requirements for these two types of coverage differ by state.
Establish an agent relationship
You’ll want to work with an insurance agent who you are comfortable with and could envision yourself working with for the long-term. Conversely, be wary of agents who try to load you up with policies. The agent should view you as a long-term client and should respect the fact that you’re in the early stages of operations. Do a lot of comparison shopping among insurance agencies, and look for opportunities to bundle your plans together with one agent. Some agents will offer you a discount on multiple policies, but it is fine to use several agents if the numbers make more sense.
Join an association
A strong professional association will have the buying power to offer you better insurance rates and options in the form of group coverage than you would get with an individual policy.National Federation of Independent Business (NFIB) is a popular U.S. organization for entrepreneurs that offers business insurance benefits.
Watch your claims Just like your personal car insurance, business insurance rates can jump dramatically if you make claims early in the relationship. If your claim is small, pay it yourself, and use your insurance policy as a fallback option for costlier items.
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