4 Insurance Basics New Businesses Should Know
Dan Levenson February 24, 2020
New businesses often make one costly mistake- not buying adequate insurance. It is a very easy mistake to make. At this time, money is usually tight and there are so many things to do or think about.
But while protecting yourself and your business against potential threats might seem unimportant at this stage, a single lawsuit, an injured employee, or one natural disaster is all it takes to destroy your business before it even takes off.
And yet, for every risk, some insurance company out there is ready to offer protection. And there comes your first conundrum- should you run broke keeping your business secure?
The reality is that when running a business, you must determine your comfort level, how much risk you can take and how much protection you need to cover those risks. And to help you do that, here are four business insurance basics to keep in mind.
Workers Compensation May Be Required By Law
As soon as you recruit your first employee, you may be legally required to have workers’ compensation insurance. However, the mandatory requirement varies from one state to another depending on the number of employees.
Workers’ compensation covering medical bills, lost wages and rehabilitation costs for employees injured while working is usually required in all the 50 states. The coverage usually consists of two major parts and a third optional policy.
The first component covers lost wages and medical bills while the second part covers the business owner in case a dependent of an injured or killed employee decides to sue. The third component protects your business from lawsuits arising from claims of issues such as discrimination, harassment and more.
The rates for workers’ compensation and the minimum amount are usually set by the state. However, you can buy insurance from private insurers. Just make sure you choose a reputable company that is licensed to offer the coverage in your state.
Commercial General Liability Is Essential If You Rent Or Own Business Premise
Commercial general liability (CGL) policy covers your business from financial costs that may arise from bodily or personal injury and property damage caused by your products or operations. And it’s not just about protecting you or your business from financial losses.
Having commercial general liability insurance can boost the reputation of your business in many ways, including:
- Demonstrates Responsibility: CGL insurance shows your customers that you’re willing to take responsibility if your business is held liable for accidents that occur on the job.
- Reinforces Trust: It also shows you’re in business for the long term by not taking chances with claims that could jeopardize your business’ future.
- Increases Chances Of More Client Contracts: Most clients consider commercial general liability coverage a prerequisite for working with them because they don’t want to be held liable for your mistakes. A CGL also shows that you have higher safety standards as compared to businesses that don’t have coverage.
Get Multiple Quotes And Review The Coverage Thoroughly
With so many insurance companies in the market, getting multiple quotes is easy. Just apply for business insurance and wait.
But once you get them, it is extremely important to review the coverage thoroughly. Most new businesses often focus so much on premiums that they forget it’s just one part of a big equation.
To effectively review and compare quotes, here are a few tips to follow:
- Look at policy inclusions and exclusions
- Double-check policy limits and deductibles
- Choose a policy can grow with your business
- Work with an agent who understands your industry well and can assess your needs.
Insurance Ratings Vary
Insurance ratings can vary greatly from one business to another. This is because there are so many factors can affect the price of your policy. Some of these factors include:
- Business Location: Businesses located in areas prone to crime or vandalism are more likely to pay higher insurance rates.
- Industry Type: Business in riskier industries tend to pay more for insurance. The risk factors here can be a physical or financial risk to your customers, vendors, employees, business and more.
- The number of employees: Workers’ compensation benefits are generally based on payroll. The bigger the number of employees, the higher the worker’s compensation premiums.
Insurance is important for all businesses including startups. At Insure Your Company, we take pride in helping you secure the best coverage and acquire the right documentation for your business. Contact us today to speak with one of our business insurance experts.