Starting a small business is incredibly rewarding, as you’re your own boss and can make a lot of money. No wonder there are 33,185,550 small businesses across America! Illinois, Florida, Texas, California and New York boast the most small enterprises while Connecticut holds 99.4% of private enterprises are small enterprises.
While starting a business is a dream come true for many, running it is not always smooth sailing. Every year, 36% to 56% of small businesses are sued. The average cost of fighting a lawsuit is $54,000.
How do you safeguard your company from lawsuits and losses that occur during normal business operations? By purchasing business insurance.
But buying the appropriate business insurance policy can be challenging and daunting task, due to all of its options and choices. Have no fear – here are a few helpful tips that will assist in selecting an insurance plan suitable for your small business.
#1 Know the Different Types of Insurance Policies
Without understanding all available insurance policy options, choosing an ideal policy can be impossible. Gaining knowledge on different forms of cover helps business owners narrow down their choices to make informed choices and decisions.
The most common business insurance policy in the USA is general liability insurance, which covers firms against claims of property damage, slander, libel, or false advertising.
Workers’ compensation insurance is another insurance that businesses with employees must invest in, irrespective of their size. This insurance policy pays for employees’ medical expenses, lost wages, and other costs.
To reduce the financial burden of property damage due to floods, fire, theft, or vandalism, investing in property insurance will be wise. This insurance compensates for damaged or lost commercial property caused by storms, fires, natural disasters, accidents, or vandalism.
If your business has a vehicle, commercial auto insurance is a must-have. In case any of your employees gets into an accident while performing business duties, the insurance will cover all damages.
For companies that provide professional services, professional liability insurance is essential. This insurance offers coverage against malpractice, negligence, oversights, and mistakes.
Cyber liability insurance, business interruption insurance, and business owner’s policy are other types of business insurance.
#2 Consider the State Insurance Laws
While most insurance coverage is optional, a few are mandated by law to protect you, your business, and your employees.
In the USA, almost all states but Texas require businesses with employees to have workers’ compensation insurance. It makes sense because this insurance policy offers rehab or medical benefits and wage replacement to workers injured during the course of employment.
According to reports from the Bureau of Labor Statistics (BLS), an estimated total of 2.6 million nonfatal workplace injuries took place nationwide during 2021 and 32,700 occurred here in Connecticut alone (Source). Of the 32,700 injuries, 21,700 were severe, resulting in DART (Days Away, Restricted or Transferred).
Illinois experienced 102,000 nonfatal workplace injuries and illnesses in 2021; of these incidents 67,200 were classified as chronic. Wisconsin witnessed 61,200 non-fatal workplace incidents according to U.S. Bureau of Labor Statistics’ estimates for 2021.
Therefore, workplace accidents are inevitable. Not having workers’ compensation insurance in place can make your business vulnerable to financial liabilities and potential legal issues. In the event of an accident, you will have to bear the lost wages and medical bills of injured employees.
Integrating workers’ compensation also protects you from legal consequences, as employees waive off their right to sue you for damages.
Brooks, Todd & McNeil note that every state has its own set of rules for workers’ compensation. That is why it’s best to discuss coverage options with a reputable insurance provider.
If you’re based in Connecticut, a Connecticut business insurance agency can help you purchase the right workers’ compensation coverage by evaluating the risks your business is likely to face. Likewise, if you’re from Illinois, an Illinois insurance provider can help you choose workers’ compensation insurance as per your state laws.
Besides workers’ compensation, many states require small businesses offering services to carry professional liability insurance.
In Oregon and Idaho, professional liability insurance is mandatory for lawyers. Connecticut, Colorado, Massachusetts and Kansas are just four states where doctors must carry professional liability insurance to practice medicine legally.
Before you purchase any insurance policy for your small business, consider the coverage mandated by law. Invest in mandatory insurance first and then proceed to add-ons to be on the safe side.
#3 Prioritize Business Coverage Over Cost
In regard to business insurance, more is always better. While business insurance is an added expense, buying more coverage than you need could save you some serious money in the long run. After all, insurance protects business owners from major payouts in legal proceedings.
It may be tempting to pick a cheap business insurance policy to save on your premiums. But bear in mind that they offer very limited coverage, leaving you vulnerable to common risks. As such, you will have to bear the majority of expenses out of your pocket.
When buying business insurance, always weigh the cost against the coverage offered. That way, you will make an informed decision.
Selecting the right insurance for your small business is a tricky task. But it can be simplified with a bit of research.
Start by learning about the different types of insurance available. Thereafter, invest in the ones mandated by your state laws and then purchase the ones you think are essential for your business, depending on its operations.
Remember to assess your business needs before purchasing insurance. You must also review and update your insurance coverage from time to time to ensure you’re adequately protected.