The process of buying insurance for your company can be a time-consuming and complex undertaking; however, it is a critical part of your overall operations as a business owner. Several entrepreneurs choose to take the easy route by applying for an insurance policy without having a complete understanding of what they are purchasing. Doing this provides a temporary solution; however, it could ultimately result in serious problems.
If your business is under-insured, you could potentially face financial disaster. It is also possible that you could end up paying for costly insurance that is totally unnecessary. As such, you need to become knowledgeable of what is involved in ensuring your company is adequately insured. We spoke to SmartBusinessInsurance, and these are the 5 things to consider when looking for a full-proof business insurance:
1. Do Not Automatically Choose the Least Expensive Policy
When purchasing business insurance, shopping around makes sense since some insurance providers offer better value than others. This is not an indication that you should always go for the least costly policy. This is important because the policy that is least costly will not end up being a bargain if it leaves the company susceptible to expensive claims.
When seeking out insurance, it is wise to get quotes from multiple insurance providers and thoroughly compare and contrast the details. Ensure that you consider the amounts and types of coverage each provider has listed in the quotation. If help is needed when comparing quotes, ask a reputable broker or agent for assistance.
2. Get Adequate Liability Insurance
If the product that you sell or manufacture could cause damage to property or be harmful to someone, you can assist with protecting your company be getting liability insurance. If the business you operate is structured as an LLC or limited liability company, it is likely that you can choose a lower amount of liability insurance. This is because the maximum total for which you will be responsible will typically not go beyond the assets that are owned by the company.
However, if you operate a sole proprietorship, the authorities could seize your personal assets to compensate the claimant. In such a case, it would be wise to purchase a higher volume of liability coverage. In addition, as a part of an insurance program, it is recommended that you establish some type of legal structure which will safeguard your personal assets in case something takes place when you are transacting business. Limited liability companies or corporate structures will assist with safeguarding your personal assets.
If you operate a small business that is defined as a limited liability company, some situations exist where you could be deemed personally responsible for claims made against your company. Limited liability protection will not be applicable if you have behaved negligently or if an illegal act has been carried out.
3. Make Adjustment to the Coverage as the Business Changes
Over time, the majority of businesses experience growth and inevitable changes come about. Small companies could expand, employing more workers and adding more locations. Other businesses could make changes to the services and products they offer. When these changes occur, it is vital to make changes to the insurance policy as well.
If your business has undergone a major change, such as the acquisition of a new location or a new company, your insurer or agent should be notified right away. Any other change that has taken place with the business should be reported to the provider prior to renewing your policies.
Ensure that you communicate with your broker or agent, in advance, several weeks or even months. This is vital because doing this will allow him or her enough time to gather information and send it on to your insurance provider. Your agent can help you decide whether it is necessary to make adjustments to your insurance limits or coverages.
4. Ensure Locations or Entities are Accurately Listed
For the majority of liability policies, only the entities or individuals indicated in the declarations are considered named insureds. Typically, the ones that are not listed on the policy are not covered. The failure to have a business entity listed on a commercial auto, general liability, umbrella, or other liability policies could end up having disastrous consequences.
For instance, what if you own a company called DEF Inc. For tax purposes, ownership of all your business properties was transferred to a newly formed subsidiary called UVW Inc. If your liability policy only lists DEF Inc. as the named insured and an accident takes place on your property resulting in UVW Inc. being sued. Since UVW is not registered on your policy, the insurance provider could refuse to cover the claim.
Problems like these can also come about if business locations are left off a commercial property policy. The majority of property policies provide coverage for physical loss or damage to covered property at the locations outlined in the declarations. If a damaged property is located at a location not indicated on the policy, you might not receive coverage for the damage.
5. Insure Possible Income Losses
A number of business owners ensure that the physical assets of the company are insured. However, they fail to think about a normal consequence of physical losses, which is loss of income. A business will lose income should the property be hit with a physical loss and the company has to cease operations for a period until the damage is fixed.
You can assist in ensuring that your company endures an interruption by buying insurance coverage for business income. Also referred to as business interruption insurance, this type of coverage pays back your company for the amount of income it would have earned in the event the loss had not taken place. In addition, this insurance covers expenses you are obligated to pay whether your business is in operation or not. These include electricity and rent.
Whether big or small, every business is a risky venture. However, in contrast to big corporations, small businesses often do not have an adequate cash reserve to face a huge and unexpected expense. Therefore, it is important to have fool-proof insurance for your business.