Need business insurance for your company but not sure where to start? In this guide, we will explain the available options, how to go about purchasing business insurance, and give you the questions you should be asking to make sure you get the right insurance package for your business.
The Hartford makes getting a comprehensive insurance policy for your business easy. Their team of specialists will get you a customized insurance quote based on your needs. Fill out their online questionnaire to get a free, no-obligation quote.
Table of Contents:
Protecting Your Personal Assets
Types of Business Insurance
The Business Owners Policy
Business Insurance Costs
Where To Buy Business Insurance
Questions to Ask
Start By Protecting Your Personal Assets
If you do not operate your business under the correct legal structure, and you get sued, your personal assets are likely at risk.
If you have not done so already, we recommend forming a Limited Liability Company (LLC) for your business. One of the primary functions of an LLC is to separate your personal assets from your business assets. Once you have setup your LLC, your personal assets are protected under most scenarios from things that go wrong in your business.
You don’t have to be a new business to form an LLC and it can be done online for a few hundred dollars. You can read more about business structures here, and get help setting up an LLC at LawTrades. They will prepare and review the articles of organization and the LLC operating agreement for you.
Types of Business Insurance
If you can think of a risk that is associated with your business, there is likely an insurance package available to protect your business from that risk. The best small business insurance companies will be able to help you protect yourself against all the risks your business may face.
Below is an overview of the primary types of business insurance. Once you understand the options available, the insurance companies will mix and match the different packages to offer a customized solution for your business.
 | Workers Compensation Insurance:Workers compensation insurance replaces an employee’s wages if they are injured on the job. If you have employees then it’s often a legal requirement. You can see laws specific to your state here. Who’s it For?: All Businesses |
 | Commercial General Liability Insurance (CGL):Pays the costs associated with your business being sued for injuring someone, damaging property, slander (personal injury), or false advertising. This normally includes the cost of defending your business against the lawsuit. Who’s it for?: All Businesses |
 | Commercial Property Insurance:Pays the costs associated with damages or theft at your place of business, equipment, or other property associated with your business. Who’s it for?: Businesses that own or rent their place of business and/or have other valuable property such as equipment. |
 | Commercial Flood Insurance:Pays for damages caused by flooding that are not covered under your commercial property insurance. Who’s it for?: Businesses that have a risk of flooding. |
 | Business Income Insurance:Also known as business interruption or business continuation insurance. The purpose is to replace your income if your business is temporarily shut down due to direct physical loss or damage at your premises resulting from a covered cause of loss. Who’s it for?: Businesses who would suffer if their place of business became unusable for an extended period of time. |
 | Professional Liability Insurance:Being sued for mistakes made while rendering a professional service is not covered under most general liability policies. Who’s it for?: Businesses that provide a professional service such as Dr.’s, Lawyer’s, Realtors etc. |
 | Commercial Auto Insurance:Pays the costs associated with damages to your companies automobiles and injuries associated with accidents caused by you or your employees. Who’s it for: Businesses that have automobiles. |
 | Directors and Officers Insurance:Pays for the costs (including legal defense) associated with one of your company’s directors or officers being singled out with a lawsuit as a direct result of something they did while on the job. Who’s it for: Larger businesses. |
 | Employment Practices Liability Insurance:Pays for the costs (including legal defense) associated with your company being sued for things such as workplace discrimination, wrongful termination, and lack of compliance with the federal Family and Medical Leave Act (FMLA). Who’s it for: Larger businesses |
 | Commercial Umbrella Insurance:Pays for costs that exceed the maximum payout of other policies you hold. Because umbrella insurance only pays out if your other insurance maxes out, it is generally not very costly to add a large amount of additional coverage. Who’s it for?: Any Business |
If you have questions about the types of insurance you need to protect your business, we recommend you contact The Hartford. They offer some of the broadest business insurance coverage available and their claims representatives are consistently recognized amongst the best in the industry. Complete a short online form and get a free, no-obligation quote.
Business Owners Policy (BOP)
Business owners policies (aka BOP) combine commercial general liability and property insurance into one plan. Depending on the provider and your industry you may be able to bundle other options into this one policy as well. For example, a food truck insurance BOP might also include commercial vehicle and workers compensation. In addition to keeping things simple, this will also generally save you money since you are buying all your insurance from one place.
Business Insurance Costs
How much business insurance costs depends on several factors, including:
- business type
- size of business
- industry, products and services
- risks (do you operate heavy machinery, a store or an office?)
- employee work duties
- business property and assets
Ultimately how much different types of insurance cost are going to depend on how often businesses that fit the same profile as you are sued, and how much the insurance company has to pay out when they are.
A business whose employees operate heavy machinery will likely pay more for commercial liability insurance than those who sit in an office all day. Similarly, all else being equal, larger companies will likely pay more than smaller companies.
Cost of Business Insurance Example:
While several companies that we contacted would not give even sample premium rates or examples, Tech Insurance does provide pricing samples for different types of companies, though you need to contact them for exact quotes.
According to this site, a sample small consulting firm with 0 to 2 staff and revenue between $250,000 and $1,000,000 can access a plan with the following details:
- Commercial General Liability
- Includes: General Liability and Property Coverage
- Annual premiums between $500 and $900 per year
- $500 property claim deductible
Additional coverage for this scenario includes:
- Add Umbrella Coverage to General Liability for $450.00/year for an extra $1,000,000 in coverage
- Add Worker’s Compensation for $2,441.00/year
- Add Professional Liability for $2,500 to $4,500/year.
As discussed above, companies where workers are more likely to be injured on the job, where property damage is more likely to occur, or costly mistakes happen often will pay significantly higher premiums.
Where To Buy Business Insurance
Business insurance is a much different ballgame than personal insurance. Every business has it’s own unique risks so it’s important to work with an agent and company that has experience insuring businesses like yours.
Unless your buddy who sells insurance has experience selling business insurance, works for a major insurance firm, and has insured businesses like yours before, it’s best to look elsewhere.
Shop Around
There is no one sized fits all package for business insurance. Because of this the quote you get for your business can differ substantially from one insurance company to another.
In short, it pays to shop around. We recommend starting with the online service TechInsurance.com which allows several large insurers to compete for your business, and have agents standing buy ready to talk to you.
Once you have the lowest rate from that source, then go and talk to a local insurance agent, have them review the policy and see if they can beat it. If they can, without sacrificing the quality of the policy, then go with them. If not then go with the techinsurance provided option.
Some of the largest providers in the business insurance space who likely have agents in your area are Allstate, The Hartford, Travelers, and Liberty Mutual.
If you want to get a free, no-obligation quote immediately, fill out this online form with The Hartford.
Questions To Ask When Buying Insurance
Ask Yourself: What harm could your product or service cause?
There are going to be obvious things that you want coverage for depending on the business. What have other businesses like yours been sued for in the past? Make a list of those things, and make sure you understand how it would be handled if you ever needed to make a claim.
Ask your agent to describe what coverage you need?
You want to make sure that you are working with an agent that has experience specific to your business. A good way of determining this is to ask them to describe the type of coverage they think you need.
Agents who have worked with businesses like yours should have no problem giving you a detailed explanation, in laymen’s terms, of the unique risks of your business. If they can’t then look somewhere else.
What are the deductibles?
An insurance deductible is the amount that you have to pay before your insurance kicks in. As an example let’s say you have $500K in general liability insurance with a $1000 deductible. Someone slips in your store and sues you. You have to pay the the first $1000 in costs related to the lawsuit. After that the insurance company pays up to $500K in additional costs.
What are the coverage limits?
In the above example $500K is the coverage limit.
Ask how specific claims are handled?
If you are sued does the policy pay for your legal defense? Do legal costs count against your level of coverage? Under what circumstances are you not covered?
The Bottom Line
You should now have a good understanding of the different types of insurance available and how to go about purchasing the right insurance package for your business. All of your coverages, limits, and policyholder information should be listed on your certificate of insurance (COI). Don’t be surprised if a supplier, vendor, or partner asks to see your COI to ensure your sufficiently covered. If you have any questions as you go through the process, drop us a comment in the comments section below. We respond to all comments personally.
The Hartford makes getting a comprehensive insurance policy for your business easy. Their team of specialists will get you a customized insurance quote based on your needs. Fill out their online questionnaire to get a free, no-obligation quote on a plan that’s made to fit your business.
Geoffrey A. Gordon, CFP®, CIC, CRM
Excellent overview of different types of commercial insurance at http://www.agordon.com. Agreed that structuring a customized risk program that meets the unique needs of the business is critical. We work with businesses throughout eastern Massachusetts, and appreciate great content like this.
0
0
Michael Rosenthal
Great article, David. It does my heart good to see others so deeply committed to providing information and resources to the SMB owners and leaders out there, the driving force and most integral piece of our economy.
As a writer and “marketeer” for Newtek, The Small Business Authority, I spend a lot of time working with our Insurance Division (Newtekinsurance.com) who is licensed in all 50 states, provides both personal and commercial policies, and works with all of the top providers (yes they get preferred rates;) – and all of the great smaller/niche companies, too.
Beyond shameless self-promotion, I wanted to add some thoughts about “breach insurance,” to your comprehensive article. As cyber crime escalates to epidemic proportions, most SMBs (literally ALL of them who use computers) can be targeted and victimized. They can be hacked and fleeced of all their personal/proprietary information – and what’s worse, that of their CUSTOMERS as well.
It may come as a shock to find out that general liability policies DO NOT COVER cyber crime. No. They. Do. Not.
So, with that in mind, one might be somewhat less surprised to discover that 60 percent of all SMBs victimized by cyber crime shut down within one year. With no coverage, there is no way to survive the lawsuits, the bad publicity, and really just the sea of costs needed to right the ship.
The answer?
Breach insurance, of course, is your ace in the hole. And with top statisticians claiming that being victimized through your network is no longer a question of “if” but “when” over the next few years, this is something really worth your time and attention.
Aside from following IT security best practices (none of which are foolproof, Apple Computers and Target were even hacked) the value of cyber/breach insurance is on the rise.
Should you have any questions about cyber insurance, IT security best practices, or anything else in the world of ‘small business services,’ please feel free to reach out to me at mrosenthal@thesba.com. Don’t forget to mention that it was a Fit Small Business article that led you to me … they are a great Organization.
0
0
Thanks for the comment Michael. Interesting point about cyber crime will investigate a bit more and look at updating the guide.
Best Regards,
Dave
0
0