5 Lessons About Insurance for Newbie Small Business Owner
5 Lessons Every Newbie Small Business Owner Should Learn About Insurance
Brainstorming about creative business gimmicks studying your target demographic, hiring creative people, training employees
dealing with sales, and getting ahead of your competitors – these are just some of the consuming yet exciting parts of running a business. It’s all about focusing on “what needs to go right.” Rookie business owners, though, often overlook “what could go wrong.”
No enthusiastic newbie entrepreneur starts a business and then clouding his mind with the worst possible situations. However, risk management, just like other business planning essentials, should be taken care of to prevent your profits from getting wiped out when a catastrophe strikes. And no discussion about risk management is complete without talking about business insurance
If you’re planning to buy insurance for your business, here are some of the points you need to keep in mind.
1. Liability insurance is a must
Every business needs to have a Commercial General Liability (CGL) policy, a broad type of insurance that covers liability claims from accidents, injuries, or negligence when a business is found accountable. It protects the company or business owner against a formal lawsuit or other third-party claims by covering the legal defense costs associated with the claim.
CGL policies have different levels of coverage, including the premises coverage, the operations coverage, and the product coverage.
Premises
It covers the liability claims that take place at the business’ physical location during regular business operations. It may arise from the occupancy or use of a particular premise. For example, a customer slips on a wet floor due to the negligence of one of the store employees.
Operations
It covers the liability for bodily injury or property damage due to activities, often associated with manufacturers, processors, or contractors. For example, a customer passing by the store is injured while an employee painting the facade accidentally drops his paintbrush on the customer’s head.
Products and completed operations
It covers the liability for bodily injury or property damage that is the result of a finished product manufactured, sold, or distributed by a business. For example, a customer suffers from stomachache after eating a sandwich with cheese that has gone bad.
2. Liability insurance does not cover everything
Your insurance policy has its scope and limitations, and it’s your obligation as a business owner to understand things that are and are not covered.
General liability is a standard insurance policy that protects your business against liability claims for bodily injury and property damage arising out of premises, operations, and products. However, it does not include wage replacement and medical compensation for employees injured (or died) in the course of employment. You have to buy a workers’ compensation coverage for this matter in exchange for mandatory relinquishment of the employee’s right to sue you for negligence. Professional liability and auto insurance are not included either.
Additionally, liability coverage doesn’t cover intentional acts, including employee fights, fraudulent behavior, and criminal activity, and the damages sustained from those acts.
3. Opt for discounts and bundles
Many insurance providers offer lower prices for combined policies. A Business Owner’s Policy (BOP) insurance is a policy that protects your business from major property and liability risks in one package.
It includes liability protection, property insurance for buildings and their contents (office equipment, machinery, furniture), and business interruption insurance, which covers the loss of income resulting from a catastrophe that disrupts the business operation.
Purchasing a Business Owner’s Insurance, which is intended specifically for small businesses, will help you pinch your pennies while giving you peace of mind. Some insurance providers may also offer discounts on other add-on policies.
4. The nature of business influences policy costs
The higher the risk, the higher the policy cost. Insurance companies know how to classify businesses in many different categories.
For example, the insurance premiums of a clothing boutique are significantly lower than that of a fireworks shop. You may also need to seek other coverage options, like cyber-liability insurance if you’re exposed to risks associated with computer systems with online access.
Aside from the nature of the business, the insurance company also seeks the size of the business’ payroll or past sales figures or expected sales figure to determine their premiums. Your potential financial impact peaks, so it’s necessary to update and review your policies to make sure they continue to provide the right level of coverage for your business.
5. It’s possible to decrease risk
As your business risks change, so should your coverage. The good thing is you have the power to reduce these risks. You can take certain measures to decrease risk, like updating or adding security systems, installing fire fighting sprinklers, and conducting employee safety training programs. Not only will these prevent injuries and damages, but will also give you reduced insurance premiums.
Author Bio: Carmina Natividad is a resident writer for Insurance Advisernet, one of the largest and most credible general insurance businesses in Australia and New Zealand, providing high quality risk management advice for business owners. Being an enthusiast of pursuing financial security herself, she writes and shares self-help articles focused on finance and business
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