Will I need insurance for my business; if so, what kind, where do I get it and how much should it cost?
Every business requires insurance, at least commercial general liability coverage. The nature of the business will determine the extent and amount of coverage. A home based internet business probably requires less liability insurance than a contractor who works on other peoples’ property and is required to provide an insurance certificate to the customer. Likewise the cost of insurance varies with the nature of the business and its size as well as the different rates charged by insurance companies. Unfortunately, there is no generic formula that can be used to predict how much insurance will cost but, costs can be obtained from internet sites which are all too eager to quote a price. Be sure to have the details available before you ask for a quote. Google, “Business Insurance Rates” to find sites which quote rates. Keep in mind that a personal home owner’s policy does not cover business losses of a home-based business.
Here are the kinds of insurance which are applicable to small business:
- Property Insurance—Insures against loss or damage to your real or personal property. The preferred form of coverage is one that covers “open perils” (all risk of loss or damage) subject to stated exclusions. Flood is a separate insurance.
- Liability Insurance also called Casualty Insurance---Provides protection to the business owner for third party claims for bodily injury, personal injury and property damage arising out of the conduct of the business. This insurance is provided to cover your negligence in the conduct of the business by you and/or your employees, whether on or off the premises.
- Commercial Auto—Just as your personal liability insurance does not cover business liability, your personal automobile policy does NOT cover vehicles used for your business. Separate coverage for collision (losses due to accidents), comprehensive (fire and theft) and liability (protection from losses from being sued) is required.
- Workers Compensation—You will need to insure your employees against on-the-job injuries. Every state is different but every state requires some form of coverage. Locally, Google, “Indiana Workers Compensation” to get quotes.
- Health Insurance—Often driven by the need to be competitive, many companies offer their employees health insurance either fully or partially funded by the employer.
- Life and disability insurance—protects against the death or disability of key employees.
- There are a variety of other insurance or policies such as, Business Interruption Insurance for disaster coverage and Group Life Insurance.
Many businesses are eligible for a “package” policy known as a Business Owner’s Policy (BOP). This is a type of insurance that combines property and liability coverage and may offer tremendous savings over separate policies. Check with your agent or on-line insurer.
A home owner’s policy does not cover losses sustained by a home based business. You will need home business insurance. The good news is that you may obtain coverage by a rider attached to your current home owner’s policy. What’s more, it may be the least expensive way to go. Your home based company may also be eligible for a premium-saving Business Owner’s Policy (BOP). Be mindful that home business insurance is just as important as business insurance for larger enterprises so do your homework before buying.
One can buy business insurance online, direct from an insurance company or through an agent located in the business owner’s locality. An agent is responsible for analyzing the business and securing correct and adequate coverage, along with the administrative duties of handling your account which includes assistance when claims occur.
Before you meet with your insurance representative or shop for insurance on-line, you must have the necessary information on which to base a quote:
- Company overview-how long you have been in business, projected and current gross receipts and the number and nature of employees.
- Address and building specifications-you will need to state whether your business is being operated from a home or a commercial location. If commercial, the total customer area, the age of the building and the types of tenants that occupy the building. The addresses of all the places your employees work and the name and address of the landlord(s).
- Business vehicles-names, social security numbers and driver’s license numbers for all employees who drive company vehicles and the VIN numbers for the vehicles.
- Chemical storage-if you use chemicals in your business, some carriers will want to know where the supplies are stored. If in mobile vehicles, where the vehicles are parked.
- Equipment-age and location of any critical or unusual equipment.
There is an excellent reference booklet available on-line at www.netquote.com. Click on, “business insurance” then click on the, “downloadable guide to business insurance”. Other sources of information about business insurance include, www.about.com and www.sba.gov.