No matter what type of business you operate (and how long you’ve been operating it for), it’s important to make sure that your company is financially protected from lawsuits. This is where business insurance comes in. We know what you’re thinking, “business insurance is expensive, I don’t have the funds for that.” Well, you might be surprised to learn that business insurance doesn’t need to be expensive.
In fact, the majority of business insurance policies vary in price from just a few hundred dollars (per year), all the way up to the thousands. However, before you start worrying about how much you’re going to pay for your insurance, you need to figure out exactly what type of insurance your business needs.
Chances are that you actually need more than one type of policy (in order to make sure that your business is fully protected). Below we detail the most common types of business (and what they’re used for). After that, we get into business insurance cost details.
Business Insurance Types
There are numerous types of business insurance, but for the purposes of this blog we’ll be covering the main five. The first (and one of the most common types) is known as (general) liability insurance.
General Liability Insurance
General liability insurance protects a business from legal claims resulting from injuries, property damage, and also what’s known as “advertising injury.” There are actually a few different types of liability insurance, so knowing the difference between general liability and professional liability (for example) is important. Which brings us to your next insurance type.
Professional Liability Insurance
This type of liability insurance differs from general liability, in that it protects a business against claims of negligence. It’s commonly referred to as “errors and omissions” insurance. Professional liability insurance is common with businesses that deal in consultation services. An example of professional liability insurance in action would be a consulting firm being sued by a former client for “negligent consultation.” The company’s insurance policy would effectively protect them from any associated legal costs.
Commercial Property Insurance
Commercial property insurance exists to protect a business’s property (and the contents of their property – i.e. equipment). If your business owns property this type of insurance is essential. Even if your business rents or leases property, you should still look into a commercial property policy. If you’re interested in learning more about commercial property insurance, go to this link )
Worker’s compensation is one of the most common forms of business insurance, popular across nearly all industries. This type of insurance essentially pays the employees of a business if they get injured while at work. Workers’ compensation is popular because if an employee is paid via workers’ compensation, they typically forfeit the right to file legal action against their employer.
Commercial Auto Insurance
Commercial auto insurance is used to protect business-owned vehicles in the event they’re involved in an accident. If your business uses vehicles in its operation, you need to open a commercial auto policy (in some states it’s against the law to not have a commercial auto insurance policy).
Overview of Business Insurance Costs
How much your business insurance policies are going to cost you depends on numerous factors. The primary one being which industry your business operates in. After that, insurance companies take into account the size of your business, how much revenue you produce, how long you’ve been in business, etc. All of these factors are used during the quoting process.
One of the biggest mistakes you could make when shopping for a business insurance policy is choosing a provider based on how much they quote you for. Like nearly everything else in life, you get what you pay for. This is especially true in the insurance industry. Just because an insurance company has a lower rate than another company, doesn’t mean that their service will be any better (in fact, sometimes it’s the opposite).
So when you’re browsing different providers and shopping around for different quotes, remember that a lower price isn’t always the best option. One of the most important factors you should keep in mind is exactly how much coverage you’ll receive with any one policy.
Most businesses need more than one business insurance policy. In this case, it’s recommended to purchase an umbrella policy. An umbrella policy essentially conjoins multiple policies together under one main policy (hence the name “umbrella”). This makes it far easier to manage your insurance policies (rather than dealing with different policies under different providers).