7 items to consider before you buy business insurance

Brought to you by Insureon Small Business Blog: Risk management insights and more for your business.
The number of options for business insurance can be overwhelming. Learn how to choose the coverage you need for your small business.
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Entrepreneurs need to take several important steps before starting their own small business, including writing a business plan, obtaining financing, and buying insurance. However, as they begin looking for small business insurance, business owners may be confused by the sheer number of options. It can be overwhelming, especially for those who've never purchased coverage before.

Here are seven tips to keep in mind while shopping for business insurance. They will help you meet legal requirements, minimize your exposure to risk, and save you money.

1. Understand your legal obligations

Not everyone is required to purchase insurance for their small business, but some are, depending on their industry, state laws, or other requirements. For example, if a business owner is renting a commercial space, the landlord might require general liability insurance, which can protect against the costs associated with third-party property damage or injuries. Depending on which state they work in, business owners with employees may be required to purchase workers' compensation insurance.

Business owners should research the legal obligations for their area and industry to ensure they have proper coverage. An experienced insurance agent can help advise them on the coverage they are likely to need.

2. Know your industry’s risks

Every industry is different, and so are the risks that a small business owner might face. For example, an accountant needs to worry about being sued if a mistake is made filing a customer's tax return, while a restaurant owner should be more concerned about a customer becoming sick after eating a meal at the restaurant. Professional liability insurance can protect accountants and other experts from lawsuits related to errors they make in their professional capacity, while product liability insurance can pay a restaurant's legal bills if customers become ill or suffer an allergic reaction because of the food they consumed.

By carefully evaluating the risks they are most likely to experience in their industry, business owners can ensure they are purchasing the appropriate coverage to protect their business.

3. Prioritize coverage over business insurance cost

Once business owners know which policies they need, their next question is usually how much business insurance will cost. After all, when your budget is tight, every penny counts. However, it's important to realize that while business insurance is an added expense, it plays a crucial role in protecting businesses from serious financial damage.

It can be tempting for budget-conscious business owners to pick the cheapest policies they can find, but that could leave them exposed to greater financial risk. Cheaper policies are priced that way for a reason. Perhaps they offer limited coverage, or maybe the insurance carrier follows questionable practices, such as slower claim processing times or abrupt premium hikes.

Business owners would be better served by prioritizing the reputation of the insurance provider and the amount of coverage they are getting instead of making decisions based strictly on cost. That way when an incident happens and they need to file a claim, they have the coverage they need.

To get a ballpark idea of how much coverage might cost for your business, check out our business insurance cost analysis.

4. Work with top-rated insurance providers

One way to ensure that you are purchasing coverage from an insurance company you can trust is by looking at its rating. Ideally, you should look for insurance companies with an "A" rating. A-rated carriers have a reputation for offering reliable coverage, prompt payouts, and consistent terms. They are top-tier in the industry and have a reputation for the quality of their products.

To make sure you are buying coverage from insurance carriers you can trust, a business owner should work with licensed insurance agents, like the experts at Insureon. Just fill out one application and receive up to three quotes from top-rated carriers. Licensed agents can then help you select the coverage that best matches your business's needs. Insureon agents specialize by industry, so they will know exactly what policies are typically needed by someone in your line of work.

Experienced agents can also help save you money by bundling policies. For example, Insureon’s agents often recommend a business owner's policy, or BOP, which combines general liability and commercial property insurance – typically at a lower rate than if the two policies were purchased separately.

5. Read your business insurance policy thoroughly

Policies vary widely from carrier to carrier, each with its own limits, premiums, deductible, and exclusions. Business owners should make sure they understand what is included – and excluded – in a policy before they buy it.

Taking the time to read and understand a policy before purchasing it can help business owners ensure that there are no gaps in coverage. This can also help prevent unexpected surprises if they ever need to file a claim. If you ever have questions about what a policy does and doesn't cover, your Insureon agent can help.

6. Consider the deductible

Most business insurance policies include a deductible, which is the amount the business owner is responsible for paying in the event a claim is filed for a covered loss. The insurance carrier will then cover the rest of the claim amount, up to the policy limit.

Business owners may be tempted to choose a policy with a higher deductible in order to pay a lower premium. But if they ever need to file a claim, a high deductible might be more than their business can afford to pay. Although policies with a lower deductible tend to have a higher premium, it also means a smaller amount to pay when making a claim.

7. Overestimate your insurance needs

If your business is ever sued, the litigation process can be financially devastating. Even if a lawsuit is dismissed, it can still cost your business thousands of dollars in legal fees.That's why it's better to buy more than the minimum insurance coverage if you can – you never know when you might need that extra protection.

If a customer is injured at your business, or an employee gets into a car accident while running work-related errands, expenses can add up quickly. If a settlement is awarded, any amount past your policy limits would be your business's responsibility.

One way to make sure you have adequate protection is with commercial umbrella insurance. This policy offers extra liability coverage in situations where legal costs exceed the limits of your policy. It can supplement existing policies you've already purchased for your business, such as general liability, employer's liability insurance (typically included in workers' comp policies), and commercial auto liability insurance.

Compare quotes from trusted carriers with Insureon

The process of buying small business insurance can be confusing, but it doesn't have to be. By investing some time upfront to research your obligations and risks, and by working with a licensed Insureon agent, business owners can feel confident they are receiving the right coverage for their business from a top-rated carrier at a reasonable rate.

Complete Insureon’s easy online application today to compare insurance quotes from top-rated U.S. carriers. Once you find the right policy for your small business, you can begin coverage in less than 24 hours.

Save money by comparing insurance quotes from multiple carriers