How much insurance does my small business need?

Commercial insurance is vital for your business, small or large. Even multi-million-dollar corporations still face exposures daily, many of which could lose them hundreds of thousands worth of their hard-earned revenue. As a business owner, you know that the purchase of small business insurance is critical – but how much and what kind of insurance do you need? 

Naturally, you would never want to spend more money than you need to. Then again, you wouldn’t want to be underinsured either. The purchase of commercial insurance quickly becomes a criss-cross between exposure and bursting your budget.

How to choose the right amount of insurance for your small business:

Thankfully, choosing the right amount of insurance for a small business doesn’t have to be a guessing game. Of course, there is no way to precisely predict the sort of risks you’ll face on the job, off, and after the fact, but you can make some educated guesses as to what your business needs based on the way that it operates, what you own, and you can always work with a broker to help you out.

Here are some strategies to use while you shop for your commercial insurance policy:

Know the difference between personal insurance vs commercial

If your business is particularly small or you work out of home, remember to differentiate between personal and commercial insurance. Have a car, but don’t use it for any deliveries, driving clients around, etc.? That car should be insured with your personal auto insurance – not a commercial vehicle policy. On the other hand, if you have clients regularly visiting your home office for treatments, your home insurance won’t cover any incidents or damages as this is considered commercial activity.

Make a list

It sounds so simple – and really, it can be. Take the time to sit down, possibly with a broker, to create a list of potential losses that your company may experience. Take into account your property, equipment, tools, vehicles, and supplies. Remember that risks like the death of an essential employee, cyberattack, or equipment breakdown are all prevalent and should be noted.

Work with a broker

A broker is typically your best resource when it comes to understanding your insurance policy, especially a broker with experience in your industry. They can help you explore strategies and apply for discounts that may lower your premiums without slashing any critical coverage. Your broker should understand your business as it is, not just “general” business practice. A broker will also help you to shop around for a policy that is worth the money and isn’t just cheap for the sake of being cheap.

Common small business insurance coverage options

An inventory is the most important thing to do when it comes to determining how much coverage you need as a small business owner. You’ll want your coverage to match up with the risks you face, on the job, off, and after. If you have never purchased commercial insurance before, you may not be aware of the options that exist or that are available to you. Here is a list of the most common small business insurance coverage options:

Commercial general liability

This is the most common form of business insurance which can cover your business from liability claims arising from bodily injury or property damage to third-parties. For instance, if a client slipped and fell on your business property and sued, your commercial general liability insurance would cover you for any lawsuit expenses.

Property insurance

Your business relies upon the property it operates out of. Commercial property insurance can cover your business from common risks like fire, vandalism, theft, wind, and more. 

Professional liability 

Some businesses don’t offer a product but instead a service or advice. Businesses like these face different risks that are particular to the work they do, and most conventional commercial general liability insurance policies won’t cover losses to professional businesses. For this, you would need errors and omissions’ or professional liability insurance that can cover your business from claims of negligence, misinformation, error, and more.

Other popular examples of common coverage options include:

  • Commercial vehicle insurance
  • Crime insurance
  • Business interruption insurance
  • Equipment breakdown insurance
  • D&O (Directors’ and officers’ insurance)
  • Cybersecurity insurance

A broker can break these options down further for you to understand. Options like these may mean the difference between significant financial loss and continuing business as per usual!

Yes, it can be nerve-wracking to scour your options for the best commercial policy that doesn’t break the bank, but it is a necessary purchase and gives you greater peace of mind. If you need help, enlist the assistance of a professional broker and remember that it is always better to be safe than sorry.