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Ask these questions to choose the right insurance for your business

Posted by Shivali Anand

October 27, 2021    |     4-minute read (769 words)

Evaluating the different types of insurance you may need when starting a new business can be daunting. You will likely be presented with a slew of options but need only one or two policies to start. 

To help you home in on the most appropriate type of insurance for your needs, we've broken down the specifics of the different types commonly purchased by business owners. 

Each type of coverage is displayed with a corresponding question to help determine whether you need it.

Do you own or rent a commercial workspace?

Consider a business owner’s policy:

Some insurers provide comprehensive business owner's packages, which allow you to purchase a collection of business insurance policies all at once. This is referred to as a Business Owner's Policy (BOP). These packages usually include both general liability and commercial property insurance. If you own or rent a workspace, you likely need a business owner's policy.

Does your state mandate workers’ compensation insurance?

You need workers’ comp:

Workers’ compensation covers illnesses or injuries sustained by your employees (and the owners of the company) while on the job. Most US states mandate workers’comp if you employ a certain number of W-2 employees; therefore, it may not be a choice if you fall into this group. In California, for example, even if you just have one employee, you must carry workers' comp insurance. So, learn what your state's criteria are and get coverage that meets them. 

Do you need protection from possible customer lawsuits?

Consider general liability insurance:

Obtaining general liability insurance is often a first step for new firms since it protects assets in the event of a lawsuit. For example, if someone is hurt due to a slip or fall at your place of business, general liability insurance would generally provide coverage. These policies are tailored to your company's needs, so you won't find an off-the-shelf option that covers everything. 

Do you need to protect your business’s property/equipment?

Consider property insurance:

Property insurance helps you get paid if your property is damaged or destroyed. For example, if your building burns down, this sort of insurance is likely to cover not just the structure but also the contents within the structure, such as your inventory and computers.

Do you store data in the cloud or electronically?

Consider cyber liability insurance:

Depending on your business, you're likely to retain sensitive client information such as credit card numbers or health records. Consider cyber liability coverage to keep your network safe from cyber attacks. If you're found liable for violating someone's privacy and have to defend yourself, the insurance will assist you in paying for your defense and pay for any damages.

Do you need loss of income coverage in the event of a natural disaster?

Consider business interruption insurance:

Business interruption insurance covers income loss suffered after a disaster If your facility is damaged by fire, your property insurance may cover the cost of your inventory and computers. Still, you may need business interruption insurance to replace lost revenue.

Do you have a company vehicle?

Consider commercial auto insurance:

Although hardly every business has a corporate car, you'll need commercial auto insurance if yours does. If the vehicle is destroyed or someone is injured in it while on the job, these plans will usually provide coverage.

Do you operate a business from home?

Consider home-based business insurance:

Consider adding a rider to your homeowner's insurance policy to protect yourself if you run a company out of your home. It can help you recuperate the expense of losing business equipment in some circumstances, and it can cover accidents that anybody could get after visiting your house to do business.

Does your state require unemployment insurance?

You need unemployment insurance:

Unemployment insurance, like workers' compensation, is usually mandated by your state if you have employees. Employees will be able to continue earning money if they lose their employment if they have this sort of insurance. When you first enroll employees in your payroll process, you'll set up this coverage.

Do you sell or manufacture products?

Consider product liability insurance:

If a product malfunctions and causes injury, your general liability coverage may not cover it in rare circumstances. Businesses that produce, distribute, and sell products should consider purchasing product liability insurance to protect themselves.

Consult with a professional before deciding

It is wise to speak with a business insurance professional who can assess your risk and advise you on the appropriate types of policies and coverage levels you need. As you negotiate the insurance process, attorneys, accountants and professional organizations can also be valuable information sources.

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