Whether you’re thinking about starting a brand new business, or you’ve been in business for over a decade, knowing how to properly manage business insurance cost is vital to the overall success of your company. If you’re not properly managing your business’s risk (and trust me, all businesses have inherent risks), you’re potentially putting your entire company’s existence on the line.
In order to have a fully protected business, you need business insurance, period. Do you know what type of policies are right for your business? Most businesses need more than one policy (unless you purchase an umbrella policy). If you’re unsure of where to begin, or need a quick refresher, below are five of the most common business insurance types.
Five Major Types of Business Insurance
- Commercial Auto Insurance
- Commercial Property Insurance
- General Liability Insurance
- Workers’ Compensation
- Errors and Omissions Insurance
The most common type of business insurance (found in nearly every single industry) is general liability insurance. This insurance type protects businesses against third-party legal claims. For example, if a customer gets injured on the property of business A, and decides to sue business A, business A’s general liability insurance will cover most of the associated legal costs.
Now that you know a bit more about the most common forms of business insurance, let’s get right into our list of the top 10+ insurance management tips.
10+ Tips for Effective Business Insurance Management
1. You Probably Need General Liability Insurance
If you don’t already have a general liability insurance policy, it’s absolutely recommended that you purchase one immediately. Have you ever wondered about how your company would pay for a lawsuit? Legal actions made against companies can easily reach into six figures. Can your company afford that? That’s exactly why you need a general liability policy.
2. Think About Opening a Commercial Property Policy
It doesn’t matter if you rent your space, or you own it, it’s generally recommended to have a commercial property insurance policy. This type of business insurance policy would cover everything you own in your building/space (along with the actual property itself). Everything except damage from a flood or earthquake is typically covered. If you need earthquake or flood protection, you will need to purchase additional policies.
3. Workers’ Compensation is Essential
Essential as in required by law. Nearly every single state in the country requires companies to have a workers’ compensation policy. Workers’ compensation provides coverage for your company in the event of an employee getting injured at work. If you have a policy, it will cover that employee’s lost wages (and other costs).
4. Disability Insurance is Recommended
Although some states don’t have this as an explicit requirement, it’s still recommended. This type of policy provides extra coverage (in addition to workers’ compensation).
5. Business Interruption Service
If you think that your commercial property insurance policy doesn’t provide adequate coverage, then you should look into buying a business interruption policy. These kinds of policies protect businesses from lost income (due to property damage and/or operations interruptions).
6. Data Security Policy
This type of policy protects businesses from cyber-related losses. Sometimes called a “data breach” policy, this kind of insurance is a must-have if your business operates in the tech space (or even has an online presence). Imagine if all of your customer’s online data was stolen from your website. What would you do? This is where data security policies come into play.
7. Commercial Vehicle Insurance
This is one of the more common types of business insurance, and if your company owns any vehicles it’s most likely required by law to have a commercial vehicle policy.
8. Know What Your Business Needs
In order to truly have an effective insurance strategy, you need to understand exactly what your business needs in regards to protection and coverage.
9. Compare Providers and Shop Around
Before choosing an insurance provider, it’s recommended to shop around first. Likewise, when comparing quotes, don’t simply just choose the company with the lowest premium. This could end up costing your business thousands down the line.
10. Have a Good Relationship With Your Insurance Agent
One of the most important points of contact during any insurance crisis is your insurance agent. Develop a good relationship with yours to ensure everything is handled as smooth as possible (if your policy needs to be used to cover an event).
11. Carefully Review and Analyze Your Insurance Policies
You should have a quarterly or annual review of all your policies. Knowing which policies are useful and which ones aren’t can save your company thousands of dollars per year.