Your business has officially gone from startup to up-and-running. You’re hiring more employees, building partnerships, and scaling to the moon. Nothing can stop you now.
That’s exactly what 75% of underinsured business owners think too. But as you scale, your risk accrues along with your revenue. One critical mistake or unforeseen disaster could end your business for good.
Why do so few businesses get adequate commercial insurance coverage? Many business owners don’t consider commercial insurance to be a priority. Others simply don’t understand the limitations of their coverage, leaving them vulnerable to liability.
As a recession looms, small businesses are going to be on the chopping block. Getting full commercial coverage may make the difference between succeeding and failing over the next few years. Here’s what to consider.
Commercial Insurance May Be Required
For many up-and-coming businesses, a lack of insurance doesn’t just put them at risk of disaster. It also puts them at risk of prosecution. In the US, state laws dictate that most businesses must have a certain degree of coverage. For example, as soon as you hire your first employee, you may be required to purchase workers’ comp insurance, unemployment insurance, and disability insurance. Even small businesses without employees may need to purchase professional liability coverage, especially if they sell services or consultations.
Every state has different coverage requirements, so it’s important to do your homework before opening up shop. You’ll also need to be diligent about coverage as you expand operations into different states.
How to Manage Coverage vs Costs
Commercial insurance can be costly, which is why so many business owners put it off. However, it’s not nearly as costly as losing your business due to a fire or a lawsuit. As a general rule, coverage should never be sacrificed to save money. If insurance costs have you sweating, there are things you can do to reduce them. Implement a few of these safety precautions to give insurers a reason to offer you a great rate:
- Install a security system with cameras and alarms
- Take safety measures by installing fire alarms, sprinklers, and C02 detectors
- Implement a company-wide safety policy that includes regular safety training
- Perform regular checks and inspections
Minimizing workplace risk for your employees and assets may require some investment in the short term, but it will significantly reduce your insurance premiums. Plus, it will help you build a safer and more predictable working environment overall, which is good for business.
Understanding Gaps in Coverage
It’s easy to read the insurance paperwork and think you’re covered. But there are plenty of unknown threats out there that insurance companies won’t give you a dime for. If you purchase the bare minimum of commercial insurance, your coverage is likely full of gaps. This is because minimum coverage is designed to protect workers and customers and not your business.
Every industry has different risks, so the best way to identify potential gaps in your coverage is to speak to a professional insurance agent in your field. They can recommend expanding or minimizing your coverage based on your current size and budget. A short consultation could save your business in the long run.
Some small business owners such as freelancers and performers may be able to save a lot of money by foregoing traditional commercial insurance for cheaper non-commercial alternatives. For example, if a professional guitar teacher has 5 guitars, it would likely be cheaper to purchase musical instrument insurance than commercial property insurance.
However, it’s important to consult with an agent before attempting to avoid commercial insurance to make sure that non-commercial insurance offers comprehensive coverage. For instance, an IT freelancer may insure their computer setup privately without knowing that they require cyber liability insurance to protect more than just their hardware.
Work From Home Coverage
In the age of work-from-home, it can be difficult for business owners to understand the extent of their coverage. For example, people who run their business from home may assume that their homeowner’s insurance will cover damage or injuries that occur during business activities. But this is not always the case.
If anyone besides yourself enters your property for business purposes, including clients, employees, partners, or delivery people, you will need to purchase business property insurance to protect you from liability.
Protect Your Business from Risk
How long can your business coast before something unexpected happens? It only takes one fall, one spill, or one faulty electrical outlet to send your profits—and potentially your business—up in smoke. Consider the factors above and get commercial insurance to protect your business before it’s too late.