When you start a small business, it's likely you'll have many new and complicated decisions to make, one of which will be the need to obtain business insurance. Although this can seem slightly daunting, and possibly expensive, knowing the right questions to ask can make it that much easier for you.
And what's even better is that you don’t have to navigate this new terrain without a guide, you can quickly get expert advice from a business insurance agent at the Thumann Agency in Dallas, TX.
To get started we’ve put together these eight questions to help you determine just what type of small business insurance you need.
But because each business is a little different to the next, there isn’t a single right answer to these questions. When you review the details of your business, you’ll start to uncover where your risks reside and get a better understanding of the types of insurance you're going to require.
Questions #1: Do You Own a Small Business?
You’re reading a blog post about small business insurance, so we’ll happily assume you own a small business! But if you’re not sure, you can think of it in terms of your total revenues or employee count. If you have less than twenty employees, you more than likely a “small business,” or if you have revenues in excess of $10 million, it's unlikely you're a “small business.”
If you think you’re a small business, then here is a good place to start:
Commercial General Liability Insurance, is essential for every business, small or large. It gives you protection when your company is facing a lawsuit for property damage or injury resulting from a covered loss.
A general liability insurance policy will also provide coverage for advertising liability and product liability.
Professional Liability (also called Errors & Omissions Insurance), provides coverage for a business when there is an error in professional consultation or advise, or an omission of the fact that leads to damages to a client.
Questions #2: Do You Have Employees?
As your new business begins to grow, you may need to hire employees. If you have employees, there are additional forms of business insurance that you’ll require.
For businesses that have employees, Workers’ Compensation Insurance is a legal requirement in all of the state's but Texas. It covers the costs associated with illnesses and injuries that your employees have on the job. For details, check out our state-by-state guide to Workers’ Comp laws.
Employment Practices Liability Insurance (EPLI) covers you when an employee tries to sue you for harassment or discrimination.
Questions #3: Do You Own or Rent an Office?
Another sign that your business is expanding is the need for commercial office space. If you leased or purchased commercial facilities you’ll need Commercial Property Insurance to provide insurance protection to the building structure where your business is located. This will also be a requirement of any mortgage company or landlord.
As a small business, you typically will not buy commercial property insurance on its own. This is due to the fact most small businesses qualify for a convenient, and often money-saving bundle called a Business Owner’s Policy ( or BOP) that includes Property Insurance along with the General Liability Insurance.
In fact, the Business Owner’s Policy also includes a coverage called Business Personal Property, which covers the property owned by the business like computers, desks, and other items used in the day-to-day running of your business.
Question #4: Do You Accept Credit Cards?
Many small businesses will take payments online or store customer data on the cloud or a local storage system. If this applies to you, then you may be a target for hackers.
Cyber Liability Insurance is a form of protection if there is a data security breach. Cyber liability insurance covers the costs of responding to a data breach, and can provide you assistance in complying with federal and state laws. If you have the right insurance, you will be able to move quickly to solve a breach and work to earn back customer trust.
The Thumann Agency can easily and quickly put together a package that covers you for all of the above - Call Today for protection.
Question #5: Do You or Your Employees Drive for Work?
This is an area of misunderstanding for most employer and employee alike. As the assumption is made that their personal auto insurance coverage will kick in when accidents happen during any work-related trips. Though this may not be the case. In fact, many private passenger auto insurance policies have an exclusion for business use.
If you require your employees to use their own vehicle for any trips as part of their employment, you need to think about the following business insurance options:
Commercial Auto Insurance, which provides coverage for cars titled in your business’s name.
Hired and Non-Owned Auto Insurance, which covers cars owned by you or your employees that are used for work purposes. In some situations, you may be able to add this policy to your Business Owner’s Policy.
Question #6: Do You Sell Alcohol?
If you run the type of business where you can get an adult beverage, you may need to secure a particular form of business insurance called liquor liability.
In all 50 states, a business can be held liable for alcohol-related damage that happens on its property, including fight-related injuries and damage to patrons’ property. This is where liquor liability comes into actions.
Another significant reason to get liquor liability insurance is for “dram-shop laws”. 42 states allow businesses to be held liable for damage their patrons cause after leaving the premises if it’s ascertained that liquor was a proximate cause of the damages, or the driver was operating a vehicle under-the-influence.
Question #7: Do You Have a Lot of Money in the Bank?
For a relatively low investment, an umbrella insurance policy provides an additional layer of coverage that can be applied to multiple underlying policies, including Hired and Non-Owned Auto and General Liability. This will be very valuable to you if your business doesn’t have a large cash reserve, and you find out that your liability exposure exceeds your purchased limits.
Questions #8: Are You a Nonprofit?
You may benefit from Directors & Officers Insurance (D&O). This coverage pays out when someone sues a member of your board for doing something wrong (e.g., improperly firing an employee or mishandling money ).
But What About the Cost of Small Business Insurance?
This is the most frequently asked question we receive. As we mentioned above, each business is slightly different, so, unfortunately, it’s not the type of question that can be answered easily.
Even though these basic questions are a helpful way to think through your insurance needs, the smartest way to move forward is to sit down with a business insurance expert and get a professional review of your risk profile. This can help to fully determine the right portfolio of insurance protection that is right for your small business.