If you own a small business, it’s your responsibility to ensure you protect your investment and livelihood. If not, all of the money, time, blood, sweat and tears put into your business could be all for nothing.
Luckily, business insurance exists for the primary purpose of protecting businesses from the unexpected. There are a variety of plans offering different levels of coverage. Choosing the right one, along with asking the right questions, could be crucial to the future of your small business.
In this post, we cover the top five insurance coverage questions to ask to ensure that you protect your small business from the unexpected.
The Different Coverage Options
Like any insurance, small business insurance (also known as commercial insurance) provides buyers with different coverage options that insure for a variety of different scenarios and functions of the business. The most common coverages include:
General Liability: If an accident occurs at your business resulting in injury, general liability coverage will help pay for any medical bills associated with legal costs incurred if you’re taken to court.
Business Property: This insurance protects your building, and all of your belongings inside of your business, in case environmental damages occur or if your property is stolen.
Business Interruption: Also known as “business income coverage” by some insurers, but the core functions are the same. The coverage replaces any lost income or increased expenses should your business be subjected to one of the covered perils of your plan.
Now that we’ve discussed the basic coverages, here are the questions to ask to be sure that your business is insured to the fullest. Don’t get caught off guard if disaster strikes. Also included are tips to help you save money on your premiums.
1. Am I Protected from Hurricanes?
With recent hurricanes in Texas, Florida, and Puerto Rico, many small businesses are finding themselves left with the damages to repair. In many situations, businesses must rebuild. Although many small business insurance plans will cover environmental losses from fires and windstorms, many actually won’t cover flood damage, earthquakes, and hurricanes.
To overcome this, you should speak to your insurance agent about purchasing special hurricane and flood damage insurance riders if you feel that your property could be at risk. If you live in a coastal region, you can’t afford to be without some form of protection for your property. Especially since hurricanes have become stronger and more frequent in recent years and the trend doesn’t seem to be changing.
2. Do I Need Specialty Coverage?
Along with the weather-related insurance riders, there are also specialty coverages that you can purchase depending on your company’s needs.
Common additional coverage options include:
Debris Removal: This covers the expenses related to removing debris from your property in the event of a fire, flood, or hurricane. While many might overlook these costs, removing debris from the site is tremendously expensive and most property insurance only covers the costs of rebuilding.
Glass Insurance: some property coverage may include glass replacement, however not all do. Replacing a broken plate glass window out-of-pocket can get expensive. Having this coverage option will ensure you don’t incur these costs.
Inland Marine Insurance: This is recommended for businesses that are in possession of any property in transit such as your customers’ belongings. If you run a dry-cleaning business, for example, this coverage option would cover your clients’ clothes in the event of a fire.
These coverage options are generally optional, however, if you can afford it, you should consider purchasing them.
3. Do You Have Replacement-Value or Actual-Cash Value Coverage?
The difference between the two coverage options may not seem like much. If your property is significantly damaged, however, the difference can amount to thousands of dollars.
Replacement-value coverage will pay out the amount that your property would be worth today. Actual-cash value takes depreciation into account and will often pay out less. The premiums for replacement-value are more expensive than actual-cash. But if disaster ever strikes, you’ll receive a more substantial payout from the insurance company.
4. How Can I Lower My Premiums?
Similar to personal insurance, there are some steps that small business owners can take to reduce their premiums. It’s important to ask your insurance provider since they will know the exact discounts their company offers. Some common ways to lower monthly/yearly premiums include:
- Installing a security system
- Adding fire safety precautions
- Employee training
- Hiring a risk manager
Discounts are offered by insurers to businesses that are deemed less risky than others. Adding safety precautions to your business will also help protect your business from any damage. That way, you won’t likely have to file a claim in the future.
Business owners can also lower premiums by selecting fewer coverage options, raising their deductibles, and signing up for package deals that combine multiple coverage options. Determine what coverage you need. Then determine how much you can afford to pay out-of-pocket for different scenarios. Once you’ve determined what you can afford, you’ll be able to make a more informed decision about the actual coverage you’ll pay for.
5. Will You Grow with My Company?
The goal for many small businesses is to expand and hopefully drop the “small” moniker. If expansion is on the horizon, ask your insurers about their expansion practices. This will ensure your relationship meets both of your goals.
Simple things that you can ask insurance agents include:
- Where do they see their agency going in 1, 3, or 5 years?
- Will they continue offering the same products in the future?
- What is the average size of the businesses they represent?
Finding the answers to these questions provides insight into the insurance company’s plan to grow. You don’t want to build a relationship with them and find they can’t handle your claims once your business expands.
Determining the right insurer to protect your business is crucial. Knowing your coverage amounts and what is protected can save you surprises and expenses should disaster or the unexpected occur in the future. Do your research carefully, ask the questions we discussed, and you should be well on your way to finding the perfect insurance provider.