Business insurance is an essential investment for safeguarding your company against risks and liabilities. However, navigating the insurance landscape can be challenging, especially for small businesses. Here are key factors to consider before purchasing business insurance:
1. State and Local Government Requirements
Each state and locality in the U.S. has specific regulations regarding business insurance. These may include minimum coverage limits, mandatory types of insurance, or certification requirements. For example, workers’ compensation is required in most states if you have employees, but the rules vary. Additionally, certain licenses and certifications may require proof of insurance before you can legally operate. Failing to meet these requirements can result in fines, license revocation, or even business closure. Always research the requirements specific to your state and locality to ensure compliance.
2. Contractual Insurance Requirements
Often, your business may be required to fulfill certain insurance obligations as part of contracts with clients, general contractors, or vendors. For example, a client may require you to have general liability insurance or professional liability insurance to cover potential errors or accidents that could occur during a project. Ignoring these requirements can lead to contract breaches, loss of business, or legal disputes. Review all contracts carefully to understand the insurance obligations and ensure that your policy meets these requirements.
3. Cheaper Isn’t Always Better: Understanding What You’re Buying
In business insurance, it’s important to recognize that cheaper policies are not always the best option. A key factor to consider is the correct classification of your business under the insurance policy. For example, the insurance needs of a handyman differ significantly from those of a roofer or general contractor. If your business is misclassified, you may face claim denials or insufficient coverage in the event of a loss. Work with your insurance agent to ensure your business is correctly classified, and fully understand the coverage provided by the policy you’re purchasing.
4. Talk to a Human
The ability to communicate directly with your insurance agent is crucial. If your agent is unavailable or unwilling to discuss your concerns or explain your policy, this is a red flag. Business insurance is complex, and having an agent who can guide you through the nuances, answer your questions, and provide personalized advice is invaluable. Before purchasing a policy, ensure that your agent is accessible and responsive. If you can’t get your agent on the phone – DO NOT BUY !
