New businesses have many options when it comes to collecting money for their goods or services. In a nutshell, the job of a small business insurance broker is to help these business owners protect as much of that money as possible.
Unfortunately, many business owners elect to cut corners on their small business insurance policies and hope that they do not face a loss or a claim while uninsured. However, just one liability claim often means tens of thousands of dollars in litigation and settlement costs, and most new businesses simply don't have the resources to deal with such unexpected expenses.
Furthermore, insurance providers often offer premium discounts to firms that have had continuous coverage, making it even more unwise to go without insurance and give up these discounts.
Here are the major types of small business insurance policies that each new enterprise needs.
Whether your business is located in a downtown skyscraper, a suburban shopping mall or a spare bedroom, general liability insurance is an absolute must. These policies cover property-related liability claims such as slips and falls. Typically, the policy covers most of the associated costs, including settlement costs, attorneys’ fees, investigators' fees, and other expenses, so policyholders usually only pay deductibles. These costs are often substantial as fall-related compensation alone amounts to over $70 billion a year.
Furthermore, fall cases are rather easy for plaintiffs to prove in court. In most states, the property owner does not even need to actually know about the loose stairway rail, burned-out light, or other defect that caused the accident. Circumstantial evidence is more than enough to establish liability.
General liability policies cover other losses as well, such as restaurant customers who get sick from eating the restaurant’s product.
These small business insurance policies are usually quite affordable because most companies sell so many of them. Premiums are even lower if your business is an online retailer or another firm with little or no foot traffic.
General liability insurance does not cover most losses related to fires, vandalism, theft and other accidental disasters. Business owners who do not own the building but have property inside it, such as computers, furniture or inventory, should look into business personal property insurance.
Such disasters should not be taken lightly. Fires are a good example. Much of the cleanup and recovery costs come not from the flames themselves, but from the smoke and water damage, so even a small fire can create significant expenses. Furthermore, any cleanup delays increase these costs exponentially. A good small business insurance broker does much more than sell you a policy. Your broker should be able to get you the best available restoration rates, thus minimizing your claim as well as your business's downtime.
In addition to general property insurance, many owners consider adding business interruption insurance as well as flood and earthquake insurance.
Cyber Liability Insurance
Many business owners think that cyber thieves only target big businesses with large amounts of information because these high-profile breaches are usually the only ones featured in the day’s headlines. But most cybercriminals know that smaller businesses usually have fewer security safeguards and are therefore easier to hack.
Moreover, many hackers do not want money. Instead, they may have a grudge against an individual at the company or may disagree with the owner’s stance on a political or another issue. Many hackers don't even want anything at all. They just want to prove to themselves that your system can be breached.
The stakes are high, as average losses for a 1,000-record data breach run as high as $87,000 per incident. It is little wonder that most underinsured businesses that sustain a cyber liability attack close and never reopen.
Once again, a strong liability insurance policy may be your business’s only defense, as cyber thieves are so sophisticated that a breach may seem inevitable. Most of these small business insurance policies cover the following:
- Monetary losses
- Investigations to determine the source of the breach
- Credit monitoring and other services for victims
- Future regulatory compliance costs
One of the best ways to keep cyber liability insurance affordable is to decrease risk by, for example, limiting the use of thumb drives and other removable drives, requiring robust alphanumeric passwords and restricting the amount of work performed over unsecured Wi-Fi networks.
All these types of policies vary from company to company, and they all have important exclusions and limitations. Reach out to an experienced broker today who can get your business started on the right path.
Do you currently have liability coverage for your business? Have you considered adding additional coverage? What has your purchasing experience been like? We'd love to hear from you!
About the Author
Charong Chow is the head of content at Embroker, which empowers businesses to take risks that will help them grow. Embroker provides technology that takes the pain out of insurance, offers expert service from the best brokers in the game and partners with the nation’s leading carriers to surface policies tailored to your company.