combination lock and chainOne of the most difficult areas of starting a new business is choosing the insurance.  Not only do you need to obtain the correct types, but you will also need to choose the best policies with enough coverage and at a reasonable premium.  When starting to find insurance, many people begin with the same agent that handles their personal policies, such as home and auto.  Many people overlook the fact that insurance is a product.  Just like buying something as simple as shampoo, you will want to review all of your options and compare products.  Different companies specialize in different kinds of insurance and offer different policies with different annual premiums.

Insurance can be obtained in several different methods.  The first is directly from the insurance provider, known as direct insurance distribution in the industry.  Rarely, is this the best option for buying insurance because they will only offer policies from their company.  Their policies may or may not be suitable for your business’ needs, and the company may not compare policy coverage to any outside insurance you currently have. This could result in coverage duplication and extra costs.

The second method is from an independent agent and is commonly known as captive insurance distribution.  This agent sells only one company’s policies.  The benefit of this is that have a contact person who may be knowledgeable and provides you with more customer service than an insurance provider.  Similarly to working directly with the insurance provider, this agent will only be able to provide you with insurance from their insurance affiliates.  That insurance provider may or may not offer the coverage that is best for your specific needs or with a premium that is optimal.

Your last option, and typically your best, is to go to an insurance broker, known as an independent agency system.  The broker usually has several insurance providers that they work with.  They will be able to provide you with more insurance options than an independent agent and with the same personalized customer service.  They will also be able to objectively analyze your insurance policies to ensure that there is not a duplication of coverage.

Types of commercial insurance you may need…

Different kinds of businesses require different kinds and amounts of insurance.  You will want to think about all of the possible problems that could arise.  In addition, you will need to consider your type of business and its size when beginning your search.

General Liability: Almost every business will need some amount of this insurance.  General liability will protect you if customers, vendors or other people who visit your place of business are accidentally injured or harmed either on your premises or by a product you manufactured and sold.  The nature of your business might warrant increasing your coverage.

Property and Casualty: This coverage protects you from certain perils and natural disasters, such as fire, flood, theft, etc.  Read the policy over carefully because not all applicable perils will be included in every policy, and you may need additional insurance. If your business has important assets in equipment, you may need to add replacement-cost coverage.  This coverage ensures that if said equipment is damaged by fire or flood that the value of new equipment purchased is covered, as opposed to the market value of the old equipment.

Home-Business:  This will cover your home business and office.  This may or may not be covered in your homeowners insurance, but more often than not, it isn’t.

Auto: If your business is utilizes a motor vehicle in some way, it will need to be covered in case of an accident.

Workers’ Compensation: If your business employs any staff, you will need this insurance.  It will cover medical and lost income for employees injured while on the job and your liability if they should decide to sue.

Health: If you have employees, you may want to consider offering them health insurance as a benefit.  If you are an independent contractor or cannot obtain health coverage through a spouse, you may also want to consider purchasing health insurance.

Disability or Income:  This is similar to health insurance in the respect that you may want to consider purchasing this insurance, if you have employees, as a part of their benefits package or if you are a sole proprietor or independent contractor.  This coverage will provide income for you if you are unable to work due to a medical condition.

Life: This is often required by your business' financiers, such as banks or angel investors.  This insurance will cover payment of your debts and provide income to your benefactors if you should pass away.

When comparing insurance options…

When you start shopping around for insurance, you will want to compare on the following features:

  • The Insurance Provider:  Different insurance companies specialize in different types of insurance.  You will want to choose a company that specializes in the insurance that you need.  You will also want to consider how long that company has been in existence.  Your insurance policy is only good if your provider is still in business.  Likewise, your insurance claims are only as good as the financial stability of your provider.  Many times companies have higher premiums, but you can be more assured of their reliability when you need the coverage.
  • The Insurance Policy:  Different insurance policies cover different things.  You will want to make sure that your policy will cover everything necessary if the occasion should arise.
  • The Annual Premium:  Different insurance companies have varying annual premiums for similar policies.  You will want to price compare these in relation to policies.  You will also want to compare installment payments, if applicable.
  • Claims:  Different companies are quicker or slower with handling claims.  In the case of an emergency, you will want a provider that handles claims quickly, efficiently and completely.

After you choose and purchase your insurance, you will want to repeat this process annually.  Policies change and your business’ needs will also change.  You will want to continually keep the correct coverage and ensure that you do not have duplication.

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