Business insurance may be vital for your company. These are the top factors to consider before purchasing a plan.
An important part of running a successful business is planning for the worst possible outcome. There's no way to know what the future holds, so it is best to prepare for as many outcomes as possible. This means thinking about business insurance.
But what should you consider when looking into business insurance? After all, there's a fine balance between reducing costs by limiting your business's coverage and paying too much for coverage you don't need. Figuring out the exact level of coverage your business needs can be tricky.
To help, we asked nine entrepreneurs from Young Entrepreneur Council (YEC) to weigh in on the key considerations to explore when thinking about getting business insurance.
1. If benefits outweigh the cost
"Insurance should be treated the same as any other business decision: Will the benefit outweigh the cost? Personally, I think businesses should consider insurance. Generally, employers can be liable for the acts of their employees. While you may be very careful to avoid incidents, all of your employees may not. Without proper insurance, one single event can devastate a company's financial position." – Matthew Podolsky, Florida Law Advisers P.A.
2. The risk factors
"Business insurance is the one expense most businesses fail to realize they absolutely must incur. In fact, by not including this expense, companies risk even greater loss. This is because every business, regardless of size or level, is liable should even a minor calamity befall it. Therefore, you should research and invest in appropriate business insurance in the very early stages of your startup." – David Ehrenberg, Early Growth Financial Services
3. Your growth plans
"If you're in the early stages of a business, insurance is tempting since you have a lot to lose. However, waiting until you've generated more profit and monthly income might be a better strategy. If you take out a costly insurance policy too early in your company's life cycle, you can severely limit its ability to take on new team members or pursue new projects." – Bryce Welker, Accounting Institute for Success
4. If you're getting large clients
"If your company is signing contracts with larger clients or partnering with other companies, you should consider getting business insurance. These bigger clients and companies can request proof of insurance at any time, and if your company can't provide it, it can make those clients question your company's credibility and reliability." – Chris Christoff, MonsterInsights
5. Recent equipment purchases
"If you're purchasing a number of expensive new equipment pieces for your business in the near future, it's a good time to look at getting business insurance. If you rely on certain pieces of equipment to keep your business running, then you should protect your investments. Look into property insurance, equipment breakdown insurance or commercial auto insurance to protect your equipment." – John Turner, SeedProd LLC
6. Can the policy grow with the business?
"I view insurance as an investment rather than a cost. I recommend that all companies – even home businesses – have some type of insurance. The best policy is one that has the power to grow with your business. It's always difficult to predict the future, but try to assess any challenges that your growing company business may face and choose the insurance that best addresses them." – Shu Saito, Godai Soaps
7. Your hiring needs
"Having business insurance helps attract and keep employees. So if your business is growing and you need to start hiring more, you should consider getting business insurance. Qualified employees are looking for a position that will give them benefits packages, and if you can't offer that, you might lose them to another company." – Blair Williams, MemberPress
8. The liability you face
"Assess the amount of liability you face. You should get liability insurance before you do any serious work or hire people. If you are in an industry where you have manual laborers, insurance is paramount, whereas in my industry of search engine optimization, we have risks of a different, less tangible nature. Know your business to know your liability and assess potential losses and strategize." – Matthew Capala, Alphametic
9. Industry examples
"Do some research to see if any others in your industry have insurance or have dealt with any legal issues in the past. You also need to think about the max damage that you can possibly cover. A product or service improperly made or used that could lead to the death or disability of a human is the biggest risk, but a product or service that leads to a minor inconvenience might not be as risky." – Andy Karuza, FenSens