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Business Insurance 101 for 2021: Here's What You Need to Know

Jay Bregman
Jay Bregman
CEO and Founder at Thimble

In normal times, making the right choices about business insurance for a new venture can be overwhelming. In a pandemic, the stakes are even higher. So where do you start?

The COVID-19 pandemic has had a massive impact on entrepreneurs worldwide, forcing many to rethink how best to approach their business strategies going into the new year. It has also had an unexpected silver lining: a huge boost in new business formations. 

According to the U.S. Census Bureau, applications for employer identification numbers to start a new business surpassed 3.2 million in 2020 – a marked increase of 19% over 2019. It seems that, despite the challenges of running a business during a global pandemic, the "class of 2020" is actually more energized and willing to start businesses, not less. 

Accordingly, demand for business insurance is also at an all-time high: Searches for the phrase "business insurance" have increased by more than 50% in 2020 from 2019, per Google Trends. In many cases, that demand comes from new buyers. In a JustBusiness survey of over 400 entrepreneurs launching new businesses in 2020, about 51% of respondents were first-time entrepreneurs, making decisions about business insurance for the very first time. 

To begin with, how do you know if you need insurance? The answer depends on a lot of factors. First, let's discuss the various types.

What is business insurance?

Determining the right type of business insurance is important not just for protecting your own assets, but for securing clients as well. Many jobs require a certificate of insurance, proof that you are covered in the event that something goes wrong on the job site. If your company installs products in clients' homes, for example, you will likely have to show a certificate of insurance before you can perform a job. It gives your client peace of mind to know that you're covered should something go wrong – from an injury on the job to damage done to the client's property.

If you think your line of work will often require proof of insurance to protect yourself and your clients, the question becomes, what type of insurance would be best for you? What do the different types of insurance cover, and how do you know which is right for your business?

There are six common types of business insurance, and the one you should get depends on the function of your business and risks you may be taking that need financial coverage. General liability insurance, or commercial general liability, is the kind of insurance every business needs, as it protects against bodily injury, property damage, personal injury, advertising injury and the like. These are all things that a business has to keep in mind, regardless of its function. 


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Professional liability, also called errors and omissions (E&O), protects the covered party against claims resulting from mistakes in the work. Accidents happen, even to the most careful and professional among us, so professional liability insurance covers claims of negligence arising from advice, legal defense fees, and court dates, all of which can severely hurt your business if you don't have the means to handle them.

Business equipment protection, sometimes known as inland marine insurance, covers everything you use on the job. Unlike general liability insurance, which covers your clients' property in the event of a mishap, business equipment protection covers your own property that you use in the workplace. If you're a professional photographer, for example, you may want to purchase this insurance to cover any expensive camera equipment in case of an accident. 

While these are some of the more general types of coverages your business might need, there are plenty of others that you might find yourself needing, such as commercial property, commercial auto, and workers' compensation insurance. The decision to purchase business insurance is based on both the fact that you simply can't take on work without it and that you may not be able to cover the financial strain of defense and damages should an accident happen.

Tips for business insurance buyers 

Once you've decided what you need, how do you determine how much you need? Over a 10-year period, 40% of small businesses will file a claim with their insurance company at some point, so it's fairly likely that you will need it sooner or later. But how do you hit that sweet spot of knowing how much protection you need and how much you can afford to pay in premiums?

Uncertainty is at an all-time high, so one important thing to keep in mind when determining how much insurance you might need is to assess your next few months. Reassess on a monthly basis rather than annually, as it's the best way to ensure that your business is as covered as possible without overpaying or putting yourself at risk. If you stay on top of how much you're paying monthly and whether you really need that much, you can make sure you're never buying more than what you need. You can always scale up if you need more.

When seeking out an insurer, beyond making sure you're not paying too much, you should shop around for a company you can trust. Insurance is not something that goes "on sale," so you need to look deeper into the value proposition of each provider. The best way to determine whether an insurance company is right for you is to look at its customer reviews and Net Promoter Score for context.

Whichever insurer you go with, demand efficiency. Look for speed and technology, especially in customer service. The way that businesses function is changing rapidly, and the pandemic has only accelerated that change. Yet most insurance companies still require you to pick up the phone and wait on hold every time you need to make a change. That's not in line with the needs of a modern business.

Even if you think you don't need insurance, you might want to consider flexible plans that would cover you in case of emergency. These are cancelable or pausable plans that let you start with short amounts of time but scale up as the year goes on and business picks up. It's a great way to help you determine what you need when starting out without pledging to a less flexible plan that doesn't cover everything or charges you too much. 

Ultimately, only you know the kind of insurance that works best for your business, how much you should spend on it, which insurer is right for you, and whether a flexible plan would be the best fit. New businesses are changing the business landscape in a way that will continue even after the pandemic ends, so as a new entrepreneur, you must get coverage from an insurance provider that is flexible to your needs as well.

Image Credit: Kerkez / Getty Images
Jay Bregman
Jay Bregman
business.com Member
See Jay Bregman's Profile
Jay Bregman is the CEO & Cofounder of Thimble, insurance that helps small businesses succeed on their own terms. Thimble’s policies are designed for the uncertainty of starting, operating and growing a business--both in normal times and in times of heightened anxiety like 2020. As a result, Thimble has seen a surge in their monthly policies as customers opt to “cut the cord” in favor of insurance better-suited to the rapidly changing environment. Thimble has sold over 125,000 policies to small businesses all across America via its award-winning app, partner APIs, and broker tools, and has raised $30M from investors including IAC (NASDAQ: IAC). Prior to Thimble, Jay founded Hailo, a ridesharing company in London backed by investors including Sir Richard Branson and acquired by Daimler. Earlier, he founded and sold eCourier, a technology-enabled services company to Royal Mail, the U.K. equivalent of USPS. Jay holds a Master’s Degree from the London School of Economics and Political Science and a Bachelor’s Degree from Dartmouth College.