What to Know When Choosing Business Insurance

By Scott Gerber,
business.com writer
|
Jan 08, 2020
Image Credit: Kerkez / Getty Images

Choosing an insurance policy for your company or employees is a major step, and one not to take casually.

Insurance for your business is an essential safety net. However, picking the right coverages and policies can be complicated. Small businesses need to understand the most efficient way to spend their money and get the most protection for their company and employees.

The problem, however, is that individual insurance needs vary greatly by business type and industry. For instance, while many businesses take a look at general liability insurance, a remotely operated marketing agency may not need the same types of coverage as a brick-and-mortar retail business or a construction firm with expensive and potentially dangerous equipment.

Employee needs also factor into the discussion. Health insurance is important, and a big step for a growing small business. It can also be challenging to figure out exactly what suits your team best.

To help highlight what to pay attention to, we asked a panel of Young Entrepreneur Council what they believe small businesses should keep in mind when considering insurance, either for the company or for the employees. 

 

Editor's note: Looking for the right insurance for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

 

1. Shop around and speak with multiple insurance providers.

I would suggest consulting with a few different insurance agents before deciding which types of policies to purchase. The benefits and costs will vary between providers, so you should explore multiple options to find the best fit for your needs. - Matthew Podolsky, Florida Law Advisers P.A.

2. Choose a plan that will scale with you.

When you're first able to get insurance for your employees, it feels good. When you're shopping for company insurance, think about whether the prices will work as your business scales. Some insurance agencies have individual employee costs that make scaling with their company difficult. Planning for growth is helpful in all areas of business, and insurance research is no different. - John Turner, SeedProd LLC

3. Understand how your insurance agency calculates its quotes.

Of course, you want to shop around for different insurance companies and get the best quote. So, you need to find out how the insurance company calculates its quotes. They should be transparent about this process and what they consider. For instance, do they take into account the size of your company and your industry? Knowing how they assess your business will allow you to be more informed. - Thomas Griffin, OptinMonster

4. Look at the total per-employee cost of your policy.

When you're making a deal with a new insurance company, always ask what the final cost of the program will come out to per employee. There's a chance you could get blindsided and be forced to pay an additional premium, depending on the situation of the employee. Learning about the cost changes over time can help you make smarter decisions and choose the right insurance company for your business. - Chris Christoff, MonsterInsights

5. Don't make assumptions about what's covered and what's not.

Every business is different and you should choose insurance based on your location, the type of business you own and other factors. If you have a basic plan such as property insurance, don't assume that this will cover other possible risks, such as natural disasters. Consider the types of risks your region is subject to, such as floods, fires or earthquakes, and make sure you're covered for these. - Kalin Kassabov, ProTexting

6. Look beyond general liability insurance to cover all your risks.

It's important that you read the insurance contracts in detail to find out what is covered and what's not. Usually, small businesses will start out with the general liability insurance and do their own risk analysis to find out if they need to get any additional insurance. - Syed Balkhi, WPBeginner

7. Know your specific industry's business insurance obligations.

It's a must to understand what your insurance obligations are as a small business. If you neglect any area, it could mean serious risk for your company. It's also important to understand that not all small businesses need to purchase insurance, so know what you're getting into. - Stephanie Wells, Formidable Forms

8. Read your insurance policy carefully and look for any gaps.

Make sure you read your business insurance policy before making a final decision. Each carrier has its own policy with different requirements, and reading it front to back ensures you don't encounter any gaps that could hurt you in the future. - Jared Atchison, WPForms

9. Splurge on the maximum coverage.

As Murphy's Law states, "Anything that can go wrong will go wrong." Enlist an expert to identify all relevant insurance areas and buy the broadest coverage with the highest limits you can afford. - Mahesh Chaddah, Reservations.com

10. Narrow down your options before searching.

When you're shopping around for insurance, you may feel like you need to find every possible option out there before you make a decision. However, this only serves to frustrate you since remembering and comparing a dozen policies can be very hard to do. Ask for recommendations from peers and try to restrict your options. You'll make a good decision in less time. - Blair Williams, MemberPress

11. Find and work with a broker you can trust.

Because of the complexities entailed with insurance and the lack of expertise among most business owners in understanding the appropriate plans and sources of coverage for their businesses, it is imperative to find and work with a suitable insurance broker. When seeking an insurance broker, it is important to find someone extremely knowledgeable with strong common sense who you deeply trust. - Adam Mendler, The Veloz Group

12. Do a thorough risk analysis to understand your coverage needs.

Start by considering what could happen that would leave you liable or open you up to an excessive outlay of cash. Once you've identified the risks, you know what you need insurance to cover. Talk with several providers to see what options they offer. And check the company's ratings – if you need to make a claim, how they operate will be more important than saving a few bucks on your premium. - Keith Shields, Designli

13. Seek out niche-specific clauses.

When searching for policies, be sure that your insurance agent understands your business niche. In my case, in addition to the general liability insurance, the errors and omissions insurance is also important because as a digital marketing agency we deliver social media and content marketing services where there are always risks of accidental copyright infringement. - Matthew Capala, Alphametic

14. Anticipate your business's future needs.

One thing that can make business insurance so expensive is continually having to modify or expand your coverage as your business develops and enters new markets. To prevent this from being a major issue in the future, try and anticipate your needs ahead of time and discuss them with insurance companies to find a better deal. - Bryce Welker, Accounting Institute of Success

Scott Gerber is the founder of Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses. Gerber is also a serial entrepreneur, regular TV commentator and author of the book Never Get a “Real” Job.
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