Now that 2015 is here, and as you embark on goals for the New Year, perhaps you’ve decided that this year is the year you’ll start your own business, or maybe you’re already the owner of a small business and have made business related goals and resolutions for the new year.
If you’ve already decided on resolutions for 2015, do they include anything regarding business insurance? If not, there are a few things you ought to be thinking about for the upcoming year — or you could be facing the possibility of not having a business in 2015 or beyond. Here are a few things you absolutely need to know about commercial insurance coverage for small businesses.
#1: No matter how small your business is, obtain business insurance!
One common misconception among small business owners is that they don’t need commercial insurance coverage, especially if they’re running a one-man show and are professionals such as consultants, freelancers, or independent contractors. The unfortunate reality is that sometimes those types of small businesses face just as much risk – or sometimes even more risk — than large companies do.
Regardless of the industry you’re in, whenever you’re dealing with others in any way, shape, or form, you’re facing potential liability issues — after all, ‘to err is human.’ Mistakes and accidents happen all of the time, and if you don’t have coverage to protect your business, you not only risk losing your business, you also risk losing your personal assets in the event of a claim against your business that you’re found liable for.
Consider this — say that you own a consulting firm and that you recommend a certain payroll software to a company. That payroll software has a glitch, causing the system to make tons of mistakes, resulting in the company losing thousands and thousands of dollars. Who is the company likely to sue first? You. And if you’re not carrying professional liability insurance, you could end up having your personal assets seized in addition to potentially losing your business, not to mention your reputation. So if you’ve been unsure as to whether you need small business insurance or not, the answer is simple:
#2: Assess or re-assess your insurance needs.
So now you know you need coverage if you don’t have it. If you’re a business owner and already have business insurance (good for you!), odds are your business has undergone plenty of changes. When most businesses start out, they’re (hopefully) in different financial standing than they were when their business started. The beginning of every year is the perfect time to review what kind of coverage your business likely needs. Consider things such as the size of your business, what services or products you’re offering, as well as any business assets.
Perhaps you started a company that originally only employed a couple of people, and you ran it out of your living room, but now you employ twenty people and rent an office customers come to. Once you’ve hung a shingle and a customer steps into your office, your liability needs have changed greatly. Now you’re responsible for anything that happens to that customer resulting not only from your products or services, but also in the event that something happens while the customer is on your property — think “Caution — Wet Floor” signs.
The same is true if you’ve expanded your products and services. Although it may be uncomfortable to think about, it’s actually a good idea to review every aspect of your business and think of possible worst-case scenarios that could result from each – no matter how bizarre they may be. Case in point? Who would have thought McDonald’s would have been sued because their coffee was too hot? Since we live in a litigious society, businesses can’t risk being poorly protected.
Like any insurance policy, insurance needs vary from one to another. There are many types of business insurance, from policies and coverage catering to small businesses liability coverage (often referred to as a ‘BOP,’ short for “Business Owners Policy”), to coverage a business of any size can benefit from, like key man insurance, public liability, business interruption insurance, worker’s compensation, product liability, errors and omissions insurance, and more. Talk with your insurance agent about the details of your business, and your agent will be able to advise you on the coverage you need.
#3: Learn what your policy covers — and what it doesn’t.
Although your agent can guide you through your policy, to do ensure you understand what’s covered and what isn’t, you’ll need to read your policy. That’s not something you’re likely to necessarily enjoy, and odds are that ever since you started your business, you’ve seen enough legal paperwork with terms and definitions that aren’t in your everyday vocabulary. However, there’s no way to tell if you’re adequately covered if you don’t read your policy thoroughly and understand it.
If you don’t read your policy, you won’t know what you’re covered for, and what you’re not covered for – both equally important. Paying attention to the exclusions on your policy will also help raise any red flags if you’re regularly doing something that the policy doesn’t provide coverage for.
If there’s something that’s not quite clear or understandably confusing, just ask your agent to provide some more details and explain. Also, ask your agent to review the policy with you and ask what specifically is not covered. Sometimes a business owner will purchase a simple professional liability policy just so they can say they have coverage, or only carry it so that they can show proof of coverage if customers ask for it, but it should be something to take an interest in and sometime to view as just important as your customer base.
#4: Look at the big picture.
Often when you’re trying to build a business, it can be easy to lose sight of the bigger picture — like what you risk losing if something happens to your business. Step away from being on the inside of your business and take a look on the outside – who is dependent upon the success of your business – family, employees, customers? This too will help you determine exactly what your needs are. What happens if your business is sued, you’re found liable, and due to insufficient insurance coverage, your home and even personal savings and assets are seized to pay a lawsuit or judgment, and you have a family to provide for?
Along with making sure your business is protected, make sure yourself and those involved in your business are protected too. Many business owners sacrifice health and life insurance for themselves, and then if something happens, families are left without benefits to pay for final expenses and for future expenses like mortgage payments. Being dedicated to building a business is wonderful, but don’t completely sacrifice yourself and your loved ones in the process.
Unfortunately, since 2007, only 47% of small businesses provide major medical benefits to their employees. It’s slightly understandable from a business’s costs perspective — cutting employees benefits can mean substantial savings if a business isn’t required to carry it under the Affordable Care Act due to company size or some other exemption – but regardless of the law, is it worth it? Your employees are representing your company, and if at all possible, giving them the benefits they deserve will likely keep them healthy, happy, and dedicated. Studies have proven that employees with employer provided benefits are less likely to miss work and tend to work for the same company longer — meaning more productivity and thus profit and success for you, as well as a good reputation – which at the end of the day, is all you’ve really got, right?
Aside from figures and numbers, remember that part of building a business is building a reputation, and any business is only as strong as its weakest link — don’t let poor coverage for your business or employees be that link.
Follow Desiree Baughman on Twitter @DesireeBaughman