Why Bother With Insurance?
Maintaining sufficient business insurance coverage is an important risk management consideration for small business owners. Regardless of the size of your business operation, it is imperative that you take care to ensure that you have the right types of small business insurance coverage and that your coverage limits are high enough to provide you with the protection you need to protect your investment regardless of what type of unforeseen problems might occur.
The small business insurance planning process involves taking a close look at your business operation and making an informed decision about the types of risks most likely to impact the organization and the value of the assets that need to be protected. While insurance needs can vary significantly from one company to another, there are some types of protection that every business – no matter how small or large needs to have in place.
Essential Business Insurance Coverage
Small business insurance planning for any business should include property and casualty coverage as well as liability insurance. If you own the building in which your building operates, you need to carry insurance on the building itself. If you rent your office space, while your landlord will cover the structure, you still need to carry premises coverage to provide protection for your inventory and equipment, and to protect your company against claims of injury or damages.
Additionally, it's advisable to carry business interruption insurance protection, to provide income continuity in case a natural disaster or some other covered event makes it impossible for your company to generate income for a period of time. It's also a good idea to invest in term life insurance for owners and other persons key to the operation of your business. If you have employees, the law requires that you carry workers' compensation coverage.
Small Business Insurance Planning: Creating a Plan
Before you meet with an insurance agent, create a small business insurance plan. A handy tool to help guide you is your financial balance sheet. The balance sheet lists your assets including buildings and equipment as well as your liabilities and owner/officer accounts. Start your small business insurance planning with a list of items from your balance sheet that you feel need protected including yourself as well as partners.
- Assets - List out each of your assets including all vehicles, business and office equipment, land, buildings, and leaseholds.
- Liabilities - Here you should list both long and short term loans and where the loan was obtained. Most likely, they will want to be named as additional insured on your liability policy.
- Employees - Create a list of every employee along with job titles and duties. This will help your insurance agent offer you the best quote on workman's compensation insurance.
- Owner Information - List out all the owners as well as each owner's equity or interest in the business. For example, an owner that may only be an investor may not need as much insurance coverage as the day-to-day operation owner. Make sure you ask your insurance agent about personal umbrella insurance to protect owners and officers from personal liability.
The Small Business Insurance Planning Process
The small business insurance planning process is too important to leave to chance. Build a relationship with an insurance agent who will work with you to identify your needs and put together a comprehensive coverage plan that is sufficient and appropriate for your business. Before you finalize your policy, make sure you understand exactly what is and what is not covered, and the full limits of liability that apply. Review your policy periodically to verify that the level of coverage you have remains appropriate as your business changes and grows over time.
About the Author
Mary Gormandy White, M.A., SPHR is the Director of Corporate Training and Consulting Services for MTI Business Solutions, where she specializes in human resources, management, and public relations training and consulting. She provides open enrollment on-site corporate training seminars as well as human resource management and public relations consulting services. She is also the author of 101 Human Resource Management Tips and 101 Successful PR Campaign Tips in the LifeTips book series.
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