This might come as a surprise to some, but getting the right insurance for your business might be one of the most important decisions you'll make as a business owner. The consequences of inadequate coverage, or no coverage, could be devastating. There is a whole world of things that can happen to you and your business. Not protecting yourself and your business with the right insurance could cost you in so many ways.
That's why engaging in a process of obtaining business insurance right for you and your company is so important. Do you know what general commercial liability insurance is? Well, if you don't, then it's just another reason why doing it right is so important. Not doing it right might cost you when you need help the most ? during crisis. It's why people get insurance. It's why smart business people get smart business insurance.
Doing it right essentially means avoiding some common mistakes made when trying to get the best insurance policy for your business. Knowing what some of these mistakes are, and avoiding them in the future, will help you in your quest to simply make the right business decision when it comes to insurance.
Top 5 Mistakes When Getting Business Insurance:
1. Discounting the importance of business insurance
Business people of all types, whether it be CEO's of large business conglomerates, or even someone just working out of their home office, have their own set of reasons for getting insurance specifically for their business. But not all business people necessarily think this way. Some think it might be too costly. Some think it might not be necessary . Some may even think that they're covered by other insurance policies that they have for their property or for themselves.
Not having the insurance specifically tailored for your business often comes as a result of simply not thinking that it's necessary. But it is. Take general commercial liability insurance, for example. This kind of insurance protects businesses from the costs of lawsuits resulting from basic damages done to people or property that have even the slightest contact with what you do. Not having this coverage when someone decides to throw a lawsuit at you, even if frivolous, could cost you in terms of money and reputation.
2. Not knowing the basic issues
It's nice to think that insurance is just insurance, but it isn't. Would you get car insurance for you house? Would you get life insurance for your healthcare? Of course you wouldn't.
Yes, some of the issues involved in business insurance are similar to other forms of insurance. A good policy will, for example, protect your assets in case they get stolen. It will also protect you if bad weather destroys your business property. These are straightforward insurance issues for your business. But don't be fooled into believing that they're the only insurance issues for your business.
For example, take general commercial liability insurance. Some business owners might not even know what liability insurance actually is. It's the insurance that protects you from the financial costs resulting from a lawsuit from somebody who claims they or their property has been hurt or injured as a result of the way your business conducted itself. General commercial liability insurance is the kind of insurance those companies engaging in commercial activities get to protect themselves because people hurt themselves on their premises or one of their products did damage to someone's property. Being knowledgeable about these kinds of things will most certainly help you get the right insurance.
3. Not getting insurance early enough
There are two things that can happen to you if you don't get insurance for your business early enough. The obvious one is that you'll need it before you get it, and you'll be stuck with paying for the damages from a storm or a lawsuit yourself. The other thing that can happen is that you will not have a budget for your start-up for the proper insurance, so you'll get stuck with inadequate coverage. That's the last thing you want to happen. Therefore, to avoid it, thinking about insurance as early as possible, even at the business plan stage, will help you create the budget you need to get you adequately covered for all future circumstances.
4. Getting the wrong kind of insurance provider
Perhaps the most tempting option for someone seeking business insurance is to get it through insurance companies they're already doing business with. So, for example, you like how your house is covered, and who's covering it, so you'll seek to extend that coverage to your business, too.
The reason this is inadvisable, or should at least be looked at very carefully, is that your property insurance provider might simply not have the kind of experience with the kind of insurance you need for your business.
For example, if general commercial liability is what your particular business is in need of, even if a provider carries that kind of insurance, they may simply not have enough developed expertise to know what's right for your particular needs. Ideally, only those companies and agents who have dealt with your kind of business before can help your kind of business get you adequately covered for your particular situation.
5. Getting the wrong kind of coverage
Following from the risk of getting the wrong insurance provider, a mistake to avoid is getting the wrong kind of coverage. Ultimately, you're the person in charge of making the right business decisions for your company. You're the best person suited to look out for your own interests. No one else is. That's why it's incumbent upon you to make sure you've got the right coverage for you and your situation.
As much of the above already suggests, delegating these decisions is important. Yet, in the end, it's you who has to decide if you have the right kind of coverage for your business. After going through the entire process, collecting all the information, and talking to the right people, it's you who makes the decision. Make sure it's the right one for your business and where you want to take it.
While starting a business in Sacramento you have to keep in mind various risks involved. Proper care has to be taken to understand the types of business insurance required and the risks covered. Even if you have not experienced any event that has lead to loss of business, you have to make sure that you renew your business insurance on time. You should be prepared for any eventuality. Being covered provides you a protection against any loss in business and gives you personal financial well being.
There is a wide range of policies and covers available which may confuse the prioritizing of the business risks to be covered. A research has to be carried out to find out the available and affordable coverage suitable for business. To get the best combination you have to keep certain things in mind. You need to think in terms of risk management.
The first thing to understand is the accurate value of your business. The value of the business is not just the value of assets but the cash flow of the business and the income earn from it. It is better to have a formal valuation done to know the real market value. The next thing that you need to do is find out insurance companies who will give you a very competitive coverage. Independent agencies that are part of the national network of agencies have full brokerage capability are better suited to offer you competitive prices.
Once the valuation is done, it is necessary to know the likely liability from the remote liability and decide the cover that needs to be provided. The liabilities like Officers liability covers the business against suits relating to management mistakes, employee rights and so on. An umbrella policy that covers you beyond the general liability of the Business policy could also be an additional feature that can be considered. In addition to such a policy, you have to ensure that special equipment and vehicles are also properly covered. When employees are using their own vehicles for business trips they should be well covered. Even the material in transit and the equipment and machinery on location has to be covered.
The business relies on property for income. Losses incurred due to destruction of property are sometimes covered as business interruption insurance. Such a loss due to damage or stoppage should be covered. Some things like employee dishonesty, floods, burglary, computer frauds, etc are generally not covered under the Business Owner's policy. Care has to be taken to see that you get some appropriate coverage in addition to your Business Owner's policy. The last but not the least, human capital is also of value to the company. At least the key people in the business, not necessarily the owners and the directors, should be covered for the continuation of the business.
It is necessary to carry out a proper risk analysis and the research of insurance carriers who would cover a major amount of risk at a competitive price. Every year when you buy or renew the insurance cover for the business, it is important to review the needs of the organization in the current and the future scenario. As you need cover for multiple reasons you may shop for cover from multiple carriers in Sacramento. Consider multiple policies from the same carrier if it offers some discount for multiple policies.
Both James Cochran & Kris Koonar are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
James Cochran has sinced written about articles on various topics from Insurance for Property, Insurance and Certified Public Accountants. James Cochran is the founder of Business Insurance Now, a web-based agent. With over 12,000 business clients, Business. James Cochran's top article generates over 27100 views. to your Favourites.