As a small business owner, you have a lot on your plate. While some tasks and obligations can take the back burner for the time being, others require immediate or constant attention.
Ensuring you have sufficient insurance coverage is one of those responsibilities that can’t be neglected for any period of time. As a business owner, you should understand your state’s legal insurance requirements, your industry’s associated risks, and which insurance forms you need to address these liabilities.
Properly insuring a company may seem daunting to new business owners, but you expand your knowledge and take action by considering common questions that other business owners ask. For example:
Are Any Forms of Business Insurance Legally Required?
The laws regarding business insurance vary by state, so check with the appropriate agency to ensure you are in compliance. Most states require two types of insurance for businesses: workers’ compensation to cover employee injuries and illnesses and auto insurance (commercial or personal) for all vehicles.
There are exceptions and exemptions for auto insurance and workers’ comp depending on state laws, type of industry, and other factors—so make sure you do your research and know which rules apply to your circumstances.
Most other types of insurance relevant to small business owners are not required but recommended. A few examples of common small business insurance policies include:
- Business Owner’s Policy (BOP)– This is a combination of property and liability insurance that you can customize to meet your business’s specific needs. A typical BOP covers damage to business property and protects against liability claims made by third parties.
- Errors and Omissions– Also known as professional liability insurance, this policy protects you against claims that your business made a professional mistake. It covers legal costs resulting from claims of misrepresentation, an error or omission in service, inaccurate advice, libel, and slander.
What’s the Advantage of Having a BOP?
A BOP is a combination policy that merges property and liability insurance and additional coverage types, if necessary. Advantages to choosing a BOP over multiple individual policies include:
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- The premium for a BOP is usually less than the combined premiums for separate policies.
- BOPs are not one-size-fits-all. You can add other types of coverage, such as flood or crime insurance.
- Combining policies into one package is simpler and more convenient as you’ll have one bill and one point of contact.
BOPs aren’t the right fit for all businesses; they allow for some customization but may not be as flexible as you may need. To figure out what best suits your needs, you should request quotes for BOPs and individual policies, then compare rates.
Are Business Insurance Costs Tax Deductible?
Small businesses can deduct various business expenses, including “the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.” Businesses can typically write off insurance premiums for workers’ compensation, commercial property, general liability, professional liability, and data breach insurance.
How Can I Find the Best Provider and Policy Rates?
Shopping for insurance is a chore, but a necessary one. Take the time to do your due diligence so you get the coverage you need at the best rate.
- Assess Your Needs– Consider your state’s insurance laws and your type of business, number of employees, assets, and risks. You will get the best deal and the most appropriate coverage if you understand what you need and don’t need.
- Shop Around– For something as important as insurance coverage, take time to shop around. Request quotes for small business insurance from several companies so you can compare prices and coverage.
- Work with a Licensed Agent– A reputable and licensed insurance agent will help you find policies that match your needs and choose strategic deductibles.
When Should I Reassess My Insurance Policies?
An important way to save money on business insurance, and to be sure you have the right coverage, is to assess your policies at least annually. The Small Business Association recommends that you evaluate coverage, costs, and needs once a year. In addition to an annual reevaluation, reassess your insurance needs whenever the business:
- Expands operations or premises
- Makes a significant new equipment purchase
- Offers new services or products
- Hires new employees
- Adds vehicles or drivers
Stay In the Know About Business Insurance
Learning about insurance may not be the most exciting part of running a small business—but it is essential. The more you know about state requirements and your own business’s risks and coverage needs, the better you will be able to protect your assets. Take the time to educate yourself about business insurance before starting up operations.