How to Get Business Insurance: A Step-by-Step Guide
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Getting business insurance is important for any entrepreneur looking to protect their investment and mitigate potential financial risks. You'll need to assess your particular insurance needs, determine the appropriate coverage types for your industry and research reputable insurance providers to obtain high-quality coverage for your company.
How to Get Business Insurance: Six Steps
Purchasing business insurance requires understanding your business' needs and comparing your options. Following these six steps can help you find the coverage for your company.
Determine the Types of Business Insurance You Need
In some states, businesses are legally required to have certain types of insurance, such as workers' compensation, unemployment and disability insurance. However, these are just the basics. The following common types of business insurance can help you add more financial protection for your business:
- General liability insurance protects against bodily injury, property damage and personal injury claims.
- Product liability insurance covers lawsuits related to injury or damage caused by products your business makes or sells.
- Professional liability insurance protects against claims of negligence that result from mistakes in services performed. This coverage is also known as errors and omissions or E&O insurance.
- Commercial property insurance covers damage to your business property from events like fire, theft or natural disasters.
- Business interruption insurance compensates for lost income and extra expenses when a business cannot operate due to a covered loss.
- Workers' compensation insurance covers medical costs and lost wages for employees who become injured or sick at work.
- Commercial auto insurance protects company or personal vehicles used for business.
- Cyber liability insurance covers losses resulting from data breaches or attacks on your IT systems.
- Directors and officers insurance protects the personal assets of your company's directors and officers if any employees, customers, clients, competitors, investors, or others sue them for wrongful acts in their work managing the business.
To determine which types of business insurance are suitable for you, consider the specific risks associated with your industry, the value of your business assets and the needs of your workforce. You can also consult an insurance professional to help you choose the best small business insurance for your business.
Gather Information for Your Application
For any insurance application, you'll need specific information about your business. Here's a list of commonly required details for each policy type:
- General liability insurance: Business location, number of employees, total annual revenue.
- Product liability insurance: Type of product, production process, product safety measures.
- Professional liability insurance: Professional credentials, scope of professional activities.
- Commercial property insurance: Location, age and condition of the property, security systems installed.
- Business interruption insurance: Financial records to estimate potential loss of income.
- Workers' compensation insurance: Employee roles, work environment safety measures.
- Commercial auto insurance: Vehicle details, driver details.
- Cyber liability insurance: IT infrastructure details, data handling procedures.
- Directors and officers insurance: Company's financial statements, any prior claims against directors and officers.
Compare Quotes
When comparing business insurance quotes from different companies, here are some key factors to consider:
- Coverage Limits: This is the maximum amount an insurer will pay for a covered loss. Higher limits usually mean higher premiums but also better protection.
- Deductibles: This is the amount you're responsible for paying before your insurance coverage kicks in. A higher deductible means a lower premium but more out-of-pocket costs if you file a claim.
- Exclusions: These are situations or circumstances where your policy won't provide coverage. Make sure you understand any exclusions in a policy.
- Policy Type: Check whether the policy is an occurrence policy (covers incidents that occur during the policy period, regardless of when the claim is filed) or a claims-made policy (covers claims made during the policy period).
It's crucial to balance cost against coverage. A cheaper policy might be tempting, but ensure it provides the financial protection your business needs. Don't be afraid to ask questions — a good insurer will explain policy details and help you understand your coverage.
Choose Where to Apply
You have two options for applying for business insurance: online insurance marketplaces or directly with insurance companies.
Online insurance marketplaces, also known as digital brokers, are platforms that connect buyers with multiple insurers. These platforms act as intermediaries, allowing you to get quotes from various insurance companies simultaneously. The main advantage of this approach is convenience. However, these platforms may have only some insurance companies in their database, potentially limiting your options.
Alternatively, directly applying with insurance companies allows you to explore specific providers in depth. When choosing a reputable provider, consider factors such as the company's financial strength (you can check ratings from agencies like AM Best), customer service reviews, the ease of the claims process and whether it offers the specific type of coverage your business needs.
Underwrite and Finalize Your Policy
Once you've decided on a policy, the next step is underwriting. This is where the insurance company evaluates the risk associated with insuring your business and determines the terms of your policy. They'll consider factors like your business's size, location, industry and claims history.
After underwriting, you can finalize your purchase. Your insurer will provide a policy document outlining the terms and conditions of your coverage and a certificate of insurance showing proof of coverage. Read your policy document carefully to understand what is and isn't covered. Keep these documents somewhere safe — you'll need them to file a claim or verify your insurance coverage.
Reevaluate Your Needs
As your startup or established business grows and evolves, your insurance needs will also change. Review your coverage at regular intervals to ensure it remains relevant and sufficient for your business needs — this can be done annually or whenever significant changes occur in your business.
How to File a Claim
If your business suffers a loss or other covered incident, follow these steps to file a business insurance claim:
- Assess the situation: Ensure the immediate safety of your employees and secure your property from further damage. If necessary, call local authorities or emergency services.
- Document the incident: Take pictures or videos of the damage, if possible. Write a detailed account of what happened while the event is fresh in your mind. This documentation will be valuable when explaining the situation to your insurance company.
- Review your policy: Before filing a claim, ensure your policy covers the damage or loss you've experienced. Make sure you understand your deductible and policy limits. Contact your insurance agent or representative for clarification if you're unsure about any details.
- Contact your insurance company: Reach out to your insurance provider as soon as possible. It will provide you with the necessary forms and guide you through the process of filing a claim.
- Provide necessary information: Complete the claim forms provided by your insurance company. This usually includes details about your business, your insurance policy, the incident and the damage incurred. Include any photos or other documentation you have — the more detailed and accurate you are, the easier it will be for the insurance company to process your claim.
- Work with an adjuster: The insurance company will assign an adjuster to your claim. This person will evaluate the damage, either in person or virtually, and determine how much the insurance company should pay for the loss. Cooperate with the adjuster by providing any additional information they request.
- Follow up regularly: Keep in contact with your insurance company to check on the progress of your claim. If you have any questions or if there are changes to your situation, let them know.
- Receive the payout: If your claim is approved, you'll receive a payout from the insurance company based on the terms of your policy and the adjuster's assessment.
- Review and reevaluate your coverage: After a claim, it's a good idea to review your insurance coverage. You might need to adjust your policy to better suit your business's needs.
Filing a claim can be stressful, but your insurance company is there to support you. Don't hesitate to ask questions or seek clarification at any point in the process.
Reasons to Get Business Insurance
One major reason to get business insurance is to mitigate the impact of unforeseen circumstances. Whether it's a physical disaster such as a flood or fire, a lawsuit, or a cyber attack, these events can cause significant financial damage. Business insurance provides a safety net, ensuring you can cover these costs without endangering your company's financial stability. The following are some of the key benefits of business insurance.
Risk mitigation: Business insurance provides financial protection from a wide range of risks, such as natural disasters, lawsuits, employee injuries and data breaches, helping to ensure business continuity even in the face of unexpected events.
Legal compliance: In many places, businesses are legally required to have certain types of insurance. For example, workers' compensation insurance is often mandatory if you have employees. Having the necessary insurance policies ensures your business stays compliant with these laws.
Enhanced credibility: Having insurance can make your business appear more credible and trustworthy to clients, investors and partners. It shows you're prepared to take responsibility and handle potential issues professionally.
Protects employees: Insurance such as workers' compensation and health insurance can protect your employees in case of workplace accidents or health issues. This not only benefits the employees but also contributes to a positive work environment and can improve employee retention.
Contractual requirement: Some business contracts, such as leases or client contracts, may require you to have certain types of insurance. Being insured allows you to enter into these contracts confidently.
Financial stability: Business insurance can provide financial stability by protecting your business assets and cash flow. If a claim is made against your business, insurance can cover the costs, allowing you to focus on running your business rather than struggling with financial stress.
Not having business insurance can lead to devastating outcomes. Without adequate coverage, a single unfortunate event could potentially wipe out your business assets. Additionally, operating without required insurance can lead to penalties, fines, or even the suspension of your business.
Frequently Asked Questions About Getting Business Insurance
MoneyGeek compiled answers to some of the most commonly asked questions about obtaining business insurance to help you secure the policies you need.
The cost of business insurance varies depending on your business type, size and the kind of coverage you need. Getting personalized quotes from insurance providers is the most accurate way to estimate what you'll pay to insure your business.
This depends on your business type, size and industry, among other factors. At a minimum, most businesses will need general liability insurance. If you have employees, you likely will also need to get workers' compensation insurance.
Look at coverage limits, deductibles, exclusions and the type of policy (occurrence or claims-made). Make sure you're comparing rates of similar policies, and consider the reputation and financial strength of the insurance companies as well.
It's good practice to review your insurance coverage annually or whenever significant changes occur in your business, such as hiring new employees, moving to a new location or adding new products or services.
When filing a business insurance claim, thoroughly document the incident, review your policy and contact your insurance company as soon as possible. Complete the claim forms, cooperate with the adjuster and follow up regularly until the claim is resolved.
An insurance marketplace, also known as a digital broker, is a platform that connects buyers with multiple insurers. You can get quotes from various insurance companies by filling out a single form, making it easier and faster to compare options. However, these platforms may not include all insurance companies in their database.
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