This content originated on Inc., sponsored by State Farm.
One size does not fit all when it comes to small business insurance. An insurance agent can help you select the right policy.
Small businesses come in a lot of shapes and sizes: one-person shows, startups with small teams, and fast-growing companies with hundreds of employees and millions in revenue. Small business insurance also comes in many shapes and sizes. Every entrepreneur has different insurance needs based on factors like their company’s size and their risk tolerance.
Instead of navigating the vast and nuanced insurance landscape alone, working with an insurance agent can help ensure that you select the right coverage, so you don’t accidentally leave your business exposed or pay for more coverage than you need.
Let’s consider the complicated world of small business insurance, the benefits of working with an insurance agent, and what to look for when selecting one.
Invest in the right kind of insurance
Dave Mawhinney, executive director of the Swartz Center for Entrepreneurship at Carnegie Mellon University, explains that insurance is an important consideration for entrepreneurs, and in many cases, a legal requirement.
“Oftentimes, solopreneurs and new small business owners are required to buy business insurance by the government, a bank, landlord, client, or a board of directors. In this case, you don’t have much choice but to buy insurance, so you are able to do business,” he says.
Even when it isn’t mandatory, insurance could save you thousands of dollars or more in the event of a crisis, such as a storm that destroys expensive equipment, or a costly lawsuit. Yet many small to midsize businesses (SMBs) remain uninsured.
Melinda Emerson, a best-selling author and small business expert known as the “SmallBizLady,” explains entrepreneurs sometimes think insurance is more expensive than it is. They also underestimate how much risk their businesses face.
“Business owners don’t realize how exposed they are to environmental issues that could damage their workspace, equipment, or inventory,” she says. They could also face a potential lawsuit from a client if something goes wrong or someone gets hurt during the normal course of business.”
Mawhinney encourages business owners “to have at least the basic protection, if they can afford it, even if they’re not required to do so.”
Your insurance needs will depend on your business and likely combine coverage types. Small business insurance types include, but are not limited to:
- General liability
- Professional liability
- Business owners policy (BOP)
- Commercial auto insurance
- Commercial liability umbrella policies (to protect against lawsuits that exceed their underlying policy’s limits)
Workers’ Compensation is an important tool for protecting your employees as well as the financial assets of the business from the high cost of medical care and wage replacement. Workers’ Compensation is required in most states if you have employees.
Nancy Germond, a risk management consultant and president of Insurance Writer, says one of the biggest mistakes small business owners make is “thinking those working for them are independent contractors and therefore they don’t need workers’ compensation coverage or to pay employment taxes.”
Consult an expert to be sure you understand who on your team needs coverage.
Seek out an expert
The old adage about being penny-wise and pound-foolish definitely applies to insurance, Mawhinney says. You will want to make sure your business is adequately protected from risks. If you are not an insurance expert, it is easy to make mistakes, such as not selecting adequate limits or not understanding what is or isn’t covered under a policy.
A State Farm insurance agent can help you find the right coverage, so you don’t leave yourself exposed to unnecessary risk or pay for more than what is necessary.
You also should look for an insurance agent who:
- Has a track record of working with small business owners
- Understands the unique needs of your business
- Communicates well and is pleasant to work with
It also is useful to work with someone who has ties to your community, so they understand your local business landscape and can potentially provide networking opportunities in addition to valuable insurance advice.
Curious to learn more about what small business insurance can do for you? Have a question about the biggest risks your business faces and how to protect against them? Your local State Farm agent can help. Reach out today!
State Farm
Bloomington, IL
