After you’ve worked hard to build a successful small business, you want to protect it with a good business insurance policy. Business insurance will protect you from unforeseen events that could destroy everything you’ve built. However, there are some insurance mistakes you should avoid.
Don’t rely only on your homeowner’s policy
This is most important for people who run part of their business from home. Homeowner’s insurance doesn’t cover property that is used for business. This includes structures and most business equipment. If someone visits your home office and hurts themselves, your homeowner’s policy won’t cover you. Talk to your business insurance agent about business personal property insurance, on-premise liability and off-premise liability or errors and omissions coverage.
Also known as business interruption insurance, this coverage kicks in if the business experiences a disaster. Never make the mistake of thinking that property insurance is all you need. Property insurance only pays for the physical damage done. You need a loss-of-income policy to take care of the damage done to your income as a result of the business being shut down. Fortunately, you don’t have to buy a separate policy to put this coverage in place. Instead, you can add it on to your business property insurance policy or business owner’s policy. You need to understand how covered losses are defined, so confirm that your basic policy covers disasters like water damage, fire, smoke and other problems.
People who own small businesses often are the business. Ask yourself what would happen to your business if you passed away? Would it survive without you? If it wouldn’t, what would your family use for income? If you think your absence would become a financial catastrophe for the business or your family, think about using life insurance to replace the income your business won’t provide. Consider whether or not you need to buy life insurance for your key employees. If your business depends on certain individuals, you need to insure their lives as well.
More people are more financially devastated by disability than they are by death. In fact, disability is the number one reason people lose their home. You need disability policies if you want to protect your family and your business. Buying disability coverage can be difficult, unfortunately, but if you need it, get a policy in place as soon as possible. When you buy a disability policy, try to get one that will pay you if you are disabled and can’t work in your own profession and another that will pay you until you reach 65 or older. If you can get a disability policy, make sure you fully understand how much of your income is covered. If most of your income comes from commissions and bonuses, make sure that the policy includes that or shift your income to salary to protect yourself.
Paying too much
Many small business owners pay too much for the coverage they buy. Owners often buy their coverage from the agent who provides personal coverage. Sometimes this works out, but it often backfires. Shop the coverage being offered to make sure you’re getting the best deal and don’t become complacent. Re-visit your insurance coverage each year so you are educated in each policy you own, why you need them, what they cover and what they don’t.