How small businesses should approach insurance coverage and mitigate risk

Many small business owners only have a certain budget for insurance, so a strong relationship with an insurance agent who takes a proactive approach to mitigating risk and protecting their business is key. The cost of business insurance is not prohibitive, but replacing offices and not being able to work because of a loss can be.

“Remind yourself that having good coverage is one of the costs of doing business and part of your responsibility to yourself, your business and others who depend on you,” says Tim Able, a client advisor at SeibertKeck Insurance Agency.

Smart Business spoke with Able about what small business owners need to understand about their insurance coverage and risks.

What are the most important insurance coverages for small businesses?

Every business, even if it’s home-based, needs to have liability insurance. This provides both defense and damages if you, your employees, your products or services cause or are alleged to have caused bodily injury or property damage to a third party.

If you own your building or have content, known as business personal property, including office equipment, computers, inventory or tools, you will need property insurance that will protect you if you have a fire, vandalism, theft, smoke damage, etc.

It is also important to include business interruption/loss of earnings insurance as part of the policy in order to protect your earnings in the event the business is unable to operate.

Lastly, with commercial auto insurance, you can insure your work vehicles from damage and collisions. If you do not have company vehicles, but employees drive their own cars on company business, you should have hired and non-owned auto liability to protect the company in case the employee does not have insurance or has inadequate coverage.

The top 10 insurance coverages are:

  • General liability insurance.
  • Property insurance.
  • Commercial auto insurance.
  • Workers’ compensation.
  • Professional liability.
  • Employment practices liability.
  • Directors and officers insurance.
  • Privacy and security coverage, also known as cyber liability.
  • Personal home and auto policy.
  • Umbrella coverage.

Where do some business owners fall short on essential protection?

A business may fall short in identifying risks when its risk management measures are reactive and not proactive. It’s important that a business aligns itself with an insurance agent who takes a proactive approach to mitigating your risk. Meeting with your agent on a quarterly or semi-annual basis will help to identify exposures that could potentially cost a business everything.

In addition, a proactive approach to minimizing risks in the workplace may help to lower your insurance premiums by preventing future claims.

How much does the size and type of business impact what insurance is necessary?

Risks increase substantially as a business grows, as more employees are hired and as more services are rendered or products sold. While a crossbow manufacturer will certainly have different needs and risks than a website designer, having the right protection is equally important.

Creating a new revenue channel, opening a new location or making any significant change to how your business normally runs should be reviewed with your insurance agent. Major changes like these can lead to gaps in your insurance coverage, leaving a business exposed.

Business owners put a lot of time and energy into growing their business and providing for employees and their families. That’s why it is so important they make sure their business is properly protected.

Tim Able is a client advisor at SeibertKeck Insurance Agency. Reach him at (330) 294-1363 or [email protected].

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