Whether its a small company or something larger and more established, owning a business can be a challenging and rewarding experience. Owning a business means making vital decisions, such as what insurance policy to go with. Most employers need business insurance to be in compliance with state law. It can be confusing to decide which coverages business needs.
Cost of business insurance
There are several factors that shape the cost of coverage, including:
- Type of policy – Customized policies are more expensive than basic liability coverage.
- Size of the business – The actual physical space the building covers yields higher rates.
- The Industry – Certain industries are riskier than others, so rates vary.
- Location – The value of the property and proximity to risk factors can either decrease or increase rates.
- The number of employees – Companies with more employees have a higher risk factor which drives rates up.
- Claims history – Businesses with previous claims will likely pay more for coverage.
- Revenue – Higher revenue means higher risk. If a business makes a lot of money, they have a lot to lose in a lawsuit.
Most business will likely need these policies:
- General liability – Gives business owners coverage in case of negligence, accidents, injuries, and other claims.
- Product liability – This coverage protects against defective products.
- Workers Compensation Insurance – Covers accidents and injuries to employees and their lost wages.
- Errors and Omissions Insurance – This covers a lawsuit due too bad advice/malpractice that results in a client’s loss.
- Business owner’s policy (BOP) – This is a custom policy that bundles policies to fit a business owner’s needs.
After going through these policies and their costs its important to remember that business insurance is tax deductible. The only non-tax deductible policies are self-insured reserved funds or lost earnings policies. Some business owners may feel they or their small company does not need coverage, and they may be right.
Certain employers may not be required by law, but that does not make it a good idea to operate uninsured. Its always better to be safe than sorry when it comes to protecting your business, your employees and your products. Of course, the best option for any business owner is to talk to their local insurance agent to compare quotes.
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