Business insurance is an inevitable and necessary cost for businesses. For start-ups and small businesses, this cost can be quite intimidating and tempt you to be as minimal as possible with warranty policies.
However, this isn’t the smartest move. Sure it saves you money in the short term or in the moment when you’re renewing policies, but in the long run your business will be vulnerable if all areas aren’t covered.
Why Business Insurance is Important for Small Businesses
Business warranty might seem like a burden and extra cost for your small business, but the reality is that it provides much-needed support and protection should you need it in the future.
Many firms specialize in small business insurance, such as biBERK, and work to create packages that contain all the policies you need without costing too much. Before we get into how you can find the best provider and policy for your small business, let’s understand why having it in the first place is so vital.
It Keeps Your Business Protected
The main function of insurance is to mitigate risk. A lot can affect the success of your business, and seeing as it’s impossible to predict the future, insurance is the next best thing.
The business warranty protects your business from a lot of external players, including:
- Unhappy customers
- Natural disasters
- Changes in the industry
It Saves Money in the Long Run
Insurance is quite a large upfront cost that businesses have to pay out, and while it might feel like a lot at first, a warranty saves you a lot of money in the long run. Especially if you operate in an industry that carries a lot of risks, or your headquarters or stores are located in areas prone to extreme weather conditions, insurance has the potential to save a lot more money than it costs.
The costs of covering legal fees should you find yourself faced with a lawsuit or replacing equipment or assets if they are damaged are a lot more than an insurance policy. As a small business, you have so many costs already, that an unforeseen and hefty cost could substantially affect your business.
It Ensures Your Business Operations are Legitimate
In many states and industries, businesses are obligated to have certain insurance coverage, such as workers’ compensation, which we’ll cover later on. In these cases, you must have the relevant and required warranty policies in order to conduct your business legally.
If you don’t have this coverage, you risk facing fines and possibly even legal action, so it’s always best to have the right insurance. Now we’re familiar with why it’s important to have business insurance, it’s time to move on to how exactly you can find the right coverage for your business.
Here are 6 things to look at when choosing your small business warranty
Risk Factors in Your Industry
First, when it comes to choosing insurance, the amount of risk in your industry will be a huge factor affecting what coverage you need. Some industries carry lower risk than others, and those will come with lower warranty premiums, as well as less chance of needing to make a claim.
But those operating in high risk industries will likely need more coverage and said coverage will be more costly because of how likely it is that you’ll need to use your insurance at some point. Low risk industries are defined as industries that don’t go through much change, and aren’t likely to fail or go through slumps. These include:
- Fast moving consumer goods (FMCG)
- Service Businesses
High risk industries are ones that experience a lot of change and where if businesses use their warranty, they usually need a lot of support. These include:
Laws and Legal Responsibilities
Next, you need to know what insurance coverage is obligatory to have for you as a small business. Again, this is dependent on what industry you operate in, but also on the size and nature of your business. An example of this is whether you employ people.
If you are a sole trader who works independently, then you don’t need to worry about employee-related warranty. However, if you do have a team who work for you, you’ll need to get coverage to protect them and their rights as workers within your business. The repercussions of not having the right insurance policies for your state or industry can have serious ramifications on your business.
Types of Coverage
Next, you’ll need to consider what kind of coverage you need. There are a number of different types of business insurance, including:
- Workers’ compensation insurance
- Commercial insurance
- Buildings insurance
- Liability insurance
- Errors and omissions insurance (E&O)
- Business owner’s policy
- Auto insurance
Each of these types refers to a specific area of your business, for example buildings insurance to protect your office or store, and errors and omissions insurance to cover your services and performance as a business. Looking at your business’ assets and operations will help you in identifying what you need to protect, and therefore what kind of insurance you need.
When you purchase business insurance, it’s not just the cost of the policy that you have to consider. There are other fees associated with insurance that you have to make sure your business can meet when it comes to making a claim.
Should you need to use your insurance coverage to make a claim, you would need to pay a deductible cost to contribute to what the insurance company gives you.
Uncertainty is something that all small businesses must deal with, and it’s impossible to predict exactly what will happen in the future. But it is worth thinking about how likely you think it is that your business circumstances will change throughout the duration of your coverage. This could affect whether you go to a provider that provides more flexible coverage or not.
Finally, you need to look at different providers. Insurance policies don’t have standardized pricing, meaning that you’ll be looking at different prices across providers. Do your research to find the best deal for your business, but also the best package.