Starting a business is an exciting time. You’ve likely been working on your business plan, coming up with funding and solidifying your marketing plan.
Don’t overlook protecting your personal and business assets as you get your business up and running.
Business insurance helps you when the unexpected occurs, whether it’s a fire, theft, employee injuries or a lawsuit. Learn what insurance you need for your new business.
What Does Business Insurance Cover?
Business insurance covers a wide range of circumstances. These include:
- Property damage
- Lost business income
- Injuries to your employees
- Injuries or property damage to 3rd parties like your clients and vendors
- Lawsuits related to negligence
Select the Right Insurance for Your New Business
The right insurance for your business depends on several factors. One is the type of business you own. A home-based accounting business will face different risks than a restaurant. And if you have employees, most states require you to have workers’ compensation insurance.
An experienced insurance agent or broker can help you assess what insurance you need and how much of each type you should carry. It’s not enough to just have insurance.
While setting up the appropriate business structure can help protect your personal assets, your business assets could be vulnerable without the right amount of insurance in place. That means buying enough insurance to cover rebuilding your business and potential settlements and awards from lawsuits.
Types of Business Insurance
There are many types of small business insurance. Here are the most common:
Commercial Property Insurance
This insurance helps you repair or rebuild your business if it’s affected by an event covered in your policy. Policies typically cover fire, theft, lightning, windstorms, smoke, vandalism and civil unrest.
Policies also don’t normally cover damage from floods or earthquakes, so it’s important to purchase separate coverage if you’re concerned about those events.
Commercial General Liability Insurance
This insurance protects your business from lawsuits related to non-professional negligent acts. For example, if a customer slips, falls and injures themselves and files a lawsuit, this coverage would help with your legal defense and any awards or settlements.
It covers bodily injuries and property damage to 3rd parties (not your employees or your business). It also covers personal and advertising injuries, which include libel, slander and copyright infringement.
Business Owners Policy (BOP)
A business owners policy (BOP) bundles commercial property, commercial general liability and business interruption insurance. Business interruption insurance helps cover the costs of being shut down while your business is being repaired.
BOPs are a good choice for many small business owners as it’s often cheaper to buy the policies bundled rather than separately. However, if your business has unique risks, it might be better to purchase individual policies. An experienced insurance agent or broker can help you decide which option is best for you.
Professional Liability Insurance
This coverage helps protect you if you’re sued due to professional negligence. For example, if an accountant made a mistake calculating a client’s taxes and that client ended up owing taxes and penalties, that client could sue. Professional liability insurance helps to cover your legal defense and any awards or settlements.
Workers’ Compensation Insurance
Workers’ compensation insurance pays for the medical costs for employees who have a work-related injury or illness. It also helps to make up for lost wages if they need time off to recover. If you have workers’ compensation insurance, employees typically can’t sue your business over their injury or illness.
Commercial Auto Insurance
If you have vehicles for your business, you may need commercial auto insurance. This insurance has the same options as personal insurance.
You could just purchase state minimum coverage, but most businesses would be better served by buying a policy that includes comprehensive and collision coverage.
How Does Business Insurance Work?
With business insurance, you pay a premium in exchange for coverage. You may pay annually, semi-annually, quarterly or monthly, depending on the type of policy and the requirements of the insurance company you contract with.
Most business insurance policies have a deductible and a policy limit. The deductible is the amount you’re required to pay before the insurance company starts paying.
For example, if a fire caused $5,000 in damages and you have a $1,000 deductible, you pay the first $1,000 in repair costs. Your insurance company will pay the remaining $4,000 according to the terms of your policy. A higher deductible lowers your premiums, but it means you have to pay more out of pocket when you need to file a claim.
A policy limit is the most an insurance company will pay for a claim. Suppose your commercial property insurance policy has a $100,000 limit and your building has $125,000 in damages from a covered event. In that case, you’d be responsible for paying the $25,000 not covered by your insurance company.
If you experience an event covered by your policy, you’ll need to file a claim. In most cases, you’ll fill out a form and submit it to your company along with supporting documents. The insurance company reviews the claim, and they may send someone to assess the situation.
The insurance company will then decide whether to approve the claim. If your claim is denied, you typically have the right to appeal, and the appeal process should be explained in your policy.
Cost of Insurance for New Businesses
The cost of your business insurance depends on several factors:
- The type of business
- Where your business is located
- The number of employees you have
- The size of your payroll
- Safety practices
- The value of your business property
If you’re concerned about the costs, talk to potential insurance companies. They may have suggestions for practices you could implement or precautions you could take that could lower the cost of your insurance.
Best Insurance Companies for New Businesses
Which insurance companies offer the best business insurance? Here are Benzinga’s recommendations.
Try Simply Business
Simply Business offers a comprehensive suite of business insurance that specializes in making it easy to insure your business. Whether you’re looking for construction workers' insurance or insurance for your startup, Simply Business helps you find the right workers’ comp coverage at the right price. This includes any business at any stage of development. Don’t turn to a thousand different carriers when you can get help from Simply Business.
Tell Simply Business a little bit about your business and you'll get almost-instantaneous affordable quotes from top insurance providers to protect your business and safeguard employees if they’re hurt on the job. You can also look into business owner’s plans, liability insurance, commercial auto and more that will cover everyone on your team, and you can get covered in accordance with state law without overspending.
Building your business is hard enough. Let Simply Business make it easier. Get a quote from Simply Business today.
Which Business Insurance is Right for You?
Every business has unique needs. A self-employed individual may need health insurance in addition to other types of coverage, for example.
The best way to find the right business insurance for you is to contact at least 2 to 3 insurance companies and compare prices and coverage options. Choose a company that offers competitive prices and excellent service.
Frequently Asked Questions
Q. Do startups need insurance?
Startups do need business insurance. The type of insurance depends on the business, of course. A business owners policy (BOP) is a good choice for small businesses starting out. For example, tech start-ups may have more complex needs and benefit from having directors and officers liability insurance in addition to more typical types of business insurance. You may also be required to have workers’ compensation insurance.
Q. Is it illegal not to have business insurance?
If you have employees, you’re required to carry workers’ compensation, unemployment, and disability insurance, according to the Small Business Administration. Beyond that, you’re not required by law to have business insurance. You may be required to carry a certain amount of property or liability insurance by your lender or other companies you contract with or your state.
Q. Can I deliver food with business insurance?
It depends on the type of food delivery business you’re considering. If you’re a contractor with an app-based food delivery business, you may not need most types of business insurance.
You should contact your auto insurance company, however, to ensure that you’re covered if you drive for business purposes. You can also check with the company you have a contract with to see if it recommends carrying any business insurance.
If you’re opening your own food delivery business, then you need to set up your business according to local, state and federal laws, including buying workers’ compensation insurance if you have employees. You may need home-based business insurance if you’re working out of your home.