How To Get Insurance for a New Small Business

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The Importance of Small Businesses Insurance

Small businesses face numerous risks, from natural disasters and theft to liability claims and employee injuries. Insurance is crucial for protecting your clients’ businesses against these threats and ensuring their financial stability. For one, insurance safeguards a business’s assets—including its property, inventory, and equipment—from damage. Even if a business suffers a fire or another type of calamity, they still can pay for replacement items.

Having the correct coverage can also protect companies from liability should damages impact customers or employees directly. Small businesses are susceptible to lawsuits from third parties, such as customers or partners. Liability insurance protects against financial losses resulting from these claims by covering legal fees, medical expenses, and potential settlement costs.

Investing in insurance for your clients who own small businesses is about protecting the day-to-day health of team members as well. Your clients’ workforce is a crucial part of their business’s long-term success. Workers' compensation and disability insurance are essential for covering employees’ medical expenses and lost wages resulting from work-related injuries or illnesses.

In discussing these benefits with your client, you can better ensure that they understand the gravity of selecting a plan. This way, you can lead them in a direction that best suits the needs they’ve laid out for you.

Types of Insurance Plans Available

Now that you understand the overall importance of selecting quality coverage for small businesses, it’s time to map out some popular plans for consideration. Small businesses have access to a wide range of insurance policies that will suit their unique needs. Here are some of the most common insurance plans available for small businesses:

General Liability Insurance

As outlined above, small businesses are at a particularly high risk of lawsuits in the event of a workplace accident. Since startups have very little income at this stage, this leaves them financially vulnerable. General liability insurance policies protect businesses from third-party claims relating to bodily injury, property damage, and advertising injury (such as slander or copyright infringement).

Professional Liability Insurance

Also known as errors and omissions coverage, this policy protects service-based businesses from negligence claims arising from their professional services or advice. Whether founded or not, this type of liability claim can have a severe impact on a newly formed company. So it’s vital that your clients have access to plans like these to have adequate protection.

Property Insurance

As a business finds its legs, physical assets (such as office spaces and furniture) are crucial to setting a team up for success. Because of this, companies can find themselves with devastating costs should these items sustain irreparable damage. Property insurance shields businesses from financial losses resulting from theft, fire, or natural disasters damaging their physical assets.

Workers’ Compensation Insurance

This policy is mandatory in most states and covers medical expenses, lost wages, and rehabilitation costs for employees who suffer work-related injuries or illnesses. It also provides protection for employers against lawsuits filed by injured workers.

Commercial Auto Insurance

If your clients use vehicles for business purposes, commercial auto insurance is essential to cover potential damages and liability resulting from accidents involving their vehicles. Since these assets can be incredibly expensive to replace, having the proper coverage further protects your client from financial hardship.

Cyber Liability Insurance

With the increasing reliance on technology and the internet, businesses are at a very high risk of experiencing data breaches or general cyberattacks. Cyber liability insurance aids in the aftermath of an attack by covering the costs of what your client lost, including legal fees, notification costs, and public relations efforts.

Business Owners Policy (BOP)

A BOP combines general liability, property insurance, and business interruption insurance into one comprehensive policy. This option can be more cost-effective for small businesses seeking multiple types of coverage.

Key Person Insurance

Also known as key man insurance, this policy protects businesses from financial losses resulting from the death or disability of a key employee or owner. The payout can help cover costs associated with hiring and training a replacement or maintaining the business during the transition.

Considerations for Choosing Insurance

There’s seemingly no end to the number of options when it comes to insurance, which can make your job as a broker a bit more difficult. So when the time comes to get insurance for a new small business, it’s vital that you give business owners a list of things to think about when making their decision. Your clients should carefully assess their needs and requirements before selecting insurance coverage. Here are some key factors they must consider:

Business Type

Each business type has its own set of unique risks. For example, a retail store requires extensive property coverage, while a consulting firm may prioritize professional liability insurance. It is essential to understand the specific risks associated with each business type and select policies accordingly. For this reason, you should always ask your clients to classify their company based on their offerings and business model.

Company Budget

Encourage your clients to balance their insurance needs with their budget. Advise them to choose policies with adequate coverage limits to protect their businesses effectively, but you should ensure their premiums are affordable and fit within their financial constraints. Deductibles for specific insurance plans play a significant role in determining premium costs and potential out-of-pocket expenses. Suggest your clients carefully consider their ability to pay for deductibles before committing to a policy.

Legal Requirements

Some states and industries mandate specific insurance policies for small businesses, such as workers’ compensation or commercial auto insurance. Your clients must comply with these regulations to avoid penalties and legal issues.

Selecting the right insurance coverage is a crucial step in establishing a secure foundation for your clients’ small businesses. By understanding all you can about these policies, you can help your clients make informed decisions that protect their investments and ensure their long-term success. At Warner Pacific, we help brokers find the best matches for their clients, and this includes services focused on small businesses. Our small group medical insurance quoting team will map out all the potential options based on a specific set of search criteria. We can also provide support with the paperwork so that you can keep selling and making commissions.