How do I determine the proper cover and limits for my business insurance?
Figuring out what coverage to have in place and what limits are needed is a real balancing act. On one hand, proper insurance is necessary to reduce the risk of owning and operating a business. On the other hand, unaffordable and unrealistic premiums are also not in your best interest as a business owner.
If your business is like most small businesses, you probably don’t have a full-time risk manager to answer your business liability insurance or workers’ compensation insurance questions. So where to start?
It may make sense to focus your research on three common types of small business insurance coverage: general liability, property and workers’ compensation insurance. Once you know what questions to ask, it’s much easier to select optimal small-business insurance coverage and business liability insurance rates. It’s also important to understand that business liability insurance rates will vary depending on your business’s needs.
Property and Casualty insurance covers building and property against damage, theft, and other causes such as fire. The contents and furnishing as well as most inventories are covered. It’s important to determine rebuilding costs, restocking costs, and relocation costs if the incident could require it.
Comprehensive general liability insurance coverage protects you in the event of claims of bodily injury or physical injury or damage to property. This includes legal defense and settlements up to the limits of the policy. Check with your industry association and state department of insurance to determine types of claims and what settlements are awarded. In addition, professional liability insurance may be needed.
Again, both industry and the state department of insurance can help in determining the proper limits.
Workman’s compensation limits and minimum coverage are generally determined by your industry and state.
The key is to work with a licensed insurance professional you trust to develop a comprehensive insurance package for your business. Eligible businesses can purchase property insurance packaged together with general business liability insurance coverage in a single policy called a Business Owner’s Policy, or BOP.
Such combined policies are generally available at reasonable small-business rates. Your licensed insurance professional may make this recommendation to you.