Recently HPM Insurance taught an "Insurance 101" class for new business owners through the NH Small Business Development Center (SBDC). During this event it became apparent that most business owners knew they needed insurance, but specifically what and where to get it was a mystery. Here are 5 tips to help any business looking to buy or shop for commercial insurance.
1. Understand your Risks:
If you are a small or new business, you may not believe you have a lot or risk, especially if you work from home. But...
- What if, based on your advice, serious damage is caused to your client, whether actual or perceived damage. Do you have coverage for that?
- What if you are at a client's location and you inadvertently damage something. Do you have coverage for this?
- What if you sign a contract indicating you will carry insurance. Do you understand the specific insurance requirements of the contract before you start the project?
- What if the Fed Ex driver slips in your driveway delivering paper and toner to your home office. Will your homeowner's policy cover this?
- What if you are using your car, insured on your personal policy, to drive to an appointment with a client. Will your own car insurance cover this?
In today's litigious society it is critical that you speak with an insurance professional and explain the extent of your business in detail so the best policy can be presented to meet your needs. Most reputable insurance agents are not out to sell you the most expensive policy, but rather a policy that will cover you when needed.
2. Find a Reputable Licensed Insurance Agent:
It is a misconception that if you buy something on line, it will be less expensive. This is definitely not the case with business insurance and in some situations, you could end up spending a lot more than necessary. An example of this came from a life coach who attended the HPM Insurance 101 class through the SBDC. She indicated that she thought she could easily find a policy on-line. With a few clicks of the mouse she bought a policy, but when it arrived in the mail she noticed that it did not cover her as a life coach, but rather as a yoga instructor. When she called the company to discuss the error, they could not fix the policy, but rather had to cancel and re-write it charging her a fee to do so. Bottom line is that if she went to a local professional insurance agent, she would have saved herself time and money.
Finding a good insurance agent, like HPM Insurance, is like finding a good lawyer and accountant. You want someone with whom you can establish a relationship with and call for advice. Would you rather do this with a faceless call center or someone within your own community? State government regulates the insurance industry and require agents maintain current licenses which require hours of continuing education credits. To ensure the agent you are dealing with has a current license, you can visit the New Hampshire Insurance Department's website.
3. Do not buy insurance to simply comply with a contract, buy it to protect your business:
It is not uncommon for our agents to get a call from a business owner that a policy is needed only because a client is requiring it. Although that is a valid reason, keep in mind that your client only really cares about their own interest, not yours. If you only buy a liability policy to meet the required contract, there would not be any coverage for your business equipment, loss of income or professional liability. If you think about your risks first, you will most likely already comply with what your client is requiring while getting the proper coverage for your own business.
4. What type of insurance do I need for my business?
If you are the type of person who wants to have some idea what they are speaking about before calling a professional agent, here are the very basics of what you should know:
- If your company is grossing less than $3 million and you're not in a high-risk business class, you can most likely purchase a business owners policy, also known as a BOP. This is a policy that bundles business policies together and allows you to add additional coverage as necessary. A BOP policy can vary in coverage depending on the carrier, so it is important that if you are considering changing companies, that you are familiar with what both companies offer.
- Workers' compensation is required by state law for all employees (whether full or part time, temporary or family members) and covers a workers' medical expenses, disability and death benefits if injured on the job. Rates vary widely by industry and occupation. If you do not obtain a workers' comp policy and an employee is injured, you may not only face an uninsured claim, but also a hefty fine by the state.
- Property insurance covers the building as well as equipment in the office. These rates also vary greatly by location (fire protection), age of building and construction type.
- Business income insurance can pay not just for a loss of sales, payroll expense and rent while you rebuild your business after a loss, but it can also pay for you to rent temporary office space or equipment so you can get the business going faster.
These coverages are just a snapshot of what is available to protect your business. Again, speak with a professional.
5. Assess your insurance coverage every year:
As your business grows, so can your risk. You don't want to be caught under-insured in the event of a claim. When you receive your policy every year, be sure to review it as perhaps you forgot to call your agent about that new piece of equipment you bought, or sold a truck that should be removed from the policy. Never assume that a bank, dealership or employee will take care of everything for you automatically. As the business owner, it is your bottom line that could suffer.
This material is for informational purposes only. All statements herein are subject to the provision, exclusions and conditions of the applicable policy. For an actual description of all coverages, terms and conditions, refer to the insurance policy.