Starting a business is an exciting time for any entrepreneur. There are countless things that you need to do to get your new business off the ground, from fine-tuning your business plan to connecting with potential customers. While you’re frantically checking items off your to-do list, take a moment to consider your insurance coverage.
Having the right insurance policies can make or break a business in the event of unexpected challenges, so it’s important to take the time to fully explore your options. Business insurance is not a one-size-fits-all solution; you can mix and match policies to cover what’s important to you, and allow your business to protect the things that matter.
Protect your physical assets
One of the biggest financial investments in your new business will be your physical assets.
Whether you’re leasing or buying a property, real estate costs can add up quickly, and that’s just the start. You’ll likely require computers and workstations for yourself and your employees, a product inventory to draw from, and possibly specialized equipment or machinery if you’re in the manufacturing game.
The average cost of starting a business can range from $5,000 for a basic retail model, to $125,000 for a restaurant, which is quite a significant cost. (1)
If your physical assets fell victim to fire or theft, you may struggle to replace them without causing significant damage to your finances. A robust business property and contents insurance policy can ensure that they are protected, inside and out.
Make sure to read your policy thoroughly before signing, to understand whether or not you need separate business building insurance for full coverage.
Protect and retain your employees
Workers compensation insurance is a legal requirement in most states; however, even if you’re not legally required to take out a policy, it’s an essential consideration for any new business owner.
Workers’ compensation insurance protects your employees and will cover medical costs and lost wages in the event that workers are injured as a result of their employment. If you’re not covered by workers’ compensation insurance, you may leave your business vulnerable to lawsuits from injured workers.
Health insurance is another key consideration that new business owners should make. According to the Bureau of Labor Statistics, only 55% of businesses with less than 100 employees offer health insurance. Recent studies have shown that health insurance availability is a factor in whether employees accept or reject a job offer, and 56% of workers indicate that health insurance coverage is a key factor in their decision to stay in their current role. (2)(3)
Offering health insurance is not only a great tool to attract and retain skilled employees; it can be useful for business owners who are also sole employees. Some health insurance companies will insure a group of one, allowing you to take control of your own health as you build your empire.
Protect your customers
If your new business involves interaction with the public, then general liability insurance is an important option to consider.
General liability insurance may protect your business in the event that any third-party damage or injury occurs on your property, and also in the event that a company representative is involved in any third-party damage or injury while completing work in public, or in a customer’s home.
As an example, if a customer or contractor is injured while in your building, or a company representative causes damage to a customer’s home while installing a product, then your business would be liable to pay for any repair or medical costs associated with the incidents. The average claim for customer injury is $30,000, an amount that most businesses don’t have available on such short notice. (4)
General liability insurance will cover the costs of these events, meaning that you can be confident your customers will be protected in the event of an accident, and you will not be responsible for significant out-of-pocket costs.
Protect your financial future
Depending on your business model, there is a range of insurance options available to protect you against the many challenges faced by businesses in your industry. If you’re one of the many companies who choose to invoice rather than request upfront payment, you may fall victim to clients purchasing expensive products and services, and not paying their invoice. It’s estimated that 1 in 10 invoices become delinquent. Credit insurance will allow you to claim an amount generally between 75% and 95% of the total invoice amount, in the event that your customer doesn’t pay. (5)
Another potential financial setback to prepare for is the occurrence of natural disasters, such as earthquakes, floods, or hurricanes; these are generally excluded from business insurance policies, but can usually be covered under an add-on business interruption insurance option. Business interruption insurance may cover ongoing wages, costs to move to a temporary new location, and even lost profits caused by these terrible events.
In conclusion
As a new business, you may be particularly vulnerable to the devastating impacts of unforeseen out-of-pocket expenses. Between loans for start-up costs, property lease costs, and staff wages, you may simply be unable to cover what is unexpectedly demanded of you.
A comprehensive insurance coverage plan can provide you with the peace of mind that in an emergency, your new business will have the financial support it needs to get back on track.
