Commercial insurance

Knowing how much insurance you will need as a small business owner can be a challenging endeavor. Nevertheless, having the appropriate insurance policy can save a small business a lot of money.

Needs analysis can give you a better idea of what kind and how much insurance would be the optimum for your business. Of course, buying liability, property and health insurance, in addition to Workmen’s Compensation, can be quite expensive, so assessing your business’ needs and what kind and how much insurance can be crucial.

Evaluating Your Business

The first consideration when using needs analysis for deciding on an insurance policy for your small business consists of accurately analyzing the different liabilities and assets which directly affect the business. These include:

Property — this includes equipment, real estate and other assets.

Business Volume — the amount of accounts receivable and the average cash flow of the business.

Salaries — how much you pay yourself and however many employees the company has.

Overhead — the cost of running the business including rent, utilities and other miscellaneous expenses.

Future Trends and the Local Economy — how future trends and the state of the local economy will affect the business in the future.

You can then better determine your company’s insurance objectives and what type of insurance plan would be optimal for your business by keeping the above factors in mind.

The second consideration for your insurance needs involves estimating your business’s potential for losses. This includes fire, theft, property damage, an employee’s legal action or losses due to economic hardship.

Getting the Right Amount of Insurance

Once you have evaluated your assets and liabilities, you will be much better prepared to determine how much insurance your company will need. You will want adequate coverage for your assets so make an accurate assessment of potential risks to your property to get adequate coverage.

Remember, a high premium will provide a higher amount of coverage so be aware of potential risks and make sure your business is covered for any high risk factors. Also, if you choose a higher deductible, you will probably pay less for your policy. Make sure you get the right amount of insurance depending on what your company can afford.

By law, your business will need Workers’ Compensation insurance. Consult with your company’s lawyer or advisor on how much your company may need and what type of package would be optimal for you and your employees.

Comprehensive coverage might be optimal for your business if you have several employees and own the business property. Group health and life insurance along with disability, property, flood and fire insurance can often be included in your policy.

Choose a Reliable Carrier

A reliable insurance company and an experienced agent can be an important element to obtaining the right amount of insurance for your business. A knowledgeable agent can help you perform your needs analysis, and can sometimes speed up the claim process, if you need to make one.

Also, choosing an insurance company with a good reputation and solid finances will give you greater peace of mind if any unfortunate event befalls your business. The last thing you need if you have to make a claim is an insolvent insurance carrier.

Finally, have your business appraised periodically to gauge how much insurance you will need on an ongoing basis. Since business finances and assets change over time, the amount of insurance you might need can also change.

If you already understand the risks involved when you buy commercial real estate, then several important factors should be taken into account when investing either your or your company’s money into a commercial property.

The following sections cover some of the more important items to consider before you buy commercial real estate. A professional commercial real estate agent can provide you with further advice.

Location

Those who buy commercial real estate regularly know that location is a key determinant of whether or not the purchase will ultimately turn out to be successful.

Most renters and corporate owners of commercial real estate want to be located as close as possible to their clients, employees, suppliers and vendors in order to minimize transport costs and maximize exposure to customers.

If you plan on renting to a business, make sure the commercial property is either attractive to potential renters or can be economically improved to be attractive.

Condition

Take the time to assess carefully how much repair the property requires before it can be effectively used or rented out, how much those repairs are likely to cost and how long they should take to be completed.

As with most investments, time is money in commercial real estate, and if the property will not be ready to be occupied soon for some reason, then investing in it as a rental property or as an alternative to your current commercial location could turn out to be a costly mistake.

Access and Parking Issues

You need to make sure that any commercial property you are considering buying offers easy access to customers and sufficient parking to accommodate them, as well as enough parking spaces for staff that might be employed on site.

Zoning and Improvement Limitations

Not all commercial properties are zoned for the same uses or are able to be permitted for certain improvements. You will want to check with the local planning department to find out what the zoning of the commercial property you are interested in purchasing is and what it permits.

For example, some commercial properties are located in industrial use zones, while others might be zoned for commercial office space or retailing purposes. Still other commercial properties may be located in a historical preservation area and hence substantial changes to their façade would not be permitted.

The majority of small businesses would like to offer health insurance to their employees as it allows them to attract and retain high-caliber talent. But the expense involved can be a major constraint.

The National Small Business Association’s (NSBA) 2015 Health Care Survey found that only 41% of firms with zero to five employees offer health care benefits, down from 46% a year ago. The situation is slightly better when all firms with less than 500 employees are considered with 65% of employers in this category offering insurance benefits.

Rising costs and the complexity of the health care system are among the reasons for the reluctance of small business owners to provide this essential benefit.

But it is possible for companies to reduce their expenses on insurance.

Check out group insurance vs. the cost of individual plans — The age profile of your employees and the pre-existing conditions they have will determine which of the two options is more economical. A group rate may be cheaper as the premium you have to pay is based on the rate applicable to people with the same demographic profile. You will be better off with this option if your employees are more susceptible to chronic diseases.

On the other hand, staying with individual plans may cost you less if each of your employees attracts a lower premium.

There is no simple formula to determine whether a group plan or a bunch of individual plans will save you more money. The best way to find out is to ascertain the insurance premium payable under each option.

If you are of the view that you don’t have the number of employees that are necessary to qualify for a group, don’t worry. Even two employees are enough.

Remember to negotiate — Many small business owners think that the annual premium figure cannot be lowered. But this is not true. Health insurance premiums can be negotiated, especially by firms that have between 50 to 99 employees.

When an insurance company raises rates, they usually refer to the fact that all the employees have become a year older. Employers should point out factors in their favor. They may have implemented an extensive wellness plan in the last 12 months which could have resulted in healthier employees. Some older employees may have retired or resigned.

Brokers can play an important role — Don’t underestimate the benefits that health insurance brokers can bring to the negotiating table. They would be aware of the latest developments in the various laws and regulations governing the health insurance industry. They would also have extensive knowledge about the various plans available with different insurers.

You may be eligible for tax credits — Raise this point with your tax consultant. Employers with less than 25 full-time employees who earn an average of $50,000 or less are eligible under certain conditions. These include contributing at least 50% of the total premium cost and obtaining coverage through the Small Business Health Options Program (SHOP).

Make bringing insurance costs down your priority

Bringing down health insurance costs should be a prime concern for every private firm. According to the findings of the NSBA’s survey, 90% of small business owners reported paying increased health plan premiums at their most recent renewal. Rising health insurance costs prompted slightly less than half of the respondents to defer salary increases.

If small businesses are to remain competitive they should take every opportunity to deliver the most appropriate health insurance policies to their employees at the lowest possible cost.

Business insurance exists to protect your investment in your business, along with those of your investors and co-owners. It also can help you provide financial compensation to the people who work for you, should accidents occur. Most commercial insurance coverages are optional; some, like workers compensation, are mandatory in most states. Your state government determines which are required.

What follows is a basic insurance overview of the types of insurance policies that you should know about and consider purchasing. Every business is different; some coverages may not be applicable to the type of company you own and run.

General Liability Insurance

Also simply called liability insurance, this type of policy covers your business when certain claims are made against it. These may arise as the result of injuries or property damage connected with your business, or even non-physical acts like slander or libel. If your company handles personal information, data breach coverage might be something you want to consider. This type of insurance will also assist in covering the cost of your legal defense.

Property Insurance

This insurance covers your business’ property and physical assets, including buildings, equipment, inventory, furnishings, and computers, from loss or damage in the event of man-made disasters like theft and fire, and natural ones like tornados, hurricanes and other weather events.

Workers’ Compensation Insurance

Most states require that businesses carry workers’ compensation insurance for their employees. This type of insurance replaces wages and pays for medical care for employees injured while on the job in exchange for agreeing not to sue their employer. Unemployment insurance and state disability insurance are also frequently required by states.  In addition, check out this overview of worker’s compensation coverage to learn more.

Commercial Auto Insurance

A commercial auto policy provides coverage for you, your employees, and the vehicles you own, lease, rent or borrow—both on the road and off. Many states make this coverage a requirement. Even if it’s not mandatory, this kind of policy will provide a measure of financial protection against liabilities that may arise from incidents involving these vehicles.

Commercial Flood Insurance

The National Flood Insurance Program covers businesses from financial losses due to property damage caused by flooding. You still have to pay for coverage, but it’s an important financial safeguard—and it’s backed by the federal government.

Commercial Umbrella Insurance

Often called umbrella liability, its primary purpose is to give your business added financial protection from potentially ruinous lawsuits and accidents. It serves as a backstop to other policies, including general liability, filling potential gaps when other coverages have reached their limits. It may also protect against additional liabilities not covered by your other commercial policies.

Management and Professional Liability Insurance

If you operate a professional services business like a medical practice or an investment advisory practice, coverage through a professional liability insurance policy can help shield you from losses (both legal damages and defense costs) resulting from acts, errors and omissions in the performance of your professional duties.

 

Similarly, management insurance would cover your business from lawsuits that arise in connection with your organization’s management practices. These types of lawsuits are sometimes not covered under a general liability policy. It can be complex determining the coverage appropriate for your business. An insurance professional experienced in working with others in your field can help you determine what additional levels of coverage your business may need.

Business Income Insurance, also known as Business Interruption or Continuation Insurance

If unexpected events cause your operations to be suspended, this type of insurance would help you replace the loss of business income you incur, to help you meet your continuing financial obligations such as rent or payroll.

GAME PLAN

Advice from an insurance expert with business insurance expertise is critical. Have a trusted insurance professional? Get him or her to walk you through the basics of business insurance and help you understand the right coverages for your business. Don’t have one? Get a few recommendations from your business network, and “interview” insurance professionals to find someone with the expertise you need.

The U.S. Small Business Association (SBA) offers a lot of helpful information on their website, including “Five Tips for Buying Business Insurance” and an overview article on business insurance.

Another good general resource for information on business insurance is the National Federation of Independent Business (NFIB).

To investigate an insurance company before you purchase coverage, use the National Association of Insurance Commissioners’ (NAIC) website. You can access key information, including closed insurance complaints and financial data.

The law surrounding workers’ compensation insurance for your employees can be particularly thorny. You may want to consult a lawyer about how to structure this coverage for your business. You should also contact your state’s Department of Labor to find out your coverage requirements.

Be sure to keep detailed records of your policies on hand. And whatever coverages you choose, know their ins and outs thoroughly so you’ll know what to document should incidents occur.