A Comprehensive Checklist to Choosing the Best Small Business Insurance

Running your own small business can be daunting. With so much to oversee, you’ve taken on various risks that could significantly impact your day-to-day operations, not to mention your bottom line. And with all of the time, money, and effort you’ve invested in setting up your small business, it’s crucial to have a plan in place to protect it.

But with so many options available, how can you determine what types of insurance you need to safeguard your small business? Undertake a careful analysis of your business and its unique risks to identify the most essential insurance coverage.

This 6-point checklist will ensure your small business has protection against unexpected risks.

1. Analyze your business assets

First and foremost, do a careful evaluation of your assets to determine what you need to insure. Take stock of all your holdings — encompassing current assets, liquid assets, and any investments you’ve made. 

2. Understand your risks

Every industry is different, and so are the risks to your small business. For example, an accountant may fear lawsuits for filing tax return errors. At the same time, a restaurant might have concerns about customer health. Professional liability insurance covers experts like accountants, and product liability insurance safeguards restaurants if customers get sick due to their food.

Make sure to carefully evaluate the risks you’re likely to face in your industry to make informed decisions regarding which business insurance is needed to guard against them.

3. Consider your legal responsibilities

Buying insurance may not just be a wise financial decision; it is often a necessity. Depending on your industry, state, client relationships, and lender requirements, specific insurance coverage might be obligatory.

For instance, if you have employees, you might be mandated by your state to carry workers’ compensation insurance. Often, landlords require tenants to acquire a general liability policy against third-party lawsuits concerning bodily injury or property damage claims. Clients may stipulate specific insurance requirements before entering into contracts with you.

Thoroughly research the legal requirements for your area and industry to ensure you have proper coverage. 

4. Prioritize coverage 

Although the cost of insurance can be a concern for your small business, remember, in the long run, insurance can protect you from significant payouts in legal disputes and claims. As you try to balance coverage and cost, ensure you are not compromising on the quality of the scope to save money. 

5. Don’t forget to consider your deductibles

Most business insurance policies have a deductible, the amount of money you’ll be required to pay before your insurance policy begins to cover your insured loss. After you pay the deductible, the insurer covers the remaining claim amount within the policy limit.

A higher deductible comes with lower premiums – so you might be tempted to choose the policy with a high deductible. But, your small business may be unable to pay the deductible while filing a claim. Ensure that you take into account both the costs of the premium and deductible when you choose your coverage plan. 

6. Seek scalability

Insurance with scalability offers flexibility. Such plans can adapt to your company’s changing needs. For instance, you can modify your coverage if a global pandemic impacts your productivity or your team size decreases. Before finalizing your small business insurance coverage choice, ensure it offers scalability so you’re not buying multiple policies to cover different aspects of your company’s growth.

The final word

The best insurance for your small business depends on your unique needs and the regulations governing your state and industry. It is always advisable to consult an external expert for guidance on finding the right combination of coverage to keep your small business legally compliant and financially protected.

Want to know more about startups and what it takes to get started? Since 2006, Escalon has helped thousands of startups get off the ground with our back-office solutions for accounting, bookkeeping, taxes, HR, payroll, insurance, and recruiting — and we can help yours, too. Talk to an expert today. 

This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact us here.