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Business Insurance

(Get your answers from an expert.)

Need Business Insurance, Commercial Auto, Commercial Property or Surety Bonds?

What Insurance Do I Need to Start a Business?

This year I’m finally going to start my dream business. I’m excited! What insurance do I need to get started?
The most important kind of insurance for new businesses is liability insurance. It covers legal costs, including the cost of hiring a lawyer, if your business is sued.
Legal costs can be extremely expensive, hundreds of thousands or even millions of dollars. This is even more true for businesses like childcare, cosmetics and food service, because there’s the potential to really harm your customers.

You might need other types of insurance depending on your business’s niche. Commercial property insurance and commercial auto insurance are common needs for new businesses, in addition to liability insurance. 

What Does Business Insurance Cover?

I’m not sure why I need business insurance, especially because my business is small and new. Can you explain what business insurance covers?
Business insurance isn’t just one kind of coverage. It’s a blend of multiple types of coverage. So there isn’t one set of things that business insurance covers—you can mix and match based on your business’s size and niche.
These are four common parts of small business insurance:
  • Liability: Covers legal expenses, including the cost of legal representation and any damages you might owe.
  • Commercial property: Covers buildings, equipment, inventory and even your customer’s stuff if you’re storing it (like in a hotel or repair business).
  • Commercial auto: Covers vehicles that are used for your business. You may need a commercial auto policy in addition to your regular car insurance if you plan on driving your personal car for business.
  • Consultant liability insurance (a.k.a. professional liability insurance): Provides extra legal protection if you’re sued for providing bad guidance to your customers, like in a consulting business.

Even within those categories, there’s lots of variety in what’s covered. Your insurance needs may also change dramatically over time. That’s why it’s good to work with an independent insurance agent. They can help you pick out the coverage you need at the right price point for your business. 

How Much Does Business Insurance Cost for a New Business?

I’m in the middle of putting together a business plan and I’m stumped about what to budget for insurance. How much should I be planning for?
This is a more complicated question than it seems. In short, it’s all down to your business’s size and niche. Take a second to think about worst-case scenarios for your business:
  • Could expensive property or equipment get damaged?
  • Are you working with flammable materials that are prone to fire?
    Are you driving vehicles for business that could get wrecked?
  • Is there a risk of physically harming a customer, including food poisoning?
  • Is there a risk of seriously humiliating a customer or causing them measurable financial harm?
The worse your worst-case scenarios could be, the more expensive your business insurance could be.

For now, expect to spend a few hundred dollars per year on insurance if your business is small. That should cover liability insurance and maybe even some property insurance. For a larger business, like a restaurant, the cost is likely to be in the thousands of dollars per year. 

What Happens if I Don't Have Business Insurance?

I started a small photography business last year, mostly for family and friends. I don’t have business insurance yet and I’m not sure I need it. Do I need to worry?
Photography is a good example of a field where insurance needs vary widely. A few important factors come into play. Let’s look at a few examples that also apply to many other small businesses:
  • Are you shooting high-stakes events like weddings?
  • Is your photography making up a large portion of your income?
  • How expensive is your camera?
Let’s expand all those scenarios:
  • If you’re shooting events where customers are likely to sue you (or at least be highly upset) if you screw up, then liability insurance and professional liability insurance are worth buying. Otherwise you could be on the hook for lots of money.
  • If you’re using your photography to pay your bills, then liability and commercial property insurance (insuring crucial equipment like lighting or backdrops) can keep your business afloat if something bad happens. That way you don’t have an interruption of income.
  • If you would struggle to find the money to replace your camera if it was stolen or damaged, then a special kind of property insurance called inland marine can help. Inland marine insurance covers expensive, portable equipment like cameras.
Whether you should worry depends on what your situation is relative to the questions and scenarios above. If it’s more of a hobby, you might be fine staying uninsured. But once it gets serious, it’s time to look into getting covered.

These principles apply to all sorts of other small businesses. There are lots of risks to not having business insurance. It’s important to know those risks and know your niche. 

Is Business Insurance Legally Required for Small Businesses?

I’m running a small side business. I don’t think I need business insurance, but I’m worried I could get in trouble if I don’t get it. Is business insurance required, or is it optional?
Business insurance is not legally required. However, it may be a required step in getting financing, or in attracting customers. That’s because both banks and customers want to be sure you won’t leave them hanging if things start to go wrong.

Running a business is hard, unpredictable, and potentially very expensive. Think of business insurance as backup. It takes the pressure off you. It helps you take the risks you need to take to grow your business. It takes a lot of guts and gumption to start a business. Whether or not you decide you need business insurance, good luck! 

commercial fleet auto insurance

Commercial Auto/Fleet Insurance

Commercial auto insurance provides insurance coverage for any vehicle that you use for business purposes, and for your commercial drivers. As a business owner, you can get commercial vehicle coverage for a single vehicle or a fleet of vehicles.

Commercial auto insurance provides insurance coverage for any vehicle that you use for business purposes, and for your commercial drivers. As a business owner, you can get commercial vehicle coverage for a single vehicle or a fleet of vehicles.A commercial auto policy can include several different types of optional coverage, allowing you to adjust the policy coverage to your particular business circumstances and the use of your vehicles.

In the event of an incident, such as damage to one of your commercial vehicles from weather, an accident, or some other incident, you can file a claim and receive compensation that will help to cover the cost of repairs.

If you or one of your drivers is at fault in an accident that injures another person or damages their property, that person can file a claim with your insurance company. In this case, your commercial vehicle liability insurance will cover the costs of the claim, up to the limit of your policy.

Many business owners choose to buy a commercial umbrella policy to cover the costs of large liability claims that exceed the limits of the vehicle liability policy.

This strategy can provide much higher limits, in $1 million dollar increments, to cover the costs of liability claims and lawsuits and protect the business financially.

Commercial Property Insurance

Landlord/Commercial Property Insurance

Commercial property insurance covers your business’s physical property, which could include a building and your business’s contents, equipment, and/or stock. Unlike homeowners insurance, no coverage is automatically included in a commercial property policy. If you want to insure something, you’ll have to specify it and pay the premiums for it.

The most common items that are covered under commercial property insurance include:

Building: If you or your business owns the physical building or office space that you work in, you can insure the building itself. You’ll need to decide which type of building valuation you want, which is covered in the next section. If you have multiple buildings, you’ll need to insure each one separately.

Business personal property: Business contents or personal property is essentially anything that you brought into your office building that’s not permanently attached to the building. This could include things such as desks, chairs, computers, phones, office supplies, manufacturing equipment, tools, etc. For some businesses, it could also include things that are sold to the public.

Documents: Important documents and accounting records can be insured, though the base coverage you’ll receive could be around $10,000. Since paper is relatively cheap and it’s the paper’s content that is valuable and hard to replace, you might want to increase this amount to cover the cost of replacing the lost information.

Inventory: Depending on the nature of your business and the insurance company you’re with, you might need to insure your stock or inventory separately from your business personal contents. Insurance on your inventory will normally be paid out at your buying cost, and can also account for seasonal fluctuations.

Fences, signs, and landscaping: Sometimes you’ll receive automatic coverage for outdoor signs, fences, and landscaping, but you can increase these limits if you want to.

Customers personal property: You may receive a low automatic coverage limit for customers’ personal items, but you might also need to add this coverage if your business needs it. This coverage is not intended for businesses who routinely have customers’ personal property in their care, such as auto repair shops. These businesses will need a separate type of coverage called Customers’ Care, Custody, and Control.

Landlord insurance policies contain different coverages. There’s a beginner’s basic policy that includes the minimums, but when you work with an independent insurance agent, you’ll get coverage tailored specifically to your needs. But at a bare minimum, your landlord insurance should cover:

  • Property damage from most natural and human causes (except flood protection, which is insured separately)
  • Legal representation and damages if you are sued
  • Umbrella coverage (an extra policy that kicks in and pays for things if you go over the limit of any of your other policies)

But if you continue to grow your properties, you should consider additional landlord coverage options, like:

  • Income protection
  • Appliance coverage (for boilers and other expensive equipment)
  • Workers’ compensation
  • Inland marine coverage (covers expensive equipment that moves around from property to property, such as lawn mowers or snowplows)

If you’re not seeing the coverage you want, don’t worry, landlord insurance is easily customizable with tons of other protection options available to you.

Our independent insurance agents are experts in it all who can help you mix and match the right business insurance coverage to balance the protection you need with a price you can afford. 

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Surety Bonds

Although surety bonds are common in the construction/contracting field, there are many types of bonds that serve many different purposes.

Although surety bonds are common in the construction/contracting field, there are many types of bonds that serve many different purposes.

  • License and permit bonds: The obligee, which is often a government agency, requires a bond from the principal. The bond states that all codes and regulations will be followed. For example, a plumber may be required to obtain a license before beginning work. To get a plumber license, you must first secure a license bond, agreeing to adhere to city plumbing code.
  • Public official bond: This bond states that elected or appointed officials will perform the duties they are given. Typical bonded positions include notaries, judges, and treasurers.
  • Probate and other court bonds: If you’re given a certain responsibility as a fiduciary or trustee, a probate bond guarantees you perform honestly and faithfully. Other court bonds include:
     
    • Administrator
    • Executor
    • Conservator
    • Injunction
    • Release of lien
  • Miscellaneous bonds: These are complicated bonds requiring an experienced underwriter, since most involve large risk obligations. These include several types of bonds, including:
    • Utility payment guarantees
    • Union wage and welfare
  • Contract performance bond: This bond guarantees that you will follow all terms and conditions set forth by the contract. Many require advance notice. Types of contract performance bonds include: Bid bonds, Performance bonds, Payment bonds.