Frequently Asked Questions About Business Insurance
What is the first thing that I need to understand about business insurance? You will not automatically be reimbursed for all losses just because you have insurance. Most insurance policies only cover losses specifically mentioned in the policy and will specifically exclude certain kinds of losses from the policy. You have to make sure the losses that you are likely to face are covered in the policy.
What kind or kinds of insurance do I need? This depends on your field of business, state and local laws, and many other factors. If you have a shop or place of business, you will definitely need property insurance. Most businesses need some sort of liability insurance, as well. If your business requires a regular cash flow to stay in operation, you will probably need business interruption insurance. If you have employees, you will need workers compensation and possibly fidelity insurance. If you use a vehicle in your business, you will definitely need commercial auto insurance. It is generally a good idea to check with an insurance agent who has had a lot of experience in your field of business to see what insurance your business will need.
Is business insurance expensive? Business insurance can be expensive but it doesnt have to be. As with any other product, it is possible to save a lot of money on business insurance by shopping around. Doing research on insurance, dealing with more than one agent, and getting lots of quotes can save you quite a bit of money. Business owners who are willing to deal with more than one insurance company usually pay less, as will owners who negotiate with insurance agents.
How does business insurance work? A business insurance company collects money from businesses in the form of premiums. This money is put into a pool, and funds from the pool are used to pay claims when a policyholder suffers a loss covered by the insurance. The insurance company takes a cut of the premiums to cover its costs and pay dividends to its investors. The rates, or premiums, for business insurance are usually based on the risk that the insurance company will have to pay claims. The higher the risk, the higher the premium will usually be.
How do I determine how much business insurance I
This depends on the kind of insurance you require, the field of business you are in, and many other factors. A good rule of thumb is that you will need enough property insurance to replace all of your essential equipment and supplies, and you will need enough liability insurance to cover any likely claim against your business. You may also need enough business interruption insurance to cover your cost of operations for around a month. It is often a good idea to ask other professionals in your field and insurance agents with experience in your business what level of coverage is needed.
How do I avoid redundant coverage?
Redundant coverage occurs when two insurance policies provide a similar amount of coverage for the same kinds of claims. An example of this would be a business buying a separate liability policy when it already has adequate liability coverage from its property insurance policy. The best way to avoid redundant coverage is to read all of your insurance policies and see exactly what they cover. If you dont understand what the policies say, you should have an insurance professional or an attorney take a look at them.
Does my business insurance have to be with the same company that provides my other policies? Not at all; you can have insurance policies with as many different companies as you like. It is often a good idea to deal with multiple insurance companies because different insurers will provide you with different rates and products. In some cases, using multiple insurance companies cant be avoided because not every insurer handles every kind of insurance; sometimes business insurance has to be provided by specific companies.
What questions will my agent ask when I call? Questions can vary widely, but some are standard. The agent will probably want to know what field of business you are in, what your annual income is, what property the business owns, and so on. Many questions will center on the risks your business takes because insurance rates are usually determined by risks. The agent may also try to ascertain what risk mitigation steps you are taking. For example, an agent writing a property insurance policy may ask about your burglar and fire alarms or the locks on the doors. Generally, the more information you can provide the agent, the better it will be for both of you.
What does the rating system mean, and where can I learn what my insurance companys rating is? A number of companies, including A.M. Best and Standard & Poors, rate insurance companies on their financial strength. The companies with the most financial strength are those best able to pay out on policies. The best insurance companies get the AAA rating. The worst get a CC rating. Some companies are not rated, which means they have not yet been evaluated. You can learn an insurance companys rating by going to www.ambest.com or http://www.standardandpoors.com/ratings/insurance/en/us.
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