FAQs about Small Business Insurance

  • Why hasn't my agent told me about small business insurance?

  • It is your responsibility, as a business owner, to disclose that you are running a small business and to inquire about small business insurance. Many small business owners, particularly those with home-based businesses, do not disclose this information to their insurance agents.

  • Do I really need small business insurance?

  • Some small business owners think they do not need small business insurance because their home and automobile insurance policies will cover them. However, these policies only offer minimal coverage. If your business is struck by a natural disaster or your product harms a customer, you could suffer significant financial loss.

  • Is small business insurance expensive?

  • Small business insurance is less expensive than you might think. The cost of your policy will be based on your location and type of business. Basic policies for small business owners average about $2,000 to $5,000 annually. If you or your employees operate heavy machinery or work in another high-risk occupation, your rates will be higher because the risk of injury or damage is greater.

  • How does small business insurance work?

  • Small business insurance generally includes commercial property insurance and general liability insurance. Commercial property insurance covers losses or damage in the event of damage to your property. General liability insurance will pay for legal and court costs as well as settlements if a lawsuit is brought against your business.

    After you purchase your insurance policy, you will make monthly or annual payments for your coverage. If a catastrophe should occur, you would contact your agent immediately and begin the process of filing a claim. This claim would then be paid to the extent of the coverage you have purchased.

  • How do I determine how much small business insurance is necessary?

  • A knowledgeable small business insurance agent or broker will explain your potential risks and help you determine proper coverage needed for each type of small business insurance.

  • What is the minimum amount of small business insurance coverage?

  • At a minimum, small business owners should purchase coverage for commercial property and general liability. If your company has employees, it is recommended that you also obtain workers’ compensation insurance.

    Certain professionals, such as doctors, might consider also purchasing professional liability insurance to protect them against malpractice lawsuits. Also, if vehicles are used in the course of business, you may need a commercial vehicle policy.

  • Does my small business insurance have to be with the same company as my other insurance?

  • You can choose to purchase small business insurance with your personal insurance agent, or you can sign with a small business insurance specialist. It is important to select an agent with expertise in the area of small business insurance. Doing so can save you money and ensure that you have the proper coverage for your business.

  • What types of questions will the agent ask when I call?

  • In order to provide you with a quote, the agent or broker will need to find out the type of business you have before determining the risks associated with your business. You will then need to provide basic information including your name, contact information, effective policy date, your business name, and both the mailing and physical business addresses. [NOTE: The latter items are included under “contact information,” which is already listed.]

    The agent will also ask how long you have been at your current location, how long you have been in business, and what type of business you own. If you own your building, then you will also need to provide the following information: its value, square footage, and the year it was built. If you lease the property, you will need to tell the agent if improvements were made. Then, you will need to state an approximate value of the contents of your business property. Also, you will need to tell the agent if any claims have been brought against your business. Finally, the agent will want to know what price limits you have set for your small business insurance package.

  • What does the rating system mean (i.e., A, A+, A++), and how can I find out how my insurance company is rated?

  • Insurance companies pay an organization called A. M. Best to rate their financial strength. Financial strength is important because it ensures that your insurance company can pay for your claims.

    A rating of A++ is considered superior, C++ is fair, and D, E, or F indicate that the company has financial problems.

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